Tuesday, April 14, 2015

Truly Terrible Research On Increasing The Minimum Wage To $15 An Hour

By Tim Worstall

I missed the paper when it first came out: or perhaps missed the implication of what they’re doing in it. In the wake of yesterday’s report shouting about how low wages cost taxpayers $150 billion a year (they don’t) the Financial Times makes reference to this:

Robert Pollin, co-director of the University of Massachusetts-Amherst’s Political Economy Research Institute, co-authored a paper in January that argued that companies could easily raise hourly wages to $15 and, with a period of adjustment, avoid any job or profit losses.
“[Businesses] are able to pay close to destitution wages and still attract workers because [employee] incomes are subsidised . . . by tens of billions of dollars” from taxpayers, he said.
Looking that paper up we find that there’s two major adjustments that the low wage employers have to make. The first is to raise their prices. Well, that’s great, right there, isn’t it? The second though is that they’ll save on turnover of labour costs. and I’m afraid that that is just junk:

There are three further key assumptions, as derived from our literature review
1) Cost savings from turnover reductions. Turnover reductions will generate cost
savings for the fast-food firms that will amount to 20 percent of their wage bill
 Read the rest here.

1 comment:

  1. Aren't low labor costs a result of people competing for jobs and not oppressive employers trying to screw the employees? The only control the employer has is to not hire above the marginal value. It's competing employees who drive the wage that a given position goes for.