Wednesday, July 30, 2014

The Latest in Minimum Wage Politics (updated)

I really try to avoid posting about weak arguments for things that I disagree with, but I took a few minutes to look this over in another context, so I figured I'd make it a quick post.

Last month, the Center for Economic and Policy Research released a press release about job growth and MW.  They said that 13 states had increased the minimum wage in December 2013, and that those states had outperformed the average state in job growth since then.

Now, obviously this analysis is a bit weak to begin with, and I don't want to bother with all the details.  But, I was surprised, to begin with, to see that 13 states had increased MW.  I have spent a good deal of time looking at disemployment related to Federal MW hikes, which I have treated as a sort of event study.  If states were really increasing MW at this pace, it would be much harder to track the effects of future hikes with national data.

But, CEPR explained that 9 of the 13 hikes were simply inflation adjustments.  So, they had lumped together 9 states that had increased MW by 1.7% with 4 states that had increased it from 4% to 14%.  I thought this was a strange choice.  So, I copied the data from their article and graphed it to show the scale of the increases.

This outcome is being touted as evidence supporting a 40% increase in MW.

Now, even though I've looked a little harder at this than CEPR did, this still doesn't come close to being useful information.  So, I wouldn't want this post sent out as evidence against MW increases, either.  It does suggest that people who were very excited about this press release can be a bit credulous, although I'm sure we all can be credulous sometimes.

PS.  Mark Thoma links to this New York Times editorial that smugly touts the CEPR report with gems like:
That hasn’t stopped those opponents — especially in the restaurant industry — from attacking the findings. But their only argument is bluster.
What is clear is that there is no need to fear a minimum wage increase — unless, apparently, you are a restaurant lobbyist, whose job depends on keeping wages low for already very low paid waitresses, waiters and fast-food servers.
The editorial even notes that 9 of the 13 MW hikes were only inflation adjustments, but apparently the editors weren't curious enough to wonder if that was a problem and were undeterred from their harrumphing.  It's funny that Mark Thoma sees fit to spread the news on this analysis.  Back in January, when this post of mine attained 15 minutes of fame, he linked to Tyler Cowen's post on my analysis, and added a rebuttal from Kevin Drum, to make sure nobody got the idea that my analysis was definitive.  I had put some effort into creating a way of measuring the various episodes of national MW hikes over the past 60 years as events.  After seeing the feedback of skeptics, I added to my analysis, and ended up with this.  I'm sure it's not PhD level work, but I think it introduces some significant signs of MW-based disemployment.

In any case, if, on a scale of 1-10, measuring if work is definitive, my little bit of analysis is a 3, the CEPR thing is about a negative 4.  Dr. Thoma thinks the titillated NY Times editors need some help getting the word out about it.

Oh, and, that Kevin Drum rebuttal actually included the phrase: "But but but....." unironically.  My graph actually caused him to type "But but but....".  I thought people only did that mockingly.  He wanted to dispute long term changes in teen labor force that weren't really related to my analysis.  In finance, we're used to event type studies because we see a lot of information shocks, like quarterly reports, that affect prices.  Like, what happens to the stock price over the next month after a company reports a positive earnings surprise.  That kind of thing.  That event based price behavior would be unrelated to the sort of broad changes in sentiment that would lead to changes in returns over long periods of time.  Maybe in economics they don't do that kind of analysis as much, or maybe this is a method of analysis that is discredited in some way I am not educated about.  I was just looking at the negative kink in employment that seems to happen a few months before MW hikes and persists for about 2 years.  I admittedly did not append any analysis about complicated long term trends and their causes to my discussion.

PPS.  To Dr. Thoma's credit, in the list of links that included the New York Times editorial, he also had a link to Stephen Gordon at the Worthwhile Canadian Initiative blog that discussed how recent increases in the Canadian minimum wage might be related to drops in teen employment.  It looks to me like this recent Canadian teen employment behavior is pretty similar to the scale of teen disemployment that I found in the US.  The New York Times editors should get on this story.  Apparently, Mr. Gordon is in the pay of US restaurateurs.

1 comment:

  1. TravisV from TheMoneyIllusion comments section here.

    Yeah, it was a pretty unreliable study. See here:

    "if we shorten this time span by just one month — looking now at January 2014 to June 2014 — we get a very different picture.

    In June, the number of jobs in the 13 minimum-wage states was, on average, only 0.59 percent higher than it was in January, while, for the same time period, the number of jobs for the 37 states that did not raise their minimum wages was higher, on average, by 0.69 percent. Job growth since January (the month that these 13 states actually hiked their minimum wages) was slower in states that raised the minimum wage than in states that did not."