Thursday, January 14, 2016

The Latest Restaurant Minimum Wage Study Doesn't Even Make Sense Internally

By Tim Worstall

We have yet another entry into the crowded field of studies concerning the minimum wage in the restaurant industry. It says there isn’t that much effect either way and therefore all the usual suspects are all over it. The problem with the paper though is that it doesn’t actually make sense by its own internal logic. This error is actually right there in the introduction in fact. They manage to believe two entirely opposing things about that minimum wage. Firstly that it has no employment effects and secondly that it raises productivity. These cannot both be true: because a change in productivity has employment effects.
And we’d be right to be extremely suspicious of anyone or any report that manages to make that blunder. The usual suspects of course include this:
Take that lobbyists.
When restaurants raise prices to offset moderate increases to the minimum wage, the industry as a whole is not adversely affected. Like, at all. This, the conclusion of a study (see below) released last month by theCornell University School of Hotel Administration entitled “Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!”. After an exhaustive audit of tipped and non-tipped minimum wage scenarios at state and federal levels over the course of a decade, professors Michael Lynn and Christopher Boone believe the industry needs to be more receptive to modest hourly pay hikes.
I would give some marks though as the site does post the report itself. Which contains this:

Read the rest here.


  1. Do any of these pro minimum wage "studies" actually define the difference between a modest minimum wage increase and an immodest increase? If so, on what objective basis to they make the distinction?

    What seems to be occurring here is that academic economists are nothing more than propagandists and ideologues with PhD's. In this respect they are no different than climate scientists. What do both disciplines have in common? First, their research has obvious implications for public policy. Also, most of their practitioners are government employees and/or they depend on bureaucratic funding for their research and governmental approval for establishing reputations and for career advancement. Scientists are no different than the rest of us in that they tend not to want to "bite the hand that feeds them".

    This is why we need a wall of separation between government and science, which is even more important than the separation of church and state. Politicians corrupt everything they touch, including science.

  2. The claim that an increase in minimum wage results in an increase in productivity is one of those claims much peddled by leftist thibk tanks like the Economic Policy Institute as evidence of a positive result from such a policy. However, anyone with even some knowledge of economics would recognize that the effect of an increase in productivity right after an increase in labor cost has to mean a decrease in employment. It has to be, since it is obvious that the increase in productivity for what amounts to work that requires little skill has to come from less people doing MORE things rather than the same things. This is obvious. Because of this it was easy for me to conclude that the people who peddle this supposed positive of a minimum wage increase were a bunch of charlatans and mountebanks. What amazes me is that there are still "serious" researchers making this ridiculous claim.

  3. Actually, some people do make the distinction between modest and immodest minimum wages. This isn't accurate nor proven, more a rule of thumb, but 45 to 50% of the median wage seems to be the division.

    The EPI, Dube, Mishel, axis then says great! 50% of full time full year minimum (c. $24 an hour) gives us $12 and they do actually say this is how they reach their number.

    I would argue 50% of the actual median wage (c. $17) is the dividing line to immodest, or $8.50 an hour.

    Of course, I also argue that it should be $0, because there should be no minimum wage. But that's different from saying that up to $8.50 the effects are small and concentrated among young minorities etc, and above $8.50 where we get more serious effects across the whole economy.