[HN Gopher] The California job-killer that wasn't
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The California job-killer that wasn't
Author : RestlessMind
Score : 40 points
Date : 2024-12-22 17:26 UTC (5 hours ago)
(HTM) web link (www.theatlantic.com)
(TXT) w3m dump (www.theatlantic.com)
| back7co wrote:
| I'll admit to not reading the entire article, but anecdotally
| fast food prices are within 10% of some table service restaurants
| here in Southern California. I don't know if that's really for or
| against the law, but calling the bill a huge success or failure
| depends on cherry picking stats.
| Elidrake24 wrote:
| Also true in central Wisconsin where there isn't a law such as
| this, for what it is worth.
| plantwallshoe wrote:
| The whole point of the article is that you have to cherry pick
| stats to show it was a failure, but every sound analysis shows
| that it was a success.
| gotoeleven wrote:
| Their own choice of a time interval to look at (Apr - Oct)
| looks cherry picked. If you include the next month, it goes
| from a +1000 job gain to -1200 loss. Overall it looks like
| the effect on employment at least in the short term is about
| zero. But it definitely increased cost. So the only winners
| here are I guess the people whose wages were pushed up by
| this law, and everyone else is a loser. I wouldn't call this
| a success, I'd call it a classic california left wing
| economic shell game.
| Certhas wrote:
| You claim to refer to choices in the article, yet the
| content of the article actually bears no resemblance to
| your post.
|
| > Simply comparing each month's job growth with the same
| month the previous year, which avoids the problem of
| picking a start date, reveals that California's fast-food
| sector gained jobs in all but one month since September
| 2023.
|
| As for who the losers are, the data is quite clear: Mostly
| corporate profits. The rational response of a corporation
| when faced with a law that reduces its profits is to lobby
| against the law and invest in propaganda that disparages
| the law.
|
| > That doesn't mean raising the minimum wage had no
| negative consequences. Reich and his co-author, Denis
| Sosinsky, found that the higher minimum wage caused menu
| prices in California fast-food chains to rise by about 3.7
| percent. That number is far lower than the "$20 Big Macs"
| that critics of the law warned of, but it's still
| significant at a time when many consumers are deeply upset
| over the post-pandemic spike in food prices. Even so, Reich
| points out that this number pales in comparison with the 18
| percent raise that the average fast-food worker received
| because of the new law. (The authors calculated that about
| 62 percent of the wage increase was absorbed through higher
| prices, while the rest was likely absorbed by a mix of
| reduced turnover and, crucially, lower profits for
| franchisees--hence the massive industry resistance.)
|
| Finally, why a shell game? There is nothing hidden here,
| there is no con. No money is secretly moved around. Workers
| have more money. Owners and consumers less (the latter very
| slightly so).
| gotoeleven wrote:
| From the article: "choosing a start date of either
| September 2023 (when the law was signed) or April 2024
| (when it took effect) would have shown that the number of
| jobs had risen."
|
| This statement is literally false if you include
| november.
|
| The whole bit about comparing employment numbers to the
| corresponding month a year prior doesn't make any sense.
| One reason is that the law has only been in effect since
| April and another is that the employment trends in 2023
| in fast food restaurants match trends in overall
| employment which you can look at here: https://data.bls.g
| ov/timeseries/SMS06000000000000001?amp%253...
|
| I suppose arguing over whether this redistributive scheme
| constitutes a shell game or simply wise governance isn't
| very interesting.
| eigen wrote:
| > This statement is literally false if you include
| november.
|
| look at other states, they also had a decline in fast
| food employment from October 2024 to November 2024. E.G.
| Nebraska had a 0.62% decline and California had a 0.29%
| decline.
|
| https://fred.stlouisfed.org/seriesBeta/SMU310000070722590
| 01S...
| 0xB31B1B wrote:
| > As for who the losers are, the data is quite clear:
| Mostly corporate profits.
|
| Amongst the problems I have with the policy are around
| reducing profits being presented as something purely
| beneficial or at no cost, and claiming that we have seen
| enough to "call it good" within 6 months of
| implementation. Corporate profits drive investment and
| investment grows the pie. You won't see these impacts
| over 6 months but you will see them over 1-5 years.
