Mark Perry

Republicans’ Counterproductive Fixation On A Worst-Case Scenario That Never Happens

minimum wage increase

Bread lines: Not since before the minimum wage was created, and probably unlikely to be seen after it goes up. (Image: Library of Congress)

“Conservatives have argued for years that no matter how well-meaning, efforts to increase the minimum wage end up hurting the most vulnerable, those looking to grasp the first rung on the employment ladder,” writes right-wing blogger Jennifer Rubin in the Washington Post today. And while I, personally, would have just stopped the article right there with a quick note that, of course, those warnings have never actually come to fruition, she, of course, does not.

Rubin goes on to cite the problematic, incorrect, and generally underwhelming conservative, anti-minimum wage economist Mark Perry as a source (at least she’s consistent), and then proceeds to chide Democrats about how “the impact on employment and on the poor, specifically, may be profound” should we keep hammering on about raising wages. Her thesis: That we’re not thinking this through, and that, just as the right has been warning for literally decades, our efforts to increase wages could possibly end in disaster.

And yet, what Rubin never quite manages to get around to is the fact that the]is predicted apocalypse has yet to arrive, and likely never will.

Since its birth, the minimum wage has been drawing concern and outright ire from the right, who have warned of the economic fire and brimstone it will rain down upon us, ensuring that no teen will have a job and that businesses will be forced to shutter more quickly than you can say “trickle-down.”

Truly, the quotes go way back. In case you think I’m exaggerating, here are some:

  • 2006: “If a simple legislative act increasing the minimum wage to $7.75 is all that is needed to improve the lot of the working poor by just a little, then why not raise it to $10 an hour and get them to the poverty level? For that matter, why not raise it to $50 an hour, assuring every working Californian a comfortable living?” — California State Senator Tom McClintock in the Los Angeles Times
  • 1999: “Minimum wage increases that even approach an average livable wage would result in significantly fewer jobs for low-wage workers. A substantial increase in the relative cost of labor will result in a reduction in the amount of labor used.” Thomas Kavet, Deborah Brighton, Douglas Hoffer, and Elaine McCrate in a report delivered to the State Legislature of Vermont
  • 1970: “It is unrealistic to assume that somehow the increase will be squeezed out of profits….In plain fact, the burden of an increased minimum wage will fall heavily on those least able to bear it. The fringe employers, the unskilled worker, the young and the handicapped are those who will be priced out of the job market.” — The Chamber of Commerce
  • 1938: “[The Fair Labor Standards Act] will destroy small industry….[these ideas are] the product of those whose thinking is rooted in an alien philosophy and who are bent upon the destruction of our whole constitutional system and the setting up of a red-labor communistic [sic] despotism upon the ruins of our Christian civilization.” — Representative Edward Cox (D-GA). 1938.

Yes, the scary stories of the right have been spookily whispered in the ears of the working population for decades, allowing plenty of time for these ideas—that a minimum wage that’s actually livable will bankrupt businesses and lead to an explosion of unemployment—to fully marinate and become baked into the the collective understanding of the economy.

The unfortunate thing, though, for the ultra-wealthy who benefit off these ideas (because truly, no one else is) is that they are simply not true, and they don’t hold up.

Take, for example, Washington State—the state with the highest minimum wage in the nation—was recently ranked by Business Insider as having the most robust economy in the country.

“Its Q2 2015 annualized GDP growth rate was a stunning 8.0%, by far the highest among the states and DC. The November 2015 average weekly wage of $1,073 was the second highest in the country, and was 5.6% higher than the weekly wage in November 2014, the third highest wage growth rate,” they explained.

The next highest-ranked was the District of Columbia, which boasts a $9.50 minimum wage. After that was Colorado—also with a minimum wage higher than the Federal level—and then, down at #5 was Nebraska, a state whose “unemployment rate of 2.9% was the second lowest in the country,” and whose minimum wage is also above $7.25.

Does correlation necessarily indicate causality? Of course not. But it’s worth pointing out that economic growth in states with minimum wages above the Federal floor isn’t exactly stagnate. In fact, higher minimum wages actually seem to be spurring job creation and growth.

