Faster Small Business & Retail Job Growth in States w/ Higher Minimum Wages

[Ivan Seeking]

States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth.

...Executive Summary
Some observers contend that because many small businesses are labor intensive and largely employ low-wage workers, they will experience sharp cost increases when the minimum wage is increased, leading them to reduce employment levels. However, this report examined recent state-by-state trends for small businesses employing fewer than 50 workers and found that employment and payrolls in small businesses grew faster in the states with minimum wages above the federal level than in the remaining states where the $5.15 an hour federal minimum wage prevailed.

This report also found that total job growth was faster in the higher minimum wage states. Faster job growth also occurred in the retail trade sector, the sector of the economy employing the most workers at low wages, in the higher minimum wage states. The simplistic introductory economics prediction that an increase in the minimum wage will result in job loss clearly is not supported by the actual job growth record. Rather, faced with an increase in the minimum wage, small businesses may have benefited from some combination of higher productivity through improved worker retention and savings on recruitment and training. There may also be a “Henry Ford” effect at work: if you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses. [continued]

http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf

 

[Astronuc]

Seems to me businessmen understand the adage "you get what you pay for."

 

[Office_Shredder]

Actually, it doesn't seem that, if the economy is stronger where there's a higher minimum wage

 

[Ivan Seeking]

The study suggests that it works the other way around. Also, that raising the wage did not adversely affect the economy.

 

[turbo]

Here is my take on it. Low minimum wages are a gift to the most short-sighted employers, shifting the cost of essential services onto the taxpayers, and since low-income people have to spend nearly all their income, they boost local economies disproportionately when they have more disposable income.

https://www.physicsforums.com/showpost.php?p=1157048&postcount=12

 

[Astronuc]

Not to mention that about 60-70% of the economy is driven by

Consumer Spending!

 

[turbo]

Not to mention that about 60-70% of the economy is driven by

Consumer Spending!

That's just it. If you want a vibrant local economy, you have to make sure that people are paid a fair wage - they will plow it right back into the local economy giving every local business a boost. The Wal-Mart-ization of the US is killing small businesses and damaging small-town (or neighborhood, in cities) economies in ways that are easy to see but hard to assess. I shop locally-owned business as much as possible - it's a "tax" I pay gladly to keep the money circulating locally.

 

[physics girl phd]

How about the recent amendment to Colorado's state constitution to tie the minimum wage to cost of living or inflation? (It passed.) My friends there were for increasing the minimum wage... but in the constitution?

After friends grumbled... I also found out that it is also in the state's constitution that it is forbidden (by constitutional law) to detonate a nuclear device in the state boundaries. Sweet.

 

[selfAdjoint]

How about the recent amendment to Colorado's state constitution to tie the minimum wage to cost of living or inflation? (It passed.) My friends there were for increasing the minimum wage... but in the constitution?

After friends grumbled... I also found out that it is also in the state's constitution that it is forbidden (by constitutional law) to detonate a nuclear device in the state boundaries. Sweet.

Can voters amend the Colorado constitution by referendum? I found out to my chagrin that they can do that in Wisconsin.

 

[Manchot]

How about the recent amendment to Colorado's state constitution to tie the minimum wage to cost of living or inflation? (It passed.) My friends there were for increasing the minimum wage... but in the constitution?

Missouri and Ohio passed similar propositions, and Oregon's had it for a while.

 

[BobG]

Can voters amend the Colorado constitution by referendum? I found out to my chagrin that they can do that in Wisconsin.

Yes, and it has been a bad idea. 44 amendments have been proposed in the last 14 years with 14 of them being passed. Six were on the ballot this year and four were on the ballot in 2004.

We have a constitutional amendment limiting increases in tax revenue, plus a constitutional amendment that increases educational spending each year. The two amendments combined guarantee that at some distant point in the future, 100% of the state's taxes will go to education. Beyond that point, I guess the state will have to self-destruct since it will no longer be possible to adhere to the state constitution.