| Restaurant closures in response to these policies can
| take 6 months to few years because the medium/large size
| franchisees will run a franchise operating at 0 profit
| for a year or two until the franchise requires capital
| investment (replace the parking lot, buy a new grill etc)
| or their financing situation changes against them such
| that they can't maintain working capital. "20 dollar big
| mac" is and was unrealistic fanfare, the most likely
| scenario is languishing for a while.
| plantwallshoe wrote:
| They offered several other forms of analysis besides just
| looking at April - October (for instance comparing each
| month to the previous year's month and comparing other
| states that didn't change their minimum wage laws.)
|
| As for if it was effective: if the point of the law was to
| increase the money flowing to fast food workers it managed
| to increase their wages without decreasing employment, so I
| think it was pretty clearly a success. Now if that is a
| worthwhile thing to try to accomplish is completely a
| matter opinion.
| eigen wrote:
| > Their own choice of a time interval to look at (Apr -
| Oct) looks cherry picked. If you include the next month, it
| goes from a +1000 job gain to -1200 loss.
|
| I didn't check all states, but most show a decline in fast
| food employment from Oct to Nov 2024, based on "All
| Employees: Leisure and Hospitality: Limited-Service
| Restaurants and Other Eating Places in X" data from St
| Louis Fed.
|
| Nevada Oct 2024: 65.424 Nov: 65.192 0.35% decline
|
| California Oct 2024: 740.069 Nov: 737.886 0.29% decline
|
| Utah Oct 2024: 69.571 Nov: 69.406 0.23% decline
|
| Nebraska Oct 2024: 37.732 Nov: 37.4999 0.61% decline
| toyg wrote:
| The problem is the definition of success. Yes, the sector
| grew and employees made more; but franchisees felt some pain.
| In fact, I'm sure someone will argue that they had to expand
| precisely to try and recoup the profit lost to lower margins.
|
| For capital owners, no redistributive policy can ever be a
| success, by definition.
| ghaff wrote:
| In fairness, a number of places I occasionally get take-out
| from are the same price whether take-out or eat-in. I may
| prefer to take-out--and any alcohol is probably cheaper--but I
| don't really view take-out as categorically cheaper. But then I
| rarely eat at McDonalds.
| mjevans wrote:
| Rent seeking everywhere is strangling the entire US economy.
| crackercrews wrote:
| Alternate perspective:
|
| https://reason.com/video/2024/12/19/no-californias-20-minimu...
|
| Is this an opinion piece or news? It's categorized as "ideas" at
| the top of the page. I do not know what that means. But the
| advocacy at the end makes it seem not like straight news.
| Vaslo wrote:
| Thanks for posting this. I was also trying to find some more
| recent articles that also contrasted the Atlantic author's
| cherry-picked points, and who also appears to lean a bit to the
| left.
| nosefurhairdo wrote:
| It's remarkable we even need to say it out loud: increasing the
| price of labor reduces the quantity demanded of labor.
| Believing otherwise requires magical thinking.
| kasey_junk wrote:
| Yet empirical results don't find significant impact to
| employment rates: https://www.nber.org/papers/w32925
|
| It's almost magical that simplified, reductionist economic
| models don't always play out in the real world.
| nosefurhairdo wrote:
| Your source agrees with me. I made no claim as to the
| significance, only the direction of the effect.
|
| Additionally, this research has historically yielded mixed
| results (likely due to the difficulty of isolating the
| effect of minimum wage in a highly dynamic marketplace for
| labor). Here's a good article on the topic from the SF
| Federal Reserve: https://www.frbsf.org/research-and-
| insights/publications/eco...
|
| All that to say, I prefer the simple intuition that people
| want less of a thing when it costs more. This is a basic
| fact of life that most everyone seems to accept until
| policy gets mentioned.
| toyg wrote:
| _> people want less of a thing when it costs more. This
| is a basic fact of life_
|
| And still, Apple got to be the biggest company in the
| world by charging _more_ , constantly and systematically.
|
| Maybe there are more things in heaven and earth than are
| dreamt in your philosophy.
| nosefurhairdo wrote:
| Huh, perhaps Samsung should double Apple's prices. By
| your logic, that should make them wildly successful, no?
