As the Germans say in response to the social democrat lemmings: Sozial ist Ron Arbeitsplatz. Loosely translated: A job is social justice.
A Brief History of Minimum-Wage Disasters
New research finds that job losses are concentrated among older workers, women and blacks.
Sens. Elizabeth Warren and Chris Van Hollen, Rep. Hakeem Jeffries and Senate Minority Leader Charles Schumer at a rally with fellow Democrats to announce their economic agenda in Berryville, Va. on July 24.PHOTO: TOM WILLIAMS/ZUMA PRESS
By
James Freeman
Aug. 15, 2017 2:55 p.m. ET
Democrats have been debating whether to tolerate congressional candidates who are pro-life, but when it comes to economic issues party leaders seem to have decided they’re all Sandernistas now. For example, there is absolute unanimity among senior elected Democrats in Washington that government should dictate a higher minimum wage. But this is another issue that deserves debate. New research shows the damage that minimum-wage laws have done to U.S. workers—and not just those employed in restaurants.
The latest warning against politicians committing economic malpractice arrives in a working paper from the National Bureau of Economic Research. “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs,” by Grace Lordan and David Neumark, examines decades of data to see what happens when legislated wage increases give employers a financial incentive to replace humans with technology.
Even before the publication of this report, restaurant workers were already learning what happens when political pressure to pay higher wages hits an industry that has the ability to automate. After a union harassment campaign against McDonald’sover its entry-level wages, the company accelerated the deployment of digital technology that allows customers to tap their orders on a screen instead of talking to a cashier. In the face of city and state mandates to raise wages, the chain has continued to automate more functions in its restaurants, and investors have been cheering. McDonald’s shares have risen more than 30% this year.
Now Ms. Lordan and Mr. Neumark show that mandating higher wages kills jobs for low-skill workers across a range of industries. According to the authors, older workers in manufacturing are hit particularly hard, with women and African-American workers also suffering disproportionate harm:
Overall, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers. Our estimates suggest that an increase of the minimum wage by $1 (based on 2015 dollars) decreases the share of low-skilled automatable jobs by 0.43 percentage point... In particular, there are large effects on the shares of automatable employment in manufacturing, where we estimate that a $1 increase in the minimum wage decreases the share of automatable employment among low-skilled workers by 0.99 percentage point... Within manufacturing, the share of older workers in automatable employment declines most sharply, and the share of workers in automatable employment also declines sharply for women and blacks.Our analysis at the individual level draws many similar conclusions. We find that a significant number of individuals who were previously in automatable employment are unemployed in the period following a minimum wage increase.
The authors also warn that the universe of jobs that can be done by machines is expanding, and will likely soon include such occupations as taxi drivers and bricklayers. This means that minimum wage laws could do more damage in the future than they have in the past.
According to the Democrats’ new “Better Deal” economic agenda, “increasing the minimum wage will provide economic security for all working Americans.” But it’s hard for Americans to have economic security if they’re not working.
***
Update on the ‘Monoculture’
Individual donations from employees at Alphabet Inc. (Google) to 2016 presidential candidates:
Hillary Clinton : $1,597,332
Bernie Sanders: $359,981
Jill Stein: $44,013
Donald Trump: $22,564
***
Bottom Stories of the Day
So Much for the War on Drugs
“Just a few more bongs for Big Ben before London bell is silenced for four years,” Washington Post, August 14
Subway Officials Expecting Productivity Surge
“Cops accused of storing dead bodies in MTA employee break rooms,” New York Post, August 14
News You Can Use
“Eclipse Church, in the path of totality, won’t be open for heavenly show,” Omaha World-Herald. August 11
***
Follow James Freeman on Twitter.
Subscribe to the Best of the Web email with one click.
To suggest items, please email best@wsj.com.
(Carol Muller and Sophie Mann help compile Best of the Web. Thanks to Mark Finkelstein, Tony Lima and Macrena Sailor.)
A Brief History of Minimum-Wage Disasters
New research finds that job losses are concentrated among older workers, women and blacks.
Sens. Elizabeth Warren and Chris Van Hollen, Rep. Hakeem Jeffries and Senate Minority Leader Charles Schumer at a rally with fellow Democrats to announce their economic agenda in Berryville, Va. on July 24.PHOTO: TOM WILLIAMS/ZUMA PRESS
By
James Freeman
Aug. 15, 2017 2:55 p.m. ET
Democrats have been debating whether to tolerate congressional candidates who are pro-life, but when it comes to economic issues party leaders seem to have decided they’re all Sandernistas now. For example, there is absolute unanimity among senior elected Democrats in Washington that government should dictate a higher minimum wage. But this is another issue that deserves debate. New research shows the damage that minimum-wage laws have done to U.S. workers—and not just those employed in restaurants.
The latest warning against politicians committing economic malpractice arrives in a working paper from the National Bureau of Economic Research. “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs,” by Grace Lordan and David Neumark, examines decades of data to see what happens when legislated wage increases give employers a financial incentive to replace humans with technology.
Even before the publication of this report, restaurant workers were already learning what happens when political pressure to pay higher wages hits an industry that has the ability to automate. After a union harassment campaign against McDonald’sover its entry-level wages, the company accelerated the deployment of digital technology that allows customers to tap their orders on a screen instead of talking to a cashier. In the face of city and state mandates to raise wages, the chain has continued to automate more functions in its restaurants, and investors have been cheering. McDonald’s shares have risen more than 30% this year.
Now Ms. Lordan and Mr. Neumark show that mandating higher wages kills jobs for low-skill workers across a range of industries. According to the authors, older workers in manufacturing are hit particularly hard, with women and African-American workers also suffering disproportionate harm:
Overall, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers. Our estimates suggest that an increase of the minimum wage by $1 (based on 2015 dollars) decreases the share of low-skilled automatable jobs by 0.43 percentage point... In particular, there are large effects on the shares of automatable employment in manufacturing, where we estimate that a $1 increase in the minimum wage decreases the share of automatable employment among low-skilled workers by 0.99 percentage point... Within manufacturing, the share of older workers in automatable employment declines most sharply, and the share of workers in automatable employment also declines sharply for women and blacks.Our analysis at the individual level draws many similar conclusions. We find that a significant number of individuals who were previously in automatable employment are unemployed in the period following a minimum wage increase.
The authors also warn that the universe of jobs that can be done by machines is expanding, and will likely soon include such occupations as taxi drivers and bricklayers. This means that minimum wage laws could do more damage in the future than they have in the past.
According to the Democrats’ new “Better Deal” economic agenda, “increasing the minimum wage will provide economic security for all working Americans.” But it’s hard for Americans to have economic security if they’re not working.
***
Update on the ‘Monoculture’
Individual donations from employees at Alphabet Inc. (Google) to 2016 presidential candidates:
Hillary Clinton : $1,597,332
Bernie Sanders: $359,981
Jill Stein: $44,013
Donald Trump: $22,564
***
Bottom Stories of the Day
So Much for the War on Drugs
“Just a few more bongs for Big Ben before London bell is silenced for four years,” Washington Post, August 14
Subway Officials Expecting Productivity Surge
“Cops accused of storing dead bodies in MTA employee break rooms,” New York Post, August 14
News You Can Use
“Eclipse Church, in the path of totality, won’t be open for heavenly show,” Omaha World-Herald. August 11
***
Follow James Freeman on Twitter.
Subscribe to the Best of the Web email with one click.
To suggest items, please email best@wsj.com.
(Carol Muller and Sophie Mann help compile Best of the Web. Thanks to Mark Finkelstein, Tony Lima and Macrena Sailor.)