The TABOR amendment that is part of the tax equation above is particularly ironic. It's basic assumption seems to be that voters are too stupid to elect representatives qualified to handle the state's budget, so it's response is to throw decisions about taxes back to the voters. I guess the voters that couldn't find the time to research the candidates they voted for will find the time to research each tax inititiative they vote for.

An amendment on the ballot this year would have stipulated that 65% of all tax revenues for education had to be spent for classroom activities. The main effect of the amendment would have been to set off an argument over which spending could be considered as for classroom activities (does paying the janitor that cleans the classroom fall inside the 65% or does it fall outside, etc). It failed.

We also have an amendment ruling that lottery proceeds have to be spent for protection and management of the state's wildlife, rivers, and open spaces.

While some amendments would be worthwhile as a statute on how to spend this year's money, as amendments, they are disasters. There is no flexibility for elected representatives to adapt to recessions and lower tax revenues. They have to resort to clever loopholes to run the government and risk the state's anti-tax crusader bringing lawsuits against them when they do so, which just raises the cost of everything government does.

Tax revenues vary too much year by year to have detailed instructions on what to do with tax revenues and how to spend the money in a constitution.

 

[selfAdjoint]

Here's another question; how do these amendments get on the ballot? Can the legislature just put them there by an act? That's what happened with the gay marriage amendment in Wisconsin, and it's obviously a temptation for mischief. Indeed the only reason the Republican legislature had for putting it on was to energize their conservative base. They certainly did that; in my county 57% of the voters were for it. But the democrat still won the district.

I'm not against popular choice of amendments, but I would think it should be in a two step process; The legislature can put on the ballot the question: "Should we have a referendum on such-and-such", and maybe the public sould have some influence on the wording of the proposal. Then only if the proposal was accepted could the amendment go on the ballot in a later election, And it might help if super-majorities were required, as in the federal amendment process.

 

[turbo]

I'm not against popular choice of amendments, but I would think it should be in a two step process; The legislature can put on the ballot the question: "Should we have a referendum on such-and-such", and maybe the public sould have some influence on the wording of the proposal. Then only if the proposal was accepted could the amendment go on the ballot in a later election, And it might help if super-majorities were required, as in the federal amendment process.

Good point. Amending a state constitution is a weighty thing, and it should not be able to be accomplished by a simple majority of the popular vote.

Forgive me, but the vast majority of voters are moved by party politics and "hot button" issues, showing how little they think of our future. One call-in to a local NPR show recently said that we have to stay in Iraq so we "can fight them over there instead of over here". A totally brainwashed idiot. If you believe that 9-11 was an Al-Qaida attack on the US, then you should demand that the countries that hosted and funded the plotters be attacked. Let's see, that's pretty much Saudi Arabia and Egypt... Callers like that reinforce my gut feeling that "majority rule" is dangerous in the extreme, though right up the alleys of the major parties who can influence the ill-formed "opinions" of the voters.

 

[selfAdjoint]

One call-in to a local NPR show recently said that we have to stay in Iraq so we "can fight them over there instead of over here".

Two points here. One flake does not make a snowstrom, or, anecdotqal evidence cannot substitute for valid statistics. And second, one man's "hot-button knee-jerk" is another person's deeply felt lifelong conviction.

But your general opinion is right on the money. A law is one thing, and amendment to a constitution something else again. The latter shouldn't be too easy. If not a super-majority then two successive referenda speparated by two or more years. Anything to damp down the short period swings.

 

[loseyourname]

My experience of the southern California hourly job market is that expenses are mediated by dropping hours rather than wages. I've hardly even known of small businesses that pay the minimum wage, and that's with California's minimum wage being well over the federal minimum. The truly hard-off people in the state are mostly agricultural workers that aren't subject to the minimum wage law anyway. As much as an increase might help nationally, I'm concerned in this state that it will do little to nothing to actually help the worst-off among us, who largely seem to be doing poorly for any variety of reasons having nothing to do with whether they make 7 or 8 dollars an hour should they be employed at a local retail store. The only people that will seem to truly help are the elderly semi-retired forced to work hourly to supplement their Social Security income. I don't want to downplay their importance as a bloc of people worthy of that help, but there are plenty of other blocs.