|
| A better example of quantity demanded paradoxically
| increasing with price is in the designer hand bag market.
| The value of luxury goods is in part due to the signal
| they send that the owner can afford such an expensive
| item.
|
| However, that is just an exception proving the rule. Your
| point about Apple makes no sense because they've also
| increased the quality of the goods they ship in
| conjunction with their price. Unless you're suggesting
| that minimum wage laws somehow enhance the laborers'
| productive capacities.
| EliRivers wrote:
| If your claim disagrees with reality, should I believe
| reality or you?
| lowbloodsugar wrote:
| Or math. Or reality. Magical thinking is just making claims
| like you did with no evidence. Simple models made by the
| servants of the rich don't predict real world outcomes.
|
| It's no different than when politicians pass a law that the
| police union doesn't like, and crime goes up. Look! Proof
| that the law was bad. It's remarkable that anyone would say
| otherwise. Of course it has nothing to do with the fact that
| the police just _stop doing their job_ until they get the law
| changed.
| mmooss wrote:
| > the police just stop doing their job
|
| Is there evidence of that, that you know of?
| mint2 wrote:
| California and in particular SF, there's been substantial
| reporting on police inaction. It's been improving but for
| a while there were regular stories or police watching
| people do felonies and not bothering to do a single
| thing.
| derektank wrote:
| I can't speak for every situation but it's worth keeping
| in mind that police inaction can be a result of specific
| policies placed on police departments by the city or
| state. For example, up until recently, San Francisco only
| allowed officers to engage in vehicle pursuits in the
| case of violent felonies and Governor Newsom is still
| asking Oakland to amend their own No Chase restrictions.
| If elected officials tell cops not to engage in certain
| policing actions, I would hope that law enforcement
| officers would hew to those rules pretty closely
| lazyasciiart wrote:
| Yes, lots
|
| https://www.themarshallproject.org/records/1571-police-
| slowd...
| mmooss wrote:
| The price is only one factor among many. People eat at
| restaurants other than McDonalds, even though McDonalds has a
| lower price.
| nosefurhairdo wrote:
| Correct. Generally in economics we discuss individual
| effects while holding other effects equal (ceteris
| paribus).
|
| To illustrate, if a McDonald's location can sell 1000 big
| macs a day at $2 per burger, do you expect they'll sell
| more (or even as many) if they raise the price to $3?
|
| Of course not. This intuition is obvious to everyone until
| policy gets involved. It would not make sense for employers
| to want just as much labor when the price goes up. This
| would imply a perfectly inelastic demand for labor.
| TeMPOraL wrote:
| > _Generally in economics we discuss individual effects
| while holding other effects equal (ceteris paribus)._
|
| Ceteris paribus is Latin for "holding a cat by its paws
| to look under its tail", named so because it tells you
| how long you can "hold other effects equal" before you'll
| be made to regret the attempt.
|
| This is to say, the economy is a system of tight feedback
| loops, not independently random effects. This is the part
| I rarely see emphasized wrt. "ceteris paribus". You're
| trying to hold constant the very effects that will
| _react_ to change under discussion, which both severely
| limits the range of a single forecasting step, and should
| invite conversation about those other effects.
| nosefurhairdo wrote:
| I don't disagree. I brought it up specifically as a
| constructive criticism of the original McDonald's
| argument of choosing other restaurants. It's easier to
| illustrate economic concepts when only one parameter is
| changing (e.g. price of big mac) vs multiple (e.g.
| inexpensive McD's vs more expensive alternatives).
|
| As you've pointed out, any economic policy proposal
| should consider 2nd/3rd/ith order effects.
| lazyasciiart wrote:
| Most of the question in any kind of research is "what
| else didn't stay equal _that we didn't pay attention to_
| "
| plantwallshoe wrote:
| This would be true in a perfect market, but in real life
| things aren't priced perfectly and people don't make 100%
| economically rational decisions. These imperfections means
| there's sometimes lots of room to change the price of things
| before affecting demand in a meaningful way.
| mmooss wrote:
| Reason is a straight advocacy publication for
| (libertarianism?), and I think they would be proud to tell you
| that.
