Cal minimum wage hurts Asians, whites and blacks, “helps” Hispanics
The Los Angeles Times has an article describing how the new minimum wage law is contributing to exactly the sort of industry outflow that I predicted:
After years of net losses, moving production out of Los Angeles is necessary for the survival of American Apparel, industry experts said. The company initially considered staying in California and moving to the city of Vernon, according to a person familiar with the discussions who was not authorized to speak publicly. After the state raised the minimum wage, executives began looking at manufacturers in the South, the person said.
Sensing opportunity, garment makers from Las Vegas, El Paso, Texas, and Las Cruces, N.M., have already come to the Southland to tout the benefits of moving production to their regions, said Sohn, the economist.
To be fair, the minimum wage is not the only factor, high real estate costs in LA (also due to foolish government regulations) are also a problem. I predict that the gap between the population growth rate gap between Texas and California will accelerate further. Unfortunately, I expect the GOP to sign off on an increase in the national minimum wage after the 2016 elections, which will narrow the gap. So some of those apparel jobs will go right past Texas, all the way to Mexico. (That’s assuming the GOP still exists in 2017, hopefully the party will be as defunct as the Whigs.)
People who study the minimum wage often miss the indirect costs, such as reduced benefits. Another example is queuing costs. In the economic development literature there are models where the urban formal sector pays wages far higher than those earned in the rural and informal sectors. So peasants flock to the cities, and hang around waiting for one of those good jobs to open up. Being unemployed 1/2 the time at $5/hour, is better than working full time at $2.50 hour. Because labor markets in the US are fluid, the theory of “compensating differentials” insures that hotel maids in LA can’t really be “better off” than hotel maids in Houston or Phoenix, even if they earn more. If the LA government tries to make them better off, enough people will migrate to equalize total utility of being in the hotel maid profession, between Texas and California, if only through queuing costs.
As usual I’ve buried the lede. Here is a breakdown of who “benefits” from the minimum wage in California, by race:
Note that the California population is 42.3% white, 37.6% Hispanic, 14.9% Asian, and 7.8% black. If you don’t benefit, then you are hurt by the higher prices. Looks like African Americans come out on the short end of the stick, just as when the minimum wage was first enacted in the 1930s, to protect white jobs.
Tags:
16. April 2016 at 07:17
(That’s assuming the GOP still exists in 2017, hopefully the party will be as defunct as the Whigs.)
Why? You don’t have a multi-party system in this country, and, bar for a brief period running from about 1854 to 1862, you never did. You have a choice of Party A, which represents the teachers’ unions, the trial lawyers, Hollywood, the helping professions, and the sundry word-merchant occupations, and rallies fractions of the working class with racial appeals. You have a choice of Party B, which is an omnibus of every other sector of society. Variants of this pattern are to be found in most occidental countries and are emergent even in France (which has had famously fractious politics). The Whigs imploded because they were an omnibus and could not form a coherent position on salient issues of the day. Well, the closest you have to an advocate for MOAR immigration is John Kasich, who’s good for 23% of the ballots in Republican primaries, give or take. The Republicans are coherent enough on other issues, and also have an adequate position in statehouses, so your Whig scenario isn’t happening. Gary Johnson is a putz.
16. April 2016 at 07:52
I’m not sure I agree with that last part. If Hispanics are disproportionately subject to the minimum wage, doesn’t that also mean that they will be disproportionately subject to its long-run negative effect on jobs? So if blacks are disproportionately not subject to the new minimum wage, maybe in the end that will mean they benefit, in relative terms.
I actually thought in large part the point of the high minimum wage in California was to curtail or reverse Hispanic immigration. I mean, maybe they don’t come out and say that….
16. April 2016 at 08:19
Your claim implies that everyone who does not get a raise is hurt by a minimum wage increase. It’s not clear to me why that’s necessarily true.
16. April 2016 at 08:37
“Unfortunately, I expect the GOP to sign off on an increase in the national minimum wage after the 2016 elections, which will narrow the gap.”
-So you expect Trump to be elected? The GOP is the party of obstruction; it will refuse any minimum wage increase until a Republican is in office as President.
“So some of those apparel jobs will go right past Texas, all the way to Mexico. (That’s assuming the GOP still exists in 2017, hopefully the party will be as defunct as the Whigs.)”