 

[ptabor]

To a certain extent, I am happy that the min. wage has increased here in Ohio. My girlfriend works at a gas station to support herself through school and makes ~ $6.60 an hour. Of course, with the min. wage going up to $6.85 I can't help but wonder if she'll make $8.30.

What gives me pause is the fact that the prices at places such as walmart and meijer are going to have to go up. Let's face it, walmart isn't going to be content with a smaller profit margin so they'll have no choice but to raise prices over time.

to what extent this will affect prices I'm not certain. I'm going to be intersted to see how the purchasing power of a dollar changes in the coming year as prices adjust.

I'd like to say I'm opposed to a minimum wage. In a perfect world, people would be paid what they are worth. To me, it is not equitable that I can bust my rump at a job and make the same amount as the guy that sits at the stool and reads all day. Of course, the world is not perfect. If businesses were allowed, they'd collude to supress the wage to inflate their profits - hence the need for a minimum wage law. I suppose it's the lesser of the evils.

 

[BobG]

Here's another question; how do these amendments get on the ballot? Can the legislature just put them there by an act? That's what happened with the gay marriage amendment in Wisconsin, and it's obviously a temptation for mischief. Indeed the only reason the Republican legislature had for putting it on was to energize their conservative base. They certainly did that; in my county 57% of the voters were for it. But the democrat still won the district.

I'm not against popular choice of amendments, but I would think it should be in a two step process; The legislature can put on the ballot the question: "Should we have a referendum on such-and-such", and maybe the public sould have some influence on the wording of the proposal. Then only if the proposal was accepted could the amendment go on the ballot in a later election, And it might help if super-majorities were required, as in the federal amendment process.

Colorado is one of the few states where voters can get an amendment put on the ballot by petition. Most of the more ill-advised amendments are intitiated by some citizen's group, not by legislators.

 

[Futobingoro]

http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf

My interpretation of their data: inconclusive. It is very important to look at the left end of the graph when comparing percentages of growth. A quantity's growth of 5% each year for five years is greater than an equal quantity's growth of 2% each year for 10 years. This is what we have in this document, although the authors do not address it in any detail. The graph on page 9* shows that the non-minimum wage states had higher growth rates in the first five years of the graph, which is much more important than the non-minimum wage states' superior growth in the last five years of the graph.

Indeed, the non-minimum wage states posted a cumulative nonfarm job growth of 10.2% from 1991 to 1996, versus 2.8% in the minimum-wage states. This shows us at least two things: it now became more difficult for the non-minimum wage states to maintain these rates of growth (it is harder to grow 1,000 by 10% than to do the same with 100). This early growth also provided a large base which would allow the non-minimum wage states to outperform the minimum wage states throughout the remainder of the graph, even when they were periodically surpassed by the growth among minimum wage states.

As a result, nonfarm employment in the non-minimum wage states had grown by 23% from Jan 91 to Jan 05*, versus 17.1% in the minimum wage states.

Though it appears that the non-minimum wage states outperformed the minimum wage states, I can not draw a conclusion about the effect of minimum wage. There might have been an economic crash prior to 1991, which may have disproportionately affected the non-minimum wage states, thus allowing for the comparatively high percentages of growth from 1991 to 1996. There may also be a myriad of other factors at work here.

I do, however, take issue with the premise of the document. Upon close examination, one will find that all of the statistics are derived from 1998 onwards, which FPI says reflects the introduction of state minimum wages. Although that analysis is valid within that context, there remains the glaring omission of the comparatively low performance by the minimum wage states-to-be in the early 90s. At the very least, this demonstrates that there is a difference in performance that is unrelated to state minimum wage. Yet when the strong growth of the non-minimum wage states is discussed, it is subtly connected with the presence of the federal minimum wage.

*Note that the graph in question appears on page 9 of the document itself (not the pdf page number). I used Jan 05 as a stopping point because the graph does not have a complete set of data spanning to Jan 06. The impact of the omission of the data beyond Jan 05 is probably negligible, as there is a difference of 5% to be made up by the minimum wage states.