| jmugan wrote:
| The thesis seems to be that businesses would pay more if they
| were smart enough to realize it was in their interests. Since
| they aren't, raising minimum wage seems to force them to pay
| more, which actually lowers labor costs because they have less
| turnover and fewer mistakes by new employees. Maybe. I've always
| been surprised that more businesses didn't pay more, since a few
| dollars an hour more would often bring in a much superior
| employee.
| Certhas wrote:
| No, the evidence cited is that a significant portion is also
| absorbed by companies making lower profits (and a small amount
| by higher prices).
|
| So this is simply also a case of lack of bargaining power of
| workers.
| jmugan wrote:
| So you are saying that the pie is not grown by paying more,
| it's just that the workers are getting a bigger slice. Could
| be. That didn't seem to be the main point of the article, but
| that could also be true. I haven't looked at the data
| carefully.
| mint2 wrote:
| Not true about the pie not growing.
|
| The pie did grow, so it's a benefit to society. It just
| didn't grow enough that giving the employees a larger slice
| didn't slightly shrink the owner's pie. However, The owners
| pie shrunk less than it would have had the pie not grown
| due to increased efficiency.
|
| I wonder how these studies captures the way the workers
| have more money that immediately flows back into the
| economy, benefiting everyone.
| sbuttgereit wrote:
| > I wonder how these studies captures the way the workers
| have more money that immediately flows back into the
| economy, benefiting everyone.
|
| I think you left out the part about, "and at what point
| that creates inflationary pressure."
| f1shy wrote:
| Minimum wage does not increase inflation in any
| measurable amount. Has been demonstrated over and over in
| praxis.
| mint2 wrote:
| deflation is good?
|
| Is wage the only cause of inflation we care about? Guess
| so.
| bb88 wrote:
| Higher wages should create more demand, and that should
| create pressure to raise prices.
|
| On the other hand, if people were going into debt with
| high interest credit cards, then it's very possible that
| demand doesn't actually change. Instead credit card debt
| gets paid off, or surplus income is banked as savings.
| II2II wrote:
| > No, the evidence cited is that a significant portion is
| also absorbed by companies making lower profits (and a small
| amount by higher prices).
|
| From the article:
|
| _The authors calculated that about 62 percent of the wage
| increase was absorbed through higher prices, while the rest
| was likely absorbed by a mix of reduced turnover and,
| crucially, lower profits for franchisees--hence the massive
| industry resistance._
|
| Bargaining power is undoubtedly an issue here, but the
| success of the increase in minimum wage can probably be
| attributed to it being uniform across similar businesses and
| in an industry that can't exactly move to the next state over
| (without loosing business).
| stonogo wrote:
| This was why Henry Ford paid a decent wage. It turns out to
| reduce labor costs due to turnover dropping and less time spent
| training workers.
| gotoeleven wrote:
| Their own link to the seasonally adjusted california low-service
| restaurant workers employment numbers shows it dropping from
| April 2024 to Nov 2024, albeit by a fairly small amount (~1200
| people) though using the articles preferred time interval (April
| to October) shows a gain of about 1000 people. This is out of a
| total number of people of about 750,000. So this all looks like
| noise to me. Clearly there's demand for fast food, still, and
| restaurants adapted by raising prices. The article claims the law
| caused only a 3.7% price increase but that is on top of all the
| other inflation that has happened.
| butterlettuce wrote:
| Increasing the minimum wage is cool and all but I really don't
| appreciate my Big Mac costing $7 and the smallest sized Starbucks
| Americano $4.
|
| I guess the silver lining is that this law made me go grocery
| shopping more often and as a result I eat healthier.
| toomuchtodo wrote:
| Minimum wage increases raised prices by only tens of cents per
| unit. The rest is corporate profits. McDonald's and Starbucks
| quarterly and annual profit figures are readily available with
| a quick search. They can afford to pay labor more.
|
| https://investor.starbucks.com/news/financial-releases/defau...
|
| https://www.mcdonalds.com/corpmcd/investors/financial-inform...
| danans wrote:
| > They can afford to pay labor more.
|
| Only if they decide to pay shareholders less.