-What’s the big issue that’s supposed to divide the GOP here? Trump hasn’t proposed a single policy that’s inconsistent with Romneyite/Cheneyite Republicanism. None of the policies he’s proposed are anywhere as big+controversial as expanding slavery to the territories. Art Deco is right. And you’re delusional.
16. April 2016 at 09:34
Art, You said:
“The Republicans are coherent enough on other issues,”
I guess that’s why the plan to nominate a fan of partial birth abortion, no cuts to entitlements, protectionism, eminent domain even when there is no “public purpose, single-payer health care plans, massive budget deficits, no more security treaties with Japan, Korea, etc., etc. Quite a coherent ideology.
anon, Yes, that’s why I used scare quotes in the title. But I should have kept using them.
Russ, The standard assumption is that they’d pay higher prices.
Harding, You said:
“The GOP is the party of obstruction; it will refuse any minimum wage increase until a Republican is in office as President.”
You have no imagination. They will be a chastened party in 2017, totally humiliated, and they’ll go along with Hillary. She’ll throw a bone like corporate tax reform (which she supports anyway.) Romney has already caved on the minimum wage; trust me the GOP will cave in 2017. The political mood of the country will be TOTALLY different from today, that’s always what happens after a blowout. In 1981, frightened Democratic Congressmen often voted for Reagan’s spending cuts.
The interesting question will be whether the Fed keeps targeting inflation at 2%, as the minimum wage rises to $12.
16. April 2016 at 09:36
“That’s assuming the GOP still exists in 2017, hopefully the party will be as defunct as the Whigs.”
Has this blog been taken over by left wing pundits from Moveon.org?
16. April 2016 at 09:57
“That’s assuming the GOP still exists in 2017, hopefully the party will be as defunct as the Whigs.”
“The political mood of the country will be TOTALLY different from today, that’s always what happens after a blowout.”
Please, don’t adopt Tyler Cowen’s nasty habit of using a comma to separate two sentences!
16. April 2016 at 10:39
I guess that’s why the plan to nominate a fan of partial birth abortion, no cuts to entitlements, protectionism, eminent domain even when there is no “public purpose, single-payer health care plans, massive budget deficits, no more security treaties with Japan, Korea, etc., etc. Quite a coherent ideology.
1. He’s not a ‘fan of partial-birth abortion’. He’s a businessman who has hardly given the question more than two minutes of thought, which is why you can cherry-pick sentence fragments from his public statements which make little sense collectively.
2. He’s not an advocate of ‘protectionism’ either, except in the debased sense than anyone who does not salivate when he hears the phrase ‘free trade treaty’ is a protectionist. His complaints about TPP and our relationship with China are read by your mind as an advocacy of the sort of domestic content legislation fashionable in the Democratic Party ca. 1983, or of Bismarckian ‘scientific tariffs’, or of Smoot-Hawley, or of exchange controls. Did he ever advocate any of this?
3. His complaints about ’eminent domain’ concerned a discrete project in Atlantic City. I wouldn’t subscribe to his stated view on principle, but I can appreciate his frustration.
4. We already have single-payer health care plans; they’re called Medicare and Medicaid. What we do not have is a roadmap to contain the public commitment to health care finance or to restore real prices in the realm of medical services. I’ve got a secret for you: Ted Cruz cannot persuade Congress to eliminate Medicaid and Medicare without something to replace them; neither can Gary Johnson. If Ted Cruz can persuade Congress to contain Medicare expenditure by putting the retirement age on a more rapid escalator or by adding deductibles every year, it will be an astonishing tour-de-force for Ted Cruz.
5. The Mutual Security Treaties with Korea, Japan, and Taiwan were a Cold War utility. Eventually, we’re going to have to make concessions to China in the Far East. It won’t matter if Cruz, Sanders, or anyone on the scale in between is in the White House when push comes to shove. Those concessions are, one might wager, going to take the form of conceding hegemony in the Far East to China, because they’re just the biggest baddest motherf***** on the block. China is not Iran or Cuba. Treating with them is not a discretionary policy.
16. April 2016 at 11:01
The political mood of the country will be TOTALLY different from today, that’s always what happens after a blowout.