Which means that the only thing Rubin and I can agree on is her first statement—that Conservatives have been beating this drum for a long, long time.

AEI Economist Mark Perry Proves Low Minimum Wage Kills Jobs!

Screen Shot 2015-09-22 at 2.05.23 PM

Normally I wouldn’t take a random snapshot of an unrevised, overly-broad, and notoriously noisy data set as conclusive evidence of anything, but the American Enterprise Institute’s Mark J. Perry does have a PhD in Economics, so I’ll just have to presume that he knows what he’s doing and follow his lead.

Perry helpfully offers the chart above that shows food service jobs in Washington state outside the Seattle-Tacoma-Bellevue Metropolitan Statistical Area (MSA) increasing by 5,600 since January 2015 while food service jobs within the MSA have fallen by 100. What happened in January to make that a meaningful starting point? Hell if I know. But I’m confident a PhD in Economics wouldn’t disingenuously cherrypick a date range and data set just to make a partisan point, so I’ve no choice but to place my faith in Professor Perry’s scholarly judgment.

So what does this say about the impact of Seattle’s $15 minimum wage ordinance, which took an initial step to $11 an hour in April? Professor Perry doesn’t explicitly say, but I think the implications of his research are crystal clear: Seattle’s higher minimum wage is depressing food service employment in the lower-wage areas surrounding the city.

To understand Professor Perry’s startling conclusion, you have to understand the data set with which he is working. The Seattle-Tacoma-Bellevue MSA covers all of King, Pierce, and Snohomish counties, an area with a total population 3.61 million—more than half of the state’s estimated 7.06 million inhabitants. The city of Seattle proper however, with a population of 668K, only accounts for 18.5 percent of the Seattle-Tacoma-Bellevue MSA.

Clearly, Professor Perry must understand that an MSA more than five times the size of the city proper can’t tell us much on its own about the employment effects of the minimum wage within Seattle—I mean, he has a PhD in Economics, for chrissakes. So given the rigors of his profession, any conclusion he might draw can only be made within the context of additional data.

Fortunately, we’ve got plenty of other data to work with. For example, friend of the blog Invictus has been providing us with weekly updates on Seattle food service permits showing a roughly 3.2 percent increase in the number of establishments in-city since the start of the year. But what do the number of food service establishments tell us about the number of food service employees? Actually, quite a lot.

The US Census Bureau provides detailed employment data at the city, county, and MSA level every five years, and Seattle’s ratio of food service employees per food service establishment has stood near 14.5 in 2002, 2007, and 2012. And since there’s no reason to suspect a substantial shift in this ratio in the three years since the last city-level report, we must logically conclude that Seattle’s 3.2 percent increase in the number of food service establishments since the start of the year roughly correlates to a 3.2 percent increase in Seattle’s number of food service employees.

Meanwhile, the state provides monthly county-level data jobs data, which, seasonally-adjusted, shows a 2 percent increase in food service jobs since the start of the year in King County. Since we know Seattle’s food service job growth is roughly 3.2 percent year-to-date, and historical Census data tells us that Seattle accounts for about half of King County’s food service employment, we can extrapolate the data to conclude that the number of food service jobs in non-Seattle areas of King County have only grown by about 0.8 percent year-to-date.

In other words, food service jobs are growing four times faster in Seattle than in lower-wage surrounding King County. Wow!

What about the rest of the MSA? Seasonally adjusted, state data shows Snohomish County food service jobs growing at only 1.3 percent year-to-date, while food service jobs in Pierce County have actually declined by 0.5 percent. Thus, if there has been a loss of bar and restaurant jobs in the Seattle-Tacoma-Bellevue MSA, the loss has come entirely from Pierce County—where the Tacoma city council recently failed to raise the minimum wage. Food service jobs in the rest of the three-county MSA—especially in higher-wage Seattle—continue to grow.

So thank you, Professor Perry, for proving the job-killing impact of Pierce County’s lower minimum wage.

Yes, I know, that’s a lot of math based on a lot of assumptions drawn from a lot of random, unrevised, overly-broad, and noisy data. But Professor Perry has a PhD in Economics, and I’m only following his scholarly lead.