|
| And shareholders are not going to accept getting paid less in
| order to pay labor more. That's a quick way for CEOs get
| fired.
| toomuchtodo wrote:
| Indeed! Which is why minimum wage laws and unions are so
| important. The evidence shows they can afford it and they
| wouldn't pay it voluntarily, so keep pushing the minimum
| wage up.
| danans wrote:
| Yeah. The idea that corporations are going to raise wages
| on their own even for the general well being of society
| has been debunked many times over. These things work
| according to power and leverage, and nothing less.
| toyg wrote:
| I doubt those prices are unique to California.
| stonogo wrote:
| Those prices are pretty famously lower in European nations
| with higher minimum wages.
| lotsofpulp wrote:
| Publish a letter to McDonald's shareholders to reduce
| franchising costs and hence reduce their 30%+ profit margins.
|
| https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/prof...
| bb88 wrote:
| Also fix their broken ice cream machines. That is maybe 2%
| unto itself.
|
| https://mcbroken.com/
| kevingadd wrote:
| McDonalds doesn't publish prices online, but for me in downtown
| Seattle - with a famously high minimum wage ($20) everyone said
| was going to destroy the economy - a smallest-size Starbucks
| Americano at my local one is $3.85 according to their website.
|
| I think what you're experiencing might be "business owners
| charge what the market will bear" and you, as part of the
| market, are bearing price increases.
| hollandheese wrote:
| Neither do I, but that has nothing to do with the minimum wage
| increase.
| api wrote:
| California real estate rises without bound, making other attempts
| to shore up wages moot. It all goes to property owners. The state
| is one giant property owners cartel.
|
| Cartel is explicit-- Cali homeowners do a lot to try to limit
| production to keep prices high.
|
| It's one reason I no longer live there. The only rational move is
| to leave.
| tonymet wrote:
| The title is a bit more conclusive than the article content. The
| author does a reasonable job covering the many indicators and
| trends surrounding fast food employment (seasonality, for
| example), and the short term results.
|
| It's too early and too narrow an observation to draw conclusions.
| The article is better summarized as "minimum wage doesn't lead to
| the short term drop in employment and exploding inflation as
| expected".
|
| Companies can shift around inventory, hiring, funds and more to
| address labor inflation in the short term. we won't see the real
| consequences of this policy for a year or two until the industry
| runs out of other tools.
|
| Comparing In n Out (high wages, low marketing costs) to
| McDonalds/Carls/Burger King etc (low wages, high marketing &
| product development costs) -- companies can deliver a better
| service at a low price point if they are managed well.
|
| I don't expect minimum wage to turn McDonalds into In n Out
| though.
| shrubble wrote:
| California has a lot of structural problems that other states
| don't, and, a few big industries that pay a lot of taxes that
| allow them to paper over issues.
|
| As an indicator for what other states should or shouldn't do,
| California's unique situation simply _doesn 't matter_ .
| trimethylpurine wrote:
| It doesn't seem like you can make a claim one way or the other.
|
| Other restaurants may absorb lost labor, and the negative impact
| may not be immediately visible. If you are not cooking at home,
| and McDonald's is the same price as table service, then table
| service is the better value. It has been for me, anecdotally.
| We'd not see those choices reflected in overall employment stats,
| because another restaurant will need to hire, a seemingly net
| zero change in employment rates.
|
| But, it's very likely that fast food chains, including privately
| owned fast food franchisees like many McDonald's locations will
| have lost market share. Those locations may reduce their
| workforce, forcing people to change jobs. In the interim while
| the workforce is shuffled about, the losses would be invisible
| except in unemployment claims. And without being able to tie
| those claims to any profession, since those claimants aren't
| skilled in one, we can't make any conclusion about whether or not
| those claimants are the result of a higher wage requirement.
|
| The eventuality I might expect would be a loss of competition in
| the fast food sector, if the above is true.
|
| Of course, that's all hypothetical.
| neonate wrote:
| https://archive.ph/8zN87
| chriscrisby wrote:
| The source that lead the original claim:
|
| https://irle.berkeley.edu/wp-content/uploads/2024/09/Sectora...
|
| Nowhere does it say minimum wage jobs increased or that minimum
| wage workers earned more per year
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