Your skills as a prognosticator need work. There is almost no historical precedent for a blowout by an incumbent party in these particular circumstances, nor survey research which would indicate that Hellary is capable of a blowout against Kasich or Cruz, nor survey research which would indicate it’s more than a speculative possibility v. Trump. As for Congress, presidential-candidate coattails have generated small and/or inconsequential effects about 85% of the time in the last 60 years. The Democratic Party may take the Senate this year (the calendar is bad for the Republicans), but the risk of a shift large enough for them to take the House is minimal. Such a shift did occur in 1964 and 1980, but we had a less pillarized electorate at that time. Even in the perfect storm of the 2008 election, only 20 seats shifted in the House.
16. April 2016 at 11:03
And you’re delusional.
I’d suggest that the moderator and TallDave fancy their sectarian complaints are held by much larger swaths of the public than in fact they are.
16. April 2016 at 11:35
Gene, I’m honored that you think I write as well as Tyler.
Art, You said:
We already have single-payer health care plans; they’re called Medicare and Medicaid.”
I don’t think you know what the term “single-payer” means. Hint, “single-payer health care plans” is an oxymoron, at least for a single country.
You said:
“Even in the perfect storm of the 2008 election, only 20 seats shifted in the House.”
I never said they’d lose the house, and I don’t believe they will. I used the 1981 example, and the Dems did not lose the house in 1980.
(Was that two sentences Gene?)
16. April 2016 at 11:45
“Those concessions are, one might wager, going to take the form of conceding hegemony in the Far East to China, because they’re just the biggest baddest motherf***** on the block.”
So were the Soviets. And what “hegemony” means in this context? What will the Chinese be able to get away with that they can’t get away with now because America doesn’t recognize their hegemony?
16. April 2016 at 11:58
I don’t think you know what the term “single-payer” means.
Yes, I do.
16. April 2016 at 12:00
I never said they’d lose the house, and I don’t believe they will. I used the 1981 example, and the Dems did not lose the house in 1980.
The Democratic Party lost 35 seats and a corps of Dixiecrats gave Mr. Reagan a conditional majority on programmatic questions on the House floor.
I take it ‘blowout’ does not really mean blowout.
16. April 2016 at 12:05
So were the Soviets.
Not generally. In Eastern Europe they certainly were.
And what “hegemony” means in this context? What will the Chinese be able to get away with that they can’t get away with now because America doesn’t recognize their hegemony?
The franchise to dictate outcomes in foreign relations, absent American input, or, as sometime China-hand John Derbyshire put it, a state of affairs wherein no country in the Far East has a close relationship with any extra-regional power.
16. April 2016 at 12:47
Art, Let me explain something to you. When I say “trust me, the GOP will cave in 2017.” I do not mean they will lose the majority, I mean they will follow Romney’s lead and vote for a higher minimum wage. That would be obvious to most people, but then you are not most people.
And when I say “single Payer” I mean single payer, not the sort of multiple payer regime we currently have.
And I’ll give you another hint. When progressives say they want a “single payer” system in the US, they don’t mean THEY WANT EXACTLY THE SYSTEM WE HAVE RIGHT NOW, which seems to be your assumption. No wonder you are so confused by what you read.
16. April 2016 at 13:09
ssumner, the last time the GOP suffered a blowout of the sort you’re describing was in 2008. And it only got more ideologically extreme after that. And there’s no reason to expect the GOP to be the Party of Compromise under the Third Clinton Administration. The reaction will be that the party failed by nominating a moderate in 2016 when it should have elected True Conservative Extraordinaire, the Senator Ted Cruz. And Cruz will not sell out (at least, publicly). He will make a massive show of obstruction. Imagine 2013, but on every issue. Hey, it worked for the 2014 election.
In any case, I’ve learned not to trust your political predictions after you’ve claimed Trump has almost no chance of winning the GOP nomination back in August.
And there’s no reason to expect the GOP to suffer a blowout this election year. At worst, they’ll get the states Romney got, plus Florida. At best, they’ll win the Presidency.
Also, Cowen almost always writes very poorly. You generally write much better than him. I don’t see what everybody likes so much about Cowen.
16. April 2016 at 13:35
And when I say “single Payer” I mean single payer, not the sort of multiple payer regime we currently have.
They do not have what you seem to be referring to even in the UK. I hardly think Trump is advocating Soviet institutions in American medical care.
“trust me, the GOP will cave in 2017.” I do not mean they will lose the majority, I mean they will follow Romney’s lead and vote for a higher minimum wage. That would be obvious to most people, but then you are not most people.
