Minimum Wage Conference in Berkeley

The beauty of food in its market presentation form: This is at Monterey Market on Hopkins

Joe and I went to the full-day symposium (that’s a good word; the upcoming TDT January 9-10, 2018 will be called a “workshop”, as compared to conference or seminar) at the Institute for Labor Research and Employment (ILRE) on Channing in Berkeley, which is part of UC Berkeley. The primary names associated with this event were MIchael Reich and Sylvia Allegretto, researchers at the ILRE, but they had gathered famous labor economists from around the country to present as well, in honor of the ten-year anniversary of the Center on Wage and Employment Dynamics, which is a Center at the ILRE (these are all standard terms for sub-organizations within a university). Michael and Sylvia had responded to an email from Katie Quan about the TDT conference by saying they’d be interested in coming, but they needed funding; there is, of course, no institutional funding for the TDT conference other than some in-kind (housing, meeting space, translation provided by the ILO), and in fact the airfare of the Hanoi participants was being subsidized by individual personal donations, so we were confronting quite a clear cultural and economic disjuncture in this case. Dale Belman, from Michigan State, and Ken Jacobs from Berkeley, who were present and participated in the ILRE symposium, also told me that they normally expected to have their expenses covered for such things. I said that tickets actually weren’t that expensive.

This makes me think of a question that I never thought would keep echoing in my memory, but here it comes again. It was asked by Peter Feuille, who was the Director of the Institute for Labor Relations at Illinois. The person to whom it was asked was Joe, who had asked Pete Feuille about where a certain data set about a particular workforce might be found — what government agency, think tank, library, etc was gathering and holding that information. Pete looked at him in amazement and asked, “Who would pay for that kind of information?”

Translation from academic to regular language:  Collecting and sharing information costs money. Someone pays for it. The people who pay for it choose what kinds of information they want to see gathered or shared (or sequestered for that matter). They don’t pay for information that may bring them news that they don’t want to hear, or might provide tools or encouragement for parties that they are in conflict with. Or that they don’t want spread around. So if you are looking for a data set that no one with big bucks will pay for, you may be out of luck (and have to collect it yourself).

The next question would be about whether any data is neutral, but never mind.

So one of my reasons for attending the Berkeley symposium was to see whether our friends at TDT and among the presenters there should wish they were able to afford to bring any of these US researchers to the January 9-10 conference, or to the international conference that is going to be planned for Spring 2019. Do the ILRE researchers have data, arguments, methods, perspectives, ideas that our Vietnamese colleagues can benefit from? (Or should pay to hear?)

I think this is bitter squash, because I have eaten soup in Viet Nam with slices of something that looks like this floating in it.

I promised Angie et al that i would take notes on the Berkeley symposium, so here they are. Since the whole thing will be both published and streamed on the internet (or at least a link will go up on the internet so that you can watch the whole thing) I will not do my usual hyper-note-taking; I’ll just summarize and comment.

But First, Minimum Wage in the US is an Altogether Different Issue than it is in Viet Nam

In the US, most of the research discussion around minimum wage (raising it) concerns whether or not it will result in job loss (employers being unable to afford higher labor costs, and therefore hiring fewer workers). For those who don’t know already: federal minimum wage is $7.25 per hour; some states allow a “tip wage” which goes down to $2.15 per hour; “living wages” are estimated to be between $15-22 per hour; many states, cities, districts, etc have higher minimum wages, typically $12-13 per hour, and through organizing and political pressure and the involvement of labor unions representing low-wage workers in industries like food service or retail, $15 per hour seems to be within reach in many places.  This was a dream that seemed impossible only a few years ago, but organizing has made it seem within reach in many plaes.

Research that shows that raising the minimum wage does not result in job loss is paid for by progressive, left-ish think tanks and academic bodies, and is drawn upon by activist and political entities (such as unions — for example, a young policy analyst from SEIU 2015 was sitting behind me and said he would use what he learned for bargaining). This issue (raising the minimum wage towards a decent or living wage vs job loss) merges into issues of social wage, social welfare safety net, socialism, what does a government owe its people? etc etc, and fractures along those lines. By the time you are talking about a living wage and universal healthcare, someone is calling you a socialist.