 

[Gokul43201]

I do, however, take issue with the premise of the document. Upon close examination, one will find that all of the statistics are derived from 1998 onwards, which FPI says reflects the introduction of state minimum wages. Although that analysis is valid within that context, there remains the glaring omission of the comparatively low performance by the minimum wage states-to-be in the early 90s. At the very least, this demonstrates that there is a difference in performance that is unrelated to state minimum wage.

Doesn't this only make more of a case for the raised minimum wage (MW)? If the states that were underperforming (compared to the national average) when they were tied to the federal MW are overperforming (compared to the national average) after the introduction of a higher state MW, doesn't that tell you the effect of the introduction of the higher MW?

 

[Futobingoro]

Doesn't this only make more of a case for the raised minimum wage (MW)? If the states that were underperforming (compared to the national average) when they were tied to the federal MW are overperforming (compared to the national average) after the introduction of a higher state MW, doesn't that tell you the effect of the introduction of the higher MW?

Not necessarily. It has already been established that the positive trend in the non-MW states from 1991-96 was not due to any state minimum wage. That alone should caution against drawing the conclusion that minimum wage is positively tied to job growth.

The best statistics would come from two identical states or countries, one with a MW and the other without. This will never happen, but that doesn't mean that comparing a MW wage state to a non-MW state is any more valid. I've seen this kind of comparison before with the crime rates in death penalty states and non-DP states. These comparisons are tempting to many people because they seem to be scientific in nature and have that aura of authority. The bottom line, however, is that these comparisons assume there is only one relevant difference between one subject and another and that a disparity in an indicator can be accounted for by this difference.

 

[Ivan Seeking]

This analysis does not prove that increasing the minimum wage will boost employment growth over what it otherwise would have been. But it is clear that the prediction that an increase in the minimum wage will result in adverse employment outcomes has not been validated. In fact, this analysis suggests that small employers may benefit from a higher minimum wage because of positive effects on worker retention and productivity and savings on recruitment and training costs. It is clear that higher minimum wages have helped workers get a fairer wage while small businesses have continued to grow.

From page 6 of 17 in the report.

 

[Ivan Seeking]

A related report cited.

For a discussion of the economic research literature on this issue, see the Appendix in Raising the Minimum Wage in New York: Helping Working Families and Improving the State’s Economy, January 2004, Fiscal Policy Institute. This report is available at:
http://www.fiscalpolicy.org/minmumwagereportrevised20jan2004.pdf

 

[jammieg]

Here I'll simplify it for you Ivan, people don't choose to be homeless...we make them, society has a need to see some people on the bottom so the rest of us can "feel superior" because we have a house just like any other house in fuction but it took 10x more effort to build so we are special meanwhile you don't get a house because the price rate is jacked up too high for your 3$/hr waitress job to afford, everyone will say "oh no not me" oh you YOU! Everyone contributes everyone has an ego to feed at the expense of someone else in some way, you never wanted to know because if you knew you'd have to change. It's just like the outsourcing jobs to mexican and asian slaves thing, i hate this country and I can't wait to leave it.

 

[ptabor]

Here I'll simplify it for you Ivan, people don't choose to be homeless...we make them, society has a need to see some people on the bottom so the rest of us can "feel superior" because we have a house just like any other house in fuction but it took 10x more effort to build so we are special meanwhile you don't get a house because the price rate is jacked up too high for your 3$/hr waitress job to afford, everyone will say "oh no not me" oh you YOU! Everyone contributes everyone has an ego to feed at the expense of someone else in some way, you never wanted to know because if you knew you'd have to change. It's just like the outsourcing jobs to mexican and asian slaves thing, i hate this country and I can't wait to leave it.

Hrm, I would say that some people don't choose to be homeless. These include those that fall upon hard times (katrina survivors, for instance), those that are mentally ill and unable to hold down a job, those that are physically disabled...

As for the rest, it is completely and totally a choice. Many of them are alcoholics (http://www.med.uottawa.ca/homeless/alcoholism/al_factsheet_e.html )

Many are drug addicts (http://www.agrm.org/steps.html ) and care only for their own high.