Or, if you don’t trust my math, you could just look at the Federal Reserve data for the Tacoma-Lakewood Metropolitan District (which includes all of Pierce County) and double check my conclusions for yourself:

fredgraph-2

Presumably, Professor Perry must know that these finer (though still overly-broad) metropolitan district data sets exist. And he must also know that the Seattle-Bellevue-Everett MD (just King and Snohomish counties) shows a year-to-date food service job gain, not a job loss. And since I can’t believe a PhD in Economics would really mean to imply that Seattle’s minimum wage ordinance was costing the city jobs—when all the data clearly points to the opposite—I can only assume that Professor Perry has drawn the same conclusions as I.

 

Latest Restaurant Jobs Data Proves Nothing Except the Fact That We Shouldn’t Believe Mark Perry

The Perry Slump has almost totally disappeared.

The Perry Slump has almost totally disappeared.

A couple months ago at the conservative American Enterprise Institute, economist Mark Perry wrote that according to the St. Louis Fed, Seattle’s minimum wage was turning out to be a huge failure. “The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession,” Perry wrote.

Problem is, Perry’s allegation wasn’t true. The dip proved absolutely nothing about our minimum wage. We’ve talked at length about how the numbers were based on a much larger geographic area than just Seattle, which makes the data meaningless. Seattle’s increased minimum wage would not be responsible for job losses in Tacoma, for example.

And then the next time the St. Louis Fed’s restaurant employment numbers were published, they indicated the largest month-over-month gain that the region has ever seen. This should be obvious, but I’ll say it again for people who confuse correlation with causation: this does not mean that every question relating to the increased minimum wage has been settled. That month-over-month gain relates to a very large geographic area, and so it’s impossible to attribute the gain to Seattle’s minimum wage.

So let’s bear all that in mind when we look at the very latest set of numbers from the St Louis Fed, which fall juuuuuuuuust a little short of the all-time seasonally adjusted gain. Does this mean the $15 minimum wage is settled? Again, just the same as I said in the above paragraph, no it doesn’t. It’s going to take a long time before we can quantify the effects of the increased minimum wage.

So why am I even bothering to comment on this? Do these numbers prove anything at all? Yes. They do prove one thing conclusively: Mark Perry shouldn’t be allowed to predict the future based on a single data point. The fact that Perry’s report got as much play as it did on conservative media is a disgrace.

AEI’s Mark Perry Inadvertently Makes the Case that $15 is 31% Below the Peak Minimum Wage

Seattle2017

Over at the American Enterprise Institute’s Carping Diem blog, Professor Mark J. Perry flexes his Excel spreadsheet muscles by producing a chart (above) tracking Seattle’s minimum wage since 1938. The dark blue line is the real (inflation-adjusted) minimum wage in 2015 “dolalrs” [sic]. The light blue line you can ignore; nominal dollars are just plain stupid.

Pointing out that Seattle’s  2017 minimum wage of $15 an hour will be about 36 percent above its 1968 peak (actually, closer to 32 percent when you account for two additional years of inflation), Perry asks: “Economic death wish? Free lunch?”

Well, to help Professor Perry answer his own question, I’ve annotated his chart (below) to put his numbers in some actual, you know, context:

anotated_perry_chartTurns out that Seattle did quite well during most of the first three decades of Perry’s chart, quickly growing to become our nation’s 19th largest city. It was only after the federal minimum wage was unpegged from productivity growth that Seattle’s economy hit the skids. Then, starting in the late 1980s, right around the time Washington State started boosting its minimum wage substantially above the eroding federal rate, Seattle’s economy started to boom! Today, Seattle not only has one of the highest minimum wages in the nation, it is also one of the fastest growing big cities!

Sure, correlation does not equal causation. But it’s hard to look at past performance and conclude that a $15 minimum wage is some sort of economic death wish.