Do you work in Congress or cover it for the National Journal? No, you don’t. Ordinarily, categorical statements like this are ill-advised, but you’re completely out of your element making this one. Why don’t you stick to predicting what some manure-ass faculty committee at your own workplace will do? And, yes, ordinary laymen who read papers can tell this is not your best subject quite apart from your locus of employment.
16. April 2016 at 13:43
ssumner, the last time the GOP suffered a blowout of the sort you’re describing was in 2008. And it only got more ideologically extreme after that.
They did not suffer a blowout in 2008. BO’s margin was no better than George Bush the Elder’s in 1988 and it was an unremarkable margin for a competitive race. Given events, it was surprisingly close. As for Congress, they lost 20 seats the GOP House delegation was after that election about the same dimensions as it had been after the 1988 election. It was the compounding of two sets of losses which left them in a reduced position.
You’ll recall that the Republican Senate caucus posed as paladins of the Medicare program in 2009. Ayn Rand votaries these guys ain’t.
16. April 2016 at 13:49
they don’t mean THEY WANT EXACTLY THE SYSTEM WE HAVE RIGHT
They want to extend the system which prevails now among the elderly to a general clientele. Henry Waxman has been trying to accomplish this piecemeal for 40 years.
I wouldn’t mind, provided decision-making was decentralized to state legislators, the public commitment was circumscribed, and there were high deductibles conjoined to real (and posted) prices under the high-jump bar. What BO wanted was pre-paid everything with federal officials allocating costs through opaque strategems. (And various waivers for well-connected Democratic Party clients).
16. April 2016 at 14:24
Scott
We should have a wager. Republicans will be much of the same in 2017 as on recent years. They might be a little more open just because Hillary is right to obama but they will not have reconsider their strategy like you seem to suggest. Especially when they keep the house and Senate
16. April 2016 at 14:24
Harding, Is the model Germany after WWI, or after WWII? I say 2009 was Germany after WWI, and 2017 will be like Germany after WWII. Total capitulation.
Art, You said:
“I wouldn’t mind,”
Doesn’t really address the issue, does it? And how many comments have you posted here without one that addressed the post? Let’s see, 10 out of the 21. You’ve got 10 comments, none of which address the post. What does that make you?
16. April 2016 at 14:26
James, That’s a bet—I say the GOP supplies the votes needed to raise the minimum wage by the end of 2017. You say no. You’re on.
(Assuming the GOP still holds the house, if they are in the minority it makes no difference. Then the bet would make no sense.)
16. April 2016 at 14:33
“Not generally. In Eastern Europe they certainly were.”
Maybe not as surely as they were in Eastern Europe (where there was no Soviet domiastion according to President Ford), and the Japanese and the South Korea were modernizing rapidly their Armed Forces, but still the Soviets were the big boys of the area, and the USA may have had good reason for not trying to learn if the Japanese could stand to the Soviets alone. Nothing changed in this regard.
“The franchise to dictate outcomes in foreign relations, absent American input, or, as sometime China-hand John Derbyshire put it, a state of affairs wherein no country in the Far East has a close relationship with any extra-regional power.”
OK, but trying to understand the possible consequences of actions are important, so what happens after the Yankees go home (the schoolgirls in Okinawa probably will feel safer, but it is a side-effect)? Why are the Chinese so eager in seeing the Americans gone and the Japanese and the Koreans in having the Americans around?
16. April 2016 at 14:38
Wait raise the wage by how much though? I bet they’re willing to raise it to 9 Max. Hillary will want 12.
16. April 2016 at 15:10
What does that make you?
Someone who doesn’t have anything to say about the main post, bar that one parenthetical remark.
16. April 2016 at 16:23
The California minimum wage in 2020, adjusted for inflation, will be where it was in 1970. I am against a minimum wage, but fifty years of sideways drift does not strike me as a calamity.
However, what has destroyed California is property zoning, and subsequent soaring costs for retail and housing.
It would also be fair to legalize push-cart vending.
16. April 2016 at 17:33
It’ll only be WWII if the GOP loses the House and is relegated to a small minority. And that won’t happen.
17. April 2016 at 05:18
James. Any increase is capitulation, and I win.
Harding. It will be WWII if they are later ashamed of what they did.
17. April 2016 at 08:16
Trump cannot feel shame. Cruz can feel some, but not enough to calm down his instinct to stand against Hillary.
17. April 2016 at 18:32
Wasn’t 1970 a high-water mark for the minimum wage?