The rear half of the audience. Note technology tree. 

This event was organized on short notice by Sandra Smith, UCB Professor of Sociology, who is the new interim director of ILRE, in order to mark the tenth year of the CWED, Center on Wage and Employment Dynamics.

Although it was not advertised very widely, the event was open to the public. About 50 people came to the ground-floor meeting room and sat in rows in front of a projection screen, a table for the panels, and a podium. You signed in, made a name tag and indicated your affiliation, but you could list your affiliation as “community” if you wanted. The person behind me came from SEIU 2015, the union that represents homecare workers (people who do healthcare for people who are at home, a job where in California the state is the employer). He is a policy analyst and will use the information shared at this meeting for bargaining purposes, to get an increase in homecare workers’ wages.

A few overall comments for Vietnamese readers:

The big issue in the US about raising the minimum wage is, will a requirement that employers pay a higher wage lead to the loss of jobs? Right-wing, conservative politicians say higher labor costs will produce a lower demand for labor, that is, fewer jobs. Employers will simply cut back on workers. This is straight supply-demand economics. Researchers at this symposium believe that supply-demand is not an accurate or sufficient way to look at the world. They are looking for ways to build persuasive arguments in favor of increasing minimum wage. They say that “the new consensus is” that raising the minimum wage does not cause job loss.

No one dealt with the issue of jobs moving overseas. It was all about state-to-state or US labor market issues.

None of these presentations were about trade.

All of these presentations were quantitative. They used many kinds of statistical computer tools to generate graphs and charts and shake out relationships among variables, trying to get closer to the real world than supply and demand. The data sets that these researchers used came from many sources, some government (like the Current Population Survey -“CPS”- or the Census https://www.census.gov/ ) and some “administrative,” meaning coming from another source, such as an employer or university. “Administrative data” is considered more accurate but one of the researchers said that in his experience, they coincide at a larger scale. One gets access to this data by requesting or applying for it.

None of the research presented at this symposium used qualitative social science methodology such as interviews, observation, surveys, ethnographic approaches.

Furthermore, unless I am mistaken, all of them looked at jobs as an aggregate by industry or demographic, not employers. None of them used the employer as the unit of analysis to see how negotiating special wage, tax or benefit exemptions in export processing zone situations changed the picture.

So here are my notes, I have supplied brief explanations of things that are unfamiliar to our Vietnamese colleagues but mostly let things stand as is.

Michael Reich, past Director of the ILRE, introduced the program. He began with his father’s history as a garment worker, then an employer, and his own early approach (with David Gordon) to low wage work with a theory of dual labor markets – that there is a separate labor market for low-wage dead end jobs. He said that he eventually moved from diagnoses to solutions.

The first three presentations are about innovative methods and “the new consensus,” which is that increases in minimum wage help workers but do not cost jobs.

First morning presentation: Minimum Wage Effects Across State Borders: Arindrajit Dube. UMass Amherst.

The old data about minimum wage effects was time series analyses, 1970s-80s. There was the US federal minimum wage and not much difference across states until 1990s. Then new minimum wage research began to use variation across states. But are these really parallel enough to make good comparisons? States differ in politics, unionization, sectoral mix, cyclical factors. In the 1990s, there was no publicly accessible pool of data to use to generate more data points for studies. Thus the importance of long-term gathering and public accessibility of studies/data. So they tried using proximity – what happens if one state raises its minimum wage, the one next to it doesn’t? If New Jersey raises their minimum wage and Pennsylvania doesn’t, in the food service industry, what happens?   Then they tried border comparisons: doing a study of counties that border another state where there is a difference in minimum wage, where workers could travel across a state line to get a higher minimum wage job. Their research population focused on teens, and restaurant sectors, because there tend to be a lot of mininum wage workers in this age group and sector. They found that turnover goes down, earnings go up. Finding: “Moderate raises in the minimum wage help workers and do not jeopardize jobs.” Obama quoted their research in his State of the Union Address, but pushback criticized use of local control groups as methodology. Fast forward to present: the minimum wage discussion now means $15 per hour, with $19 per hour ceiling being used as standard for studies of low-wage workers.

