increase nudges it forward," said Dan Cantor, the national director of the Working Families Party, w...

1. Los Angeles Makes A Risky Bet With Its Minimum Wage
Increase
increase nudges it forward," said Dan Cantor, the national director of the Working Families Party,
which was founded in New York and has helped pass progressive economic measures in several
states. And if wage mandates aren't the best way to do it, they might be one feasible way.
Immediately after the Los Angeles vote, pressure began to build on Mr. "A lot of businesses aren't
going to make it," he added. Proponents of the wage increase say they expect that several nearby
cities, including Santa Monica, West Hollywood and Pasadena, will also approve higher wages.
But opponents of higher minimum wages, including small-business owners and the Los Angeles
Chamber of Commerce, say the increase approved Tuesday could turn Los Angeles into a "wage
island," pushing businesses to nearby places where they can pay employees less.
"They are asking businesses to foot the bill on a social experiment that they would never do on their
own employees," said Stuart Waldman, the president of the Valley Industry and Commerce
Association, a trade group that represents companies and other organizations in Southern
California. So the question becomes: If it's possible to raise the minimum wage some amount without
significantly reducing employment, then how big a hike would it take to have a meaningful effect?
Megan McArdle makes a similar point in her column at Bloomberg, and points out that the impact of
the kind of large-scale increase in wages that the Los Angeles law contemplates isn't something that
would be readily apparent in a short period of time:
When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off
their staff. Under the plan approved Tuesday, the minimum wage will rise over five years.
"The effects here will be the biggest by far," said Michael Reich, an economist at the University of
California, Berkeley, who was commissioned by city leaders to conductseveral studies on the
potential effects of a minimum-wage increase. Or the employee's landlord, grocer, etc.
(...)
There's no way to say until the new wage is fully phased in and we have years of data. What is more
likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be
somewhat reduced. And the Congressional Budget Office (CBO) estimated that raising the federal
minimum from $7.25 to $10.10 over a three year period would probably cost about 500,000 jobs,
and perhaps as many as 1 million. The studies that the supporters of the Los Angeles minimum wage
increase, and similar proposals across the country, rely upon all basically stand for the proposition
that a "moderate" increase in the minimum wage will have a minimal impact on the economy. Cuomo
of New York announced this month that he was convening a state board to consider a wage increase
in the local fast-food industry, which could be enacted without a vote in the State Legislature.
Several other cities, including San Francisco, Chicago, Seattle and Oakland, Calif., have already
approved increases, and dozens more are considering doing the same. People who were looking at
opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide
that the potential profits can't justify the risk of some operations. In 2014, a number of Republican-
leaning states like Alaska and South Dakota also raised their state-level minimum wages by ballot
initiative.

2. The effect is likely to be particularly strong in Los Angeles, where, according to some estimates,
almost 50 percent of the city's work force earns less than $15 an hour. This hardly benefits those
employees. The City Council's vote will instruct the city attorney to draft the language of the law,
which will then come back to the Council for final approval.
Not surprisingly, the news of a victory for the forces that have been lobbying for an increased
minimum wage in the nation's second largest city is being viewed as good news in many quarters,
not the least of them being the Editorial Page of The New York Times, which describes the vote as a
challenge to Congress and other states where the issue is being debated. But it seems unlikely that
you can increase the minimum wage by 65 percent, mandating higher wages for almost half of your
workforce, and be confident that the other effects will be small. Perhaps the predictions of doom will
be wrong, but I suspect that they won't be. For metropolitan Los Angeles, this suggests a figure of
maybe $12 an hour, not $15.
Some researchers are less optimistic than Dube about the employment effects. They still add up, in
the end, to deadweight loss - that is, along with a net transfer of money from owners and customers
to employees, there will also simply be fewer employees in some businesses. That hardly sounds like
"moderate" to me, and while it's true that many major employers will likely be able to absorb these
additional labor costs quite easily, it's also probable that we will see some efforts by employers at
this level to curtail labor costs. There's a sense spreading that this is the new norm, especially in
areas that have high costs of housing."
The groups pressing for higher minimum wages said that the Los Angeles vote could set off a wave
of increases across Southern California, and that higher pay scales would improve the way of life for
the region's vast low-wage work force.
Supporters of higher wages say they hope the move will reverberate nationally. But this only gets
you so far, because at some point, a high enough minimum wage would eventually start to cost jobs.
However, the increase that was just approved in Los Angeles constitutes a 66% increase over a very
short period of time followed by increases tied to the Consumer Price Index on an annual basis going
forward. In any case, Los Angeles has now made itself a test case, and other cities will likely follow.
If I had to lay money, I'd put it the other way: The effects will be significant. "Instead, it's going to be
coming from people who are just a rung or two up the ladder here," he told the New York Times.
Andrew M. Los Angeles Makes A Risky Bet With Its Minimum Wage Increase