Still, the larger problem with Perry’s chart is that when he talks about our 2017 minimum wage being 36 percent above the 1968 peak (well, 32 percent), he glosses over the question, peak of what? For example, from 1938 through 1968—through Democratic and Republican administrations alike—there was a bipartisan commitment to raising the real value of the minimum wage roughly in step with rising productivity. Just take a look at the chart below (rather than the lazy straight lines I pasted into Perry’s chart):

Productivity vs Min. Wage (via CEPR.net)

Productivity vs Min. Wage (via CEPR.net)

That’s productivity growth versus the real federal minimum wage, rather than Seattle’s, but the point remains the same. Through 1968, the minimum wage largely tracked productivity—not inflation or median wage or anything else. So if Perry truly believes that the 1968 minimum wage is a meaningful standard by which to compare Seattle’s 2017 minimum wage, wouldn’t it be more accurate to describe $15 as 31 percent below the productivity-adjusted peak rather than 32 percent above?

If Perry says “no”—that productivity is not an index by which we should adjust the minimum wage—then what’s his point? That $15 is economic suicide because it’s 32 percent higher than some arbitrarily arrived-at number? That’s not much of a persuasive argument. But if Perry says “yes”—that the productivity-adjusted 1968 minimum wage is a reasonable standard by which to judge future minimum wage increases—isn’t he just validating the very notion of a productivity-adjusted minimum wage?

The 1968 metric is either bullshit or it isn’t. Which is it, Professor Perry?

Forbes, Fox, and AEI: The Axis of Idiocy

Axis of EvilOf course this is how these things work. First Professor Mark “Connect the Dot” Perry of the American Enterprise Institute puts forth a stupid theory about some left-wing conspiracy to cover up the disemployment effects of a $15 minimum wage by gradually phasing it in, then Tim “Superfluous Adjective” Worstall echoes the meme at Forbes.com, calling it an “excellent logical point” (as opposed to one of those “awful logical points” or something). Next, no doubt, we’ll be hearing this new conventional wisdom from the mouths of Fox News and other propaganda outlets.

It’s just like making sausage. Only with more offal.

Perry and Worstall ask, “if an increased minimum wage is such a good idea then why delay implementing it?” Their conclusion: because $15 advocates know it will destroy jobs, and we’re just trying to hide the impact within years of data. Because, I presume, we’re evil!

Okay. Maybe. I suppose it’s possible that the real mission of $15 advocates is to put millions of Americans out of work. Last time I looked in the mirror I wasn’t twirling a cartoon villain mustache, but I’m pretty sure I could grow one if I wanted to.

Or—and perhaps I’m reaching here—we might want to consider the following alternative hypotheses for why we are phasing in the $15 minimum wage:

  1. Um… we always do it this way.
  2. Because, politics!
  3. We didn’t want to kill jobs.

The first hypothesis should be the easiest to understand as it is backed up by 80 years of historical fact: minimum wage phase-ins have always been the norm. Nothing new here. Simple as that. This minimum wage hike is being implemented no differently than most others.

The second hypothesis should also be pretty obvious to anybody who has observed the political process up close. Seattle’s two-tiered excruciatingly long phase-in is the result of our excruciatingly consensus-obsessed political process. A lot of minimum wage advocates wanted an immediate jump to $15 (they even adopted the name 15 Now!), but, no, we had to extract a compromise between labor and business leaders, because that’s how we do things here in Seattle. (Remember, this is the city that is still debating how to replace an earthquake-damaged highway 14 years after the trembler.) San Francisco is less process-obsessed, and so they implemented a more sensible straight-up three-year phase-in.

But given their blind faith in “the time-tested, irrefutable, ironclad economic laws of supply and demand,” the third hypothesis is likely the most difficult for the free market theocrats to wrap their minds around: perhaps some $15 advocates believe that an immediate hike would have been too disruptive, while a phase-in gives business owners enough time to adjust their models to the new reality? Because, you know, humans are adaptable.

Which brings me to where I think Perry and Worstall really go wrong—they may be very familiar with neo-classical economic theory, but they don’t seem to have much experience with actual human beings. To repeat: humans are adaptable. We’re innovative. We’re resilient. Just because we might start with a low-wage business model doesn’t mean we can’t thrive with a high-wage one.