Second morning presentation: Sylvia Alegretto (CWED), Seattle’s Minimum Wage Experience 2015-16. Wage and employment effects using a “synthetic city” comparison methodology

They are doing a 6-city study. Three cities are in CA, where San Jose’s minimum wage went up 25%, then San Francisco indexed up to a policy shift; then Oakland. Now there are 20 different minimum wages in CA. The other cities in the study are Seattle, Chicago, and DC where minimum wage is going up to $15. Historically, minimum wage now is higher than in the past. The problem for economists: how do we compare minimum wage impact? They used a “synthetic” approach. She explains this by referencing the study of the impact of the 1999 cigarette tax, which could by using this approach show the reduction of smoking by 30 packs per person. They computer-searched around the country to find counties that have parallel policies of other sorts. The collection of comparable locations is called the “donor pool.” So the Chicago “donor” pool (areas that could be compared to Chicago) has a lot of spots over the south. The SF and Seattle donor pool shows up a lot in Florida. Now the researchers can look at the difference between the real city and the “synthetic match.” They find the wage effects positive, employment effects hover near zero (meaning that workers made more money, employment did not go down). Future work: We should not see effects in civil service; should see effects in nursing home, other sectors.

Third presentation, Ben Zipperer, Economic Policy Institute (EPI): Effect of minimum wage on law wage jobs – Using a “bunching estimator”

There is near consensus on no employment effects of MW. But much of MW research is focused on demographic groups like teens or industries like restaurants, because teens tend to get low-wage jobs and restaurants provide low-wage jobs. They study employment effects before an increase and then over time after an increase. Motivation: Are we missing the total employment effect on the whole low-wage workforce? Policy work tries to apply estimates from research on teens and restaurant to entire workforce. Does this make sense? This paper tries to study effect of MW on overall workforce, not just teens and restaurant workers. Fact: lots of workers bunch around minimum wage. Can we use that to estimate the impact of MW on whole low wage workforce? Yes – employment effects close to zero. Average wage increase is 7%, spillovers die out about $3 above MW. Spillovers are mostly to incumbent workers. Limited to no spillover effects to new workers.

Seep photo for image of “missing jobs” upon intro of MW. Destruction of jobs below new MW and creation of jobs above. Missing jobs and excess jobs cancel each other out. Actually, the old jobs are the same jobs getting paid more. MW wage increase spillover is only on incumbent workers, and fades out at about $3 over minimum wage.

Discussant #1: Laura Guiliano, University of California at Merced

Previous research has used demographic groups like teenagers or sectoral groups (restaurant workers) as proxies for low-wage workers. So we have to ask, what are good control groups? Nearby cities? Synthetic cities? These approaches are too inclusive and lose precision. They make trade offs between rigor and credibility and transparency/simplicity.

Policy people want answers to the question, “If we raise minimum wage, how many workers will get a raise?” and “How about workers who already get MW or more, what is the spillover effect? How do you deal with higher wage workers getting bumped for lower wage workers? And how about measurement error?”

Internal wage structures are important in relation to the spillover effect. She has figures from day-before fed min wage increase (4.25 – 4.75) and day after, and sees bunching from $5 to $5.25, indicating an internal wage structure. This suggests that an employer, or perhaps a whole industry, has committed to paying a certain amount above minimum wage; that is their structure.

My note: An internal wage structure might be the consequence of a union contract, but this does not get mentioned. The word “union” appears only once in the day, after the last presentation.

Duscussant #2: Ian Perry, CLRE. Employment and CDP Growth from 2011 to 2016 California vs Average of Republican controlled states.

What happens to a state economy when you go to the Affordable Care Act (ACA), cap and trade, and do all these things, and raise minimum wages on top of that. People say, |”Oh, you can’t compare California to these other states.” So he compares the real California with a synthetic California if it had not done all these things. To create a synthetic California, you pick out other states that are parallel in every way except the feature you want to test, and make your comparison. In fact, CA is doing very well economically. They made a YouTube video about this, but I have not found it.