3. Earlier this week the City Of Los Angeles became the latest major city to approve an increase in the
minimum wage to $15 per hour:
LOS ANGELES -- The nation's second-largest city voted Tuesday to increase its minimum wage from
$9 an hour to $15 an hour by 2020, in what is perhaps the most significant victory so far for labor
groups and their allies who are engaged in a national push to raise the minimum wage.
The increase, which the City Council passed in a 14-to-1 vote, comes as workers across the country
are rallying for higher wages and several large companies, including Facebook and Walmart, have
moved to raise their lowest wages. The long-term result will be higher wages for many low-wage
workers, but the desperation of unemployment, or a forced relocation, for many others.
Even if the outcome that McArdles foresees come to pass, it's likely that few people will make the
connection between a higher minimum wage and fewer available jobs at the lowest end of the
employment spectrum. If and when that happens, the fact that the minimum wage is now $15 per
hour will mean very little to people who are earning less because they aren't being giving as many
hours as they used to, people who aren't being hired, or people who have been laid off because their
employers discovered that a touchscreen doesn't make any minimum wage demands at all.
As I said above, though, the minimum wage debate is more about emotion than it is about a rational
discussion of economic consequences, and it's understandable that it would be that way. As senior
administration econ adviser Jason Furman said last year when President Obama called for a national
increase in the minimum wage, "Zero is a perfectly reasonable estimate of the impact of the
minimum wage on employment." Echoing the sentiment, The New York Times editorial boardwrote
around the same time that "the weight of the evidence shows that increases in the minimum wage
have lifted pay without hurting employment."
The evidence for this isn't nearly as overwhelming as boosters sometimes like to suggest. If you end

