Study Finds Higher Min. Wages Bring Crushing Job Losses For Female And Minority Workers

Tyler Durden's picture

Anyone who has a basic understanding of elementary-level arithmetic and some common sense can easily explain why raising the minimum wage is bad for employment levels.  In a nutshell, higher labor costs simply improve the payback profile of capital investments in technology thus accelerating job losses.

We recently shared the following example regarding California's minimum wage hike from $10 per hour to $15.  At $10 per hour and a 10-year payback, employers may be reluctant to invest in new technology.  But, at $15 per hour and a 6-years payback, that investment become a no-brainer.

Payback Example 

Unfortunately, while these concepts are somewhat simplistic for most us, they have confounded left-leaning economists and politicians pretty much since the beginning of time.

And while no amount of empirical evidence will change their minds, here is yet another study, this time from Grace Lordan of the London School of Economics and David Neumark of UC Irvine, offering up evidence that raising minimum wages only serves to increase unemployment and disproportionately crushes female and minority low-income workers.

Entitled "People Versus Machines: The Impact of Minimum Wages on Automatable Jobs," the study found that each $1 increase in the minimum wage decreased the "share of lowskilled automatable jobs by 0.43 percentage point."  Here's a summary of Lordan's findings:

Overall, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers. Our estimates suggest that an increase of the minimum wage by $1 (based on 2015 dollars) decreases the share of lowskilled automatable jobs by 0.43 percentage point (an elasticity of ?0.11). However, these average effects mask significant heterogeneity by industry and by demographic group. In particular, there are large effects on the shares of automatable employment in manufacturing, where we estimate that a $1 increase in the minimum wage decreases the share of automatable employment among low-skilled workers by 0.99 percentage point (elasticity of ?0.17). Within manufacturing, the share of older workers in automatable employment declines most sharply, and the share of workers in automatable employment also declines sharply for women and blacks.

Min Wage

 

Meanwhile, the results are even worse for workers over 40, females and minorities...

For example, a higher minimum wage significantly reduces the shares of both younger (? 25) and older (> 40) workers in jobs that are automatable, by a larger magnitude compared to those aged 26-39. For the younger and older groups, the estimates imply that a $1 increase in the minimum wage reduces the shares in automatable work by 0.94 and 0.72 percentage points respectively (the corresponding elasticities are ?0.20 and ?0.17. Looking by both age and industry, for older workers (? 40 years old) the negative effect mainly arises in the manufacturing and public administration sectors (a decrease of 1.68 and 3.50 percentage points for a $1 minimum wage increase respectively), while for younger workers (< 25 years old) the effects are large in many sectors but the estimate is close to zero for manufacturing. The middle age group, also, exhibits a decline in the share of workers in automatable jobs in manufacturing when the minimum wage increases – a 1.21 percentage point decline for a $1 increase. Thus, older workers appear more vulnerable to substitution away from automatable jobs when the minimum wage increases.

 

On average, females are affected more adversely than males: in the aggregate estimates in column (1), the negative estimate is significant only for females, and is almost ten times larger, indicating that, for females, a minimum wage increase of $1 causes a decrease of 1.01 percentage points in the share of automatable jobs (the elasticity is ?0.14). Across industries, these negative effects for females are concentrated in manufacturing, services, and public administration; for example, a $1 minimum wage increase reduces the share of automatable jobs in public administration by 3.67 percentage points – an elasticity of ?0.41). For males, only the estimate for manufacturing is statistically significant; the estimated effect implies that a $1 increase in the minimum wage causes a decrease of 0.62 percentage point (an elasticity of ?0.13).

 

Table 3 also points to similar overall effects by race, with a $1 increase in the minimum wage reducing the share in automatable jobs by 0.57 percentage point for whites and 0.72 percentage point for blacks. However, the effects are heterogeneous across industries. There are large estimated effects in manufacturing (1.19 percentage points) and public administration (1.53 percentage points) for whites, although only the first estimate is statistically significant. For blacks, there are large and statistically significant decreases in automatable shares in manufacturing and transport (declines of about 4.5 percentage point in both).

Min Wage

 

But, as usual, we're sure this extra data will have no impact on Bernie's "Fight for $15."  Amazing how some politicians will embrace math and science when arguing climate change but completely reject it when discussing minimum wage...wonder why?

$15

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Buckaroo Banzai's picture

WTF I love minimum wage laws now.

political_proxy's picture

aint the sheeple great at perpetually fucking themselves 

jimmy c korn's picture

Think I'd rather have machines prepare my food than those people in that picture above.

847328_3527's picture

Machines will also be much better at maff I bet.

PT's picture

Maff is hard.  No need to worry about maff.  All you need to know is that you are in eternal debt to Honourable Supreme Loving Lord and Leader Ever Holiness Goldman Sachs who loves you and that is why you must do exactly what they say all the time it's for your own good.

BlueGreen's picture

commandment one is born

LindseyNarratesWordress's picture

Think that this shit is bad, NOW, just wait until the robots REALLY begin replacing all of those workers.

 

Our collective-future is FUCKED, Ladies and Gentlemen, unless and until THE MASSES UNDERSTAND, AND APPRECIATE, THE SERIOUSNESS OF WHAT IS INTENTIONALLY BEING DONE AGAINST US, ALL.