 

 

Questions from the floor: How do you measure the earnings of workers who are new entrants, not working in prior period?   Answer: just count the number of jobs in each wage “bin” – count the number of workers in each state in each time period. We are not following new entrants individually; we just look at the change in counts of new entrants. Total wage change for both incumbents and new entrants is similar, although spillover effect exists.

Second panel

 

First presentation: Ken Jacobs, CLRE – Living Wages at Airports. Airport employment, TSA workers after 9-11.

After 9-11 TSA (airport sercurity) workers were engaging in over 100% turnover per year. Increase in wage to SF Living wage has reduced turnover by 80% and improved worker commitment. But now that the SF City and County minimum wage is rising it will soon be higher than the Airport minimum wage; airport service contractors are now reporting increase in turnover and they are concerned about rising mistakes, poor service.

Second morning presentation: Michael Reich, CWED. He was asked by city of LA, “What would be the effect of a $15 federal minimum wage?”

Most research previous is about effect on unemployment, and discussion is about what the controls are. Now the terrain has changed. We’re looking at wage changes that might affect 20-30 percent of workers, not 6-9%. We also have to look at effects on prices and demand. The biggest effect of MW increases is on consumption due to pass through higher prices, and consumption is skewed upward because the wealthier do the major share of consumption.

Third morning presentation. Claire Montailoux, Stanford and CREST. Effects of higher minimum wages in the US.

The most likely effect will be increase in prices in restaurant industry of 7%; this is variable across related sectors such as food production and retail. It’s not just the price of the food on the plate; it’s all the inputs.

If Minimum wage had grown with output per hour, it would now be at nearly $20 per hour. This is very similar to the famous productivity/wages graph that we use a lot in labor education classes. 

Discussant #1. Emanuel Zaez, UC Berkeley. Some restaurants in San Francisco posted notices alerting customers to increases in price due to the requirement that employers in restaurants provide heathcare access. It’s important to note that prices go beyond actual labor costs. A restaurant that raises prices may attribute it to increase in labor costs of employees but their other inputs such as food or delivery or equipment, all affected by minimum wage increases, also go up.

Discussant #2: Larry Michel, EPI. There have been MW increases, we know that they have minimum employment job loss effects. But MW increases are still too small. We need to talk about it differently. “Job loss” is a mis-characterization of the world. Employment loss exaggerates the negative consequences and mis-characterizes the “employment effects” information. By focusing on “job loss,” we are implicitly accepting that metric of “one job loss is bad so don’t do it.” This is not a world in which you are either employed or not employed. The picture that says, if price goes up demand goes down, does not reflect the world – people are not just either employed or not employed. We have to shift away from that model. Studies suggest that when you increase minimum wage, the labor pool grows. They didn’t worry about this with TPP or any other policy – only minimum wage. So if minimum wage goes up and 25 million workers are affected but 500,000 jobs are lost – that’s 2%. But the lost jobs is where the focus goes. That’s a distorted framework for thinking about the value of the minimum wage. We should talk about aggregate hours reduction, not employment in terms of the unit of “job”. We should talk about the substitution effect, scale effect, income distribution effect.

Questions from the floor: Now the discussion shifts to questions about the focus of the research, and ways that the existing research does not grapple with critical issues. We have not done impact of employment effects by race or gender. Impact of minimum wage on women and minorities. If we are trying to look at the real world, we need to recognize that minimum wage jobs employ a very high percent of people of color, Black and Latino. More than half of the affected workforces in CA and New York are Black and Latino.

Bill Spriggs, Howard University. Immigrants are far more important today than teenagers. This is not like the picture of the worker in the 1960s and into the period the 1970s when everybody’s incomes went up with increases in minimum wage. The profile of low wage workers is very different now compared to then. Back then, low-wage workers were teenagers who maybe graduated high school and it was a first job. You could say they were less productive. Now, low-wage workers are men and women much older with associates degrees. Hard to explain how with technology assisting workers who have high school degrees or associates degrees, you can make the “less productive” argument. (Spriggs will present later in the day on dual labor markets; dead end jobs for women and minorities.)