4. up ordering your Big Mac off a touchscreen in five years or so, you'll know why.
. As Peter Suderman notes at Reason, though, those studies are of dubious value in the current
context:
For the past few years, liberal economists and policy wonks have been increasingly vocal in arguing
that that it's not true that increasing the minimum wage costs jobs. Many of the low-wage workers
who form the backbone of Southern California's economy live in the suburbs of Los Angeles. The
workers who are dropped have effectively gone from $9 an hour to $0 an hour. If a wage mandate
increases by some small amount then it probably won't have that big of an impact overall. "It's a risk
that rhetoric can't resolve."
That's true.
(...)
Raising the incomes of the low-paid is a worthy goal. Economists David Neumark and William
Wascher, for example, have surveyed the literature and found that, overall, most studies still show
that wage increases cost jobs. At least one councilman who voted for the measure is also concerned.
There's no serious person who thinks that employment will remain the same if you, say, raise the
minimum wage to $100 an hour, or even $40 an hour. As it stands, this seems like an axiomatic
proposition. "It puts an exclamation point on the need for $15 to be where the wage board ends up."
(...)
Much of the debate here has centered on potential regional repercussions. Other big cities should
wait and see what happens.
While the argument in favor of minimum wage increases have typically relied more on emotion than
reason, in recent years there have been some efforts by advocates of the idea to push back against
the traditional economic argument on the issue that states that, on average, an increase in the
mandated minimum wage is more likely than not to lead employers to cut back on hiring to engage
in other measures designed to save labor costs such as cutting back on hours for individual
employees or investing in automation that has the effect of replacing human workers. Cuomo to
reject an increase that falls short of $15 an hour.
"The L.A. McDonald's began moving to replace cashiers with touchscreens in its European
restaurants four years ago. That's why the people making the argument in favor of raising the
minimum wage succeeded in Los Angeles, and why they are already talking about using their victory
there to achieve the same thing elsewhere.However, public policy ought to be made based on
something better than emotions and feelings, especially when there is incontrovertible evidence that
the policy being advocated has the potential to cause harm to some of the most vulnerable people in
society. Businesses with fewer than 25 employees will have an extra year to carry out the plan. By all
means, let Los Angeles find out. For example, Panera Bread Co.'s CEO has said that he hopes to
have touchscreens replace cashiers in all the company's stores
http://www.nlm.nih.gov/medlineplus/druginfo/meds/a601209.html by 2016. As I said, this can
amount to anything from cutting hours or reducing planned hiring to replacing order takers at fast
food restaurants with computers, something that is already becoming quite common. Many owners
who stay in business will look to invest in labor saving technology that can reduce their headcount,
like touch-screen ordering or soda stations that let you fill your own drinks.

5. These sorts of decisions take a while to make. What's "moderate"? Dube says a minimum set at half
the prevailing median wage, plus a cost-of-living adjustment, would strike a prudent balance
between raising the incomes of the low-paid and maintaining employment. "The proposal will bring
wages up in a way we haven't seen since the 1960s. Gil Cedillo, who represents some of the city's
poorest districts, said he would have preferred to see the most prosperous residents, rather than
small-business owners, carry the burden. Everyone can agree with the general idea that people
ought to earn more money, and $9.00 per hour even for a menial job certainly doesn't sound like a
lot of money. Eventually, technology like this is going to make its way to the United States. But the
CBO also said it was possible that the number of jobs lost would be minimal, pointing to some
studies suggesting that the wage floor could be increased with very little effect on jobs, at least in
certain circumstances, up to a certain point.
(...)
Assume, just for a moment, that liberal wonks are basically right and it is possible to hike the
minimum wage without significantly reducing employment. Fine, sure. Starting in 2022, annual
increases will be based on the Consumer Price Index average of the last 20 years. Some folks who
have been in the business for a while will conclude that with reduced profits, it's no longer worth
putting their hours into the business, so they'll close the business and retire or do something else.
Given that, one would think that people would want to approach the issue with something more than
blatant appeals to base emotions that don't even bother mentioning facts. The editors at Bloomberg
are far more sanguine:
A scholar whose work is often cited in support of a higher minimum wage is Arindrajit Dube of the
University of Massachusetts at Amherst. According to these new studies that have been advanced by
advocates, an increase in the minimum wage has no real impact on employment or wages and that
its positive benefits outweigh any of the minimal negative impacts that economists have talked about
in the past. Gov. Businesses that were not very profitable with the earlier minimum wage will slip
into the red, and they will miss their franchise payments or loan installments and be forced out of
business. He argues that moderate increases are unlikely to have much effect on jobs. "It's great
that this is an increase for some employees, but the sad truth is that a lot of employees are zofran
lawsuit payout going to lose their jobs."
The 67 percent increase from the current state minimum will be phased in over five years, first to
$10.50 in July 2016, then to $12 in 2017, $13.25 in 2018 and $14.25 in 2019. Not every low wage
worker will be harmed, of course, but the ones who are will become part of what Frederic Bastiat
called "the unseen," meaning the people who are on the losing end of an idea that, while good
intentioned, has some very bad unntentioned consequences