Also, we’re nuanced. At least, some of us. It is no more “intellectually inconsistent” to posit that an immediate jump to $15 might cost jobs while a three-year phase-in wouldn’t, than it is to acknowledge that a $50 minimum wage would be an economic disaster while a $15 minimum wage would not. Perry and Worstall are so tightly sealed within their neo-classical closed equilibrium system that they’re incapable of accommodating a whiff of nuance.

And finally, we’re not all evil. Again, most of us. Yet to accept Perry and Worstall’s logic that a phase-in proves we know a $15 minimum wage will hurt the workers it’s intended to help, but we continue to advocate for it anyway, you must also logically conclude that we are simply bad people. And that’s what’s really missing from Perry’s stupid conspiracy theory: a motive. What’s our motive? What could I possibly gain from promoting a policy I know to be inherently bad?

There’s a shtick I sometimes employ when critiquing an adversary, in which I sarcastically ask the question “Liar or Idiot?” The joke is that I’m giving them the benefit of the doubt as to intent. But Perry and Worstall don’t even grant us that courtesy. They just assume ill-intent, whatever our motive, and in doing so they fail to follow the basic dictum of Occam’s Razor—that the hypothesis relying on the fewest assumptions is likely the most correct.

I could speculate on Perry and Worstall’s motives. Perhaps they’re just shilling for their corporate overlords? Perhaps they’re less interest in actual fact than they are in scoring rhetorical points? Perhaps they’re lashing over the frustrating lack of data to support their “ironclad” assumptions? But I think the most obvious explanation for their fervent opposition to a livable minimum wage is that their economic theories are flat out wrong.

Simple as that. I’m right and they’re wrong. No need to impugn anybody’s motives by imagining some far-out political conspiracy.

Seattle Restaurants Post Largest Month-to-Month Jobs Gain Ever!

Statistical noise, or absolute proof that higher wages produce more jobs?

Statistical noise, or absolute proof that higher wages produce more jobs?

I love to taunt the trickle-downers with tweets of “Damn you, $15 minimum wage!” every time another impressive monthly jobs report is released for booming Seattle. But of course, I’m only joking.

One month’s jobs data on its own is little more than statistical noise when it comes to proving the positive or negative impacts of Seattle’s high-minimum wage experiment, while what useful jobs data we have is incredibly coarse—the entire Seattle-Bellevue-Tacoma metropolitan area rather than just Seattle proper. And who’s to say at this point that Seattle’s booming jobs market wouldn’t be booming even more if not for our higher minimum wage?

It will take years to gather and analyze the relevant economic data, and even then there will be room for reasonable disagreements. So out of respect for, you know, facts, I generally limit my short term analysis to an occasional mocking tweet.

But conservative commentators have proven far less cautious honest.

First there was the Washington Policy Center’s effort to intentionally misrepresent a handful of Seattle restaurant closings into a case study of a minimum wage hike gone awry, despite the protest from restaurateurs that the minimum wage had nothing to do with their decisions. Then there was the hullabaloo over the minimum-wage-linked closing of a single pizzeria, a lone data point the conservative propaganda machine attempted to inflate into a trend. (Ironically, the closed pizza place is being replaced by a better pizza place.)

Then Mark Perry from the conservative American Enterprise Institute (allegedly a “think tank”) attempted to spin a one-month downturn in the preliminary seasonally-adjusted food service employment data for the larger Seattle-Bellevue-Tacoma metropolitan area into “evidence” that Seattle’s minimum wage ordinance may already have “started having a negative impact on restaurant jobs in the Seattle area.” Really.

Which is why we should all enjoy a little fun mocking Perry with the chart above—courtesy of our good friend Invictus—showing the largest month-over-month gain in restaurant employment ever recorded over the life of the data set!

Sigh.

Look, when I snarkily retweet a single data point—or Forbes’ libertarian propagandist Tim Worstall tortures one in one of his typically torturous posts—well, that’s almost okay, because we’re just dumb bloggers. But Professor Perry is an actual economist, for Chrissakes! So when Perry claims that “the loss of 1,000 restaurant jobs in May” (and that’s seasonally adjusted data—the real number of restaurant jobs actually increased by 1,000 in May) is indicative of anything more than a fluctuation in one month’s data, he knows better.

He’s just hoping you don’t.