Michael Reich: There are more business entries when minimum wage goes up. Exits happen too. There is also the aggregate demand question –we translated that into family income and break it into 9 different family income bins. We only get new firm formation going up when the bottom 80% begins to show recovery

Claire Brown: Don’t leave out rural issues. There is a disconnect between people in a city and rural people. People who live in rural areas, not cities, are people who don’t have much money and don’t spend much money. Need to do different kind of research to open this up.

BOX LUNCH: sandwiches, coffee, apples

Lunch speaker: Jared Bernstein, the Center on Budget and Policy Priorities. The Four Noble Truths about Getting to and Staying at Full Employment.

Four noble truths of Buddhism: suffering exists, its causes are knowable, it can be diminished, there is a path to diminishing it. Full employment slack exists, its causes are knowable. etc. What is the policy agenda that will get us at full employment? We need a regime shift in monetary policy if we are going to solve this slack problem. Interest rates have been so low that we worry that we don’t have the monetary space in the next recession to lower them further. We should target price levels, not price points. A level has a memory. A level target as compared to a point target says you have to make up all those years when you missed your target. There should be a process by which central bankers – the fed – should investigate a targeting change. We are not ready for recessions; state unemployment trust funds are not in good shape. Helping the states is a good thing to do because they have to balance their budgets every year. We need sustained fiscal stimulus, a full employment fund, direct job creation, infrastructure and the environment. We have never been at full employment. And wages only rise when there is FE across all sectors.

Why did it take the election of Trump to get the economic profession to pay attention to Stomper, Samuelson and Rodriguez? Economics worshipped at the same altar as classical economics, but there is something else in the model and that’s power. Power is at the center of Bernstein and CPI’s analysis. The impacts of trade were forseen. As trade becomes more and more liberalized the net gains are diminished – from tariffs that go from 15 to 10, to 2 to 1 – the assumption is that there will be winners and losers and the winners will compensate the losers.

The problem with jobs programs is that labor force participation is low because wages are low. The deeper question is the institutions that would get wages to go up have been ripped apart. (My note: No mention of what these institutions, such as the NLRB, might be. This is the closest anyone comes to speaking about what, for example, it takes to organize a union.) The importance of this meeting is that at the bottom is let’s agree that we have a mechanism to force wages up. Question: Is that sufficient to move the floor up, and if we move the floor up is that sufficient to move the whole structure?

Discussion of federally funded direct jobs programs: CETA, the example they give, is reviewed now as “working petty well.’ My comments: That was a Nixon-era program signed in 1973. Yes, it did work pretty well. It was criticized and eventually eliminated for being a kind of welfare that put Black and minority people and women into paid work. It was only an early version of the jobs programs that have followed: JPTA and then all the WIA programs, which were essentially subsidies to employers. The discussants mention TANF, which was the welfare reform under Clinton, but not WIA which was supposed to provide jobs for people who were thrown off welfare (this did not happen). However, all of these programs were floated out into the politically volatile world of funding. Create a good program and don’t fund it, it won’t work. Funding depends on power.

It sounds as if they’re talking about a federally funded jobs program for low-wage workers, which would eat up the slack in the labor market for low-wage workers and is somehow related to the assumption that low-wage workers have low skills or need training, etc. There is no mention of partly-employed, under-employed or unemployed high-wage workers – who would be better served by expansions of the public sector (for employment of teachers, analysts, office workers, health and safety inspectors, healthcare workers, etc etc) where there are mid-level wage jobs.