Furthermore, I did a google search and there are 10 homeless shelters in the Dayton area (population ~ 170k). (http://www.google.com/maps?num=50&h...elters&near=Dayton,+OH&sa=X&oi=local&ct=title)
So there exists ways to get out of the situation, if only they would make the CHOICE to do so.

As for the waitresses, cry me a freaking river. If the pay doesn't suit your needs, get a different job. Not qualified for another job? go to school.
Don't have 5 children that you can't afford to support and then whine because you were too stupid to think of the consequences of having unprotected sex.

Yes, I am insensitive and callous. Life has dealt me a rotten hand and I made the best of it... I could've ended up on the streets whoring myself out - but I didn't because I have PERSONAL RESPONSIBILITY. Something that is lacking in most people, and clearly you.And yes, giving jobs to people who live in absolute squalor without the opportunities we have here in america is such an awful thing... so terrible to give other people a chance at having a life, at a price that benefits the corporation's shareholders as well as the employees.Go ahead, leave the country.

 

[jammieg]

ptabor why do you think I piss you off so much? Is it because I'm just an idiot or is it because I told you the truth you didn't want to hear? I think black people understand what I mean about society's need to push some people down. Just because you don't want to see it doesn't mean it's not there, I think you are one of these people ptabor who endorse the suffering of others "yes I'm insensitive and callous" a nice way of saying it, to make yourself think you feel better by your comments and so when I point the truth out to you, you really don't like me for it.

 

[DaveC426913]

But what the about the more important aspect that everybody's ignoring?

It's a http://www.vimeo.com/clip:95225" ! (Don't hurt yourself memorizing the lyrics.)

 

[loseyourname]

I think the web of causation leading to homelessness is a little more sophisticated and complex than:

The average American has low self esteem and needs to see other people down.
Therefore, home prices are inflated and wages are kept low so that we'll be able to walk down the street, see people living on it, and feel better about ourselves.

There might just be some other factors in there, like drug abuse and alcoholism problems, insufficient workman's comp and disability insurance, the shifting demands of a labor market that values different skill sets today than in prior decades, and urban population explosions that have skyrocketed the demand, and thus the price, of urban and suburban housing. It's not some conspiracy to ensure that a certain number remain out there so society can collectively feel good about itself, because lord knows, a community with a lot of homeless people is a happy community.

 

[russ_watters]

How about education? Regardless of if there really would be enough good jobs out there if everyone bothered to finish high school, people who choose not to do so do not have the right to seek outside remediation of the situation they find themselves in.

 

[Severian]

I have never really understood the philosophy behind a minimum wage. If the workers feel that they are not paid a fair amount then then shouldn't work for that employer.

Now, of course, one might say that they have no choice - there are a lack of jobs and if they want their children to eat they must take whatever job they can. I agree, but this is a different issue.

What we are really saying (with this objection) is that everyone should have a basic minimum standard of living. We might disagree what that standard of living is, but it should at least let them eat and have housing. But this is not the employers problem - it is the state's problem (or the community's problem if you like). We should instead be giving welfare to poor families so that they have enough to eat irrespective of whether or not they work. Then, if their employer is not paying them a fair wage (ie. not commensurate to their effort) they will not work for him.

Of course, some people may object to giving poor people money for 'nothing', so an alternative mechanism is to call the welfare a 'wage' and insist that the people who receive it do a few hours of community service a week. That may even refoster a new community spirit.

 

[Gokul43201]

We should instead be giving welfare to poor families so that they have enough to eat irrespective of whether or not they work. Then, if their employer is not paying them a fair wage (ie. not commensurate to their effort) they will not work for him.

Of course, some people may object to giving poor people money for 'nothing', so an alternative mechanism is to call the welfare a 'wage' and insist that the people who receive it do a few hours of community service a week. That may even refoster a new community spirit.

You don't think this system will lead to rank degeneration due to the hordes of people who'd rather not work since they get paid the same amount anyway? You don't think this will be more debilitating to industry than a minimum wage?