First afternoon presenter: Bill Spriggs, Howard University: Upgrading Skill Use of Incumbent Workers in Low-Wage Industries.“Falling minimum wages favor organizing work along the minimum wage contour”

When Spriggs went to work at Sears after high school they told him, “We pay you 15 cents above MW.” That was retail. There were a cluster of employers that used this. They used the minimum wage as a benchmark and paid just enough above that to attract workers. Today, he still sees jobs bunching around the minimum wage plus a little. These are (my interpretation here) dead-end jobs that do not stair step via promotions up into decent living wage jobs. They are also disproportionately filled by minority workers. Why during the 1970s recovery did the wages of HS educated workers go up? Then in the later recover the wages of HS-educated workers went down? Answer: the share of wage workers that were on the minimum wage contour went up. Employers saw that they could organize work around minimum wage workers. They would create minimum wage jobs. Instead of a $17 an hour technician, they would hire a $8 an hour handler, or two of them, and get the handlers to do the technician’s work. So we see a shift from using higher wage works to using lower wage workers – this is in the face of technological improvements, which you’d think would use the higher wage workers, but they don’t. Instead, you are lowing my entry wage and you are narrowing the type of jobs available to lower wage. A larger share of these are women, and far more Blacks and Latinos also. Very much a dual labor market. These people are not getting the jobs that go up with productivity. These are jobs that only relate to minimum wage, on the minimum wage contour.

Who are the people who are on the minimum wage contour? When the relative prices change, then the low-wage path is not favored and this helps the workers who are pushed into the mw contour because of gender or race.   This affects the structure of the jobs that are offered. If I am going to have workers that stay longer, I want you to do different thing. This is taking persons with the same skills and doing using them differently . FedUp campaign. Workers in the 1960s with a HS degree who got minimum wage plus 15 cents, are the same workers who today, with an AA degree, are getting pushed in to minimum jobs. And this is because they are women, black, Latino.

(My note: a very visible instance of this is in education and healthcare, where many parts of a high-skill job like nursing or teaching were unbundled and then a workforce is trained using 1 year or 6 week certificate programs to do one piece of that bundle. Programs like this were typical of WIA job programs.) When we read that X number of “new jobs” were created, they are jobs like this. They do not have “career ladders.”

Second afternoon presentation: Linsey Rose Bullinger, Indiana University. Does the Minimum Wage Affect Child Maltreatment Effects?

37% of children are the subjects of investigations by Child Services (a govern,ent social welfare agency) during their lifetimes. The researchers used state data and found causal relationship between increase in minimum wage and reductions in child maltreatment. The main change is a 9% reduction in neglect; strongest in ages -1-5. Again a 9% reduction in neglect for ages 5-12. No changes in other forms of maltreatment (abuse, need for removal from family, etc). So an increase in minimum wage by $1 decreases child reports by 10% especially among child and school-age children.

Third afternoon presenter: Will Dow, UC Berkeley: Minimum wages and Health

Presenting a survey of what work has been done on health and minimum wage. In many ways, increases of $1 in minimum wage would produce health effects (longevity, reduction in infant deaths, etc et) that would save billions of dollars currently spent on transfer payments.

Discussant #1: Arindajit Dube – these presentations show a broadening of the outcomes and mechanisms behind minimum wage effects. However: A large percent of inequality can be attributed to inequality between firms. High person-effect people get into high-firm effect firms – a double labor market . Can you upgrade the jobs without changing the people – can or do firms do that? Upgrading the skills of incumbent workers?

Discussant #1: Rachel West – Center for American Progress; Downstream effects on children.

Comments from the floor: The problem with arguing in favor of a $1 mininum wage increase on the basis that the benefits in terms of health and longevity and etc will reduce the need for social programs like that provide money supplements to low income families (like welfare, SNAP) is that the likelihood is that there will be cuts in public programs before any increase in minimum wage goes in. However, claims like this have worked when people in the room like larry Mishel talk to legislators. If they think that raising minimum wage will reduce transfer payments, they support it. Others think this will backfire. Here someone says, “Berkeley is a special place.”

The discussion and the day concludes with talking about what kinds of research need to be done.

Berkeley is a special place: The Bears Fountain

Berkeley is a special place #2: Voting on one of two resolutions at the Sunday Dec 10 general membership meeting of the East Bay Democratic Socialists of America (EBDSA).