 

THE HUMAN-RACE IS UNDER-ATTACK, BY WHAT CAN ONLY BE DESCRIBED AS A "MALEVOLENT FORCE", AND THAT IS PRETTY MUCH ALL THAT I KNOW FOR CERTAIN.  Well, that is NOT, necessarily, "all" that I know for certain, given-the-FACT that (((they))) have told us, ALL, REPEATEDLY, over-the-centuries, what (((they))) have intended to do, and ARE doing, now.  Look-up "The Kalergi Plan", "The Six Million Myth", and "Barbara Lerner Spectre and multi-culturalism", and you will see PRECISELY what I mean.

 

Seriously.

 

Lindsey

We Are The Priests's picture

Check out Electronic Virtual Intelligent Life, or EVIL.  Start here

LindseyNarratesWordress's picture

Mr. Priest, I know all about that, thanks to Genius Max Igan.  All of you people would do yourselves-a-tremendous-favor by taking-the-time to listen to this conversation about what is being planned for "The 5G Revolution", and it will be an absolute CATASTROPHE, on MYRIAD-OF-LEVELS.

 

Please, just listen to it, and decide for yourselves if it makes-sense, or not, because this is FAR too important to pretend like it is not a serious threat, as far as I am concerned.

 

http://youtu.be/ABRLIQSo-J4

 

We are, ALL, under-attack, by "something", and it is absolutely terrifying.

 

Lindsey

 

 

We Are The Priests's picture

Max Igan also has some interesting commentary on Virtual Life, Autonomic AI, 5G, and the Internet of Things, which can be found here.

political_proxy's picture

When I was a kid my mom always told me "be sure you never live in a an ever on microwave".

5g is a killer of people

PT's picture

The robots are supposed to do all the work.  That was the whole idea.  Now we just have to stop pretending that people need to work 100 hours per week to stay alive.  Get the robots to do as much work as possible.  Let the people share whatever work is left over.  What a novel idea.

PT's picture

Re " In a nutshell, higher labor costs simply improve the payback profile of capital investments in technology thus accelerating job losses." :

Income minus Expenses (INCLUDING LABOUR COSTS) Equals Profit.  Business school day one says, "Add up your costs, then add profit, that is your price."  Business school day two says, "Charge whatever you can get away with without your customers complaining too loudly."    Price is a function of what your customers are prepared to pay.  Low-paid labour is cream.
Lower labour costs allow the company to buy Capital with Cash instead of Borrowing the money.  One way or another the robots are coming.

So is what your customers can afford related to what your labour is paid?
How much do your customers earn?
Are their earnings a function of the minimum wage?
Is it the minimum wage?
Posh up-market restaurant vs McDonalds - your answer will vary.
GM vs Ferrari  - your answer will vary.

libertyanyday's picture

You want to see the demise of society, have 150 miillion people sitting around bored with nothing to do for the rest of their miserable lives..........MOST of mankind needs something to bitch about.....

rejected's picture

Definitely a bad week for white males it seems. Tylers are on a roll. 

Not only are we white supremacists, racists, bigots, misogynists but now we are unfairly keeping employed.

Next up?

Folkvar's picture

Well you know what they say - the cream always rises to the top!

PT's picture

What's that?  You mean that now the productive people are being paid what they are worth, the company can no longer afford to employ the dead-beats and free-loaders?  Why didn't yous do this years ago???

Sirius Wonderblast's picture

Those who are good at arslikhan and butt-slurping will be kept on as first priority - competence will have f-all to do with it. Incompetent, i nsecure managers will see to that.

wisehiney's picture

Dog food laced with birth control.

We Are The Priests's picture

So, what are we really saying here?  Mandated minimum wage laws are sexist and racist?  Oh, please.  Say it isn't so.

Creative_Destruct's picture

"....no amount of empirical evidence will change their minds"

Empirical evidence means NOTHING to the good intentioned, wishful thinking, self-delusional, post-modern progressive.

Just say nice sounding things and pretend that makes it so.

Infants.

moneybots's picture
"Study Finds Higher Min. Wages Bring Crushing Job Losses For Female And Minority Worker"

 

Is this why the Democratic party supports minimum wage increases?

LindseyNarratesWordress's picture

No, Mr. Bots, that is not-at-all, NECESSARILY, why The DNC supports it.  The REAL reason that they support it, is because THEY ARE PANDERING TO THEIR BASE, AND ARE LITERALLY IGNORANT OF THE DEVASTATING EFFECT OF INCREASED-AUTOMATION, or robots taking-the-jobs of those unskilled laborers, like burger-flippers, cashiers, and ware-house workers.

 

That is the truthful, and direct, answer that you are seeking.

 

Lindsey

Sirius Wonderblast's picture

They are pandering to their paymasters, not their voter-base. The voters have sod all say in the matter, having been given Hobson;s choice for so long. Why do you think Trump was elected?

Arrest Hillary's picture

Women have their little mink money maker .... their furry ATM ?

c2nnib2l's picture

when people ask me if I support higher national minimum wage I normally reply with question

Why do we send financial support to Africa when we could just ask their goverment to increase their minimum wage to $ 20 per hour and things will work out just fine for them 

LindseyNarratesWordress's picture

Mr. Cannibal, read my comment, near the top, to see my anwer to your question, OK?

 

Lindsey

Vatican_cameo's picture

 

This is obviously Propaganda, Bernie promised it would solve all our problems.

c2nnib2l's picture

Of course Bernie is right. We should tell Maduro to increas minimum wage in Venezuela ! just watch the Venezuela economy lift off ! Rocket ! 

lew1024's picture

But of course, the 'math and science' behind climate change is completely bogus also.

Falling Down's picture

Working in manufacturing, I'm seeing a huge, as in colossal, push towards robots.

It's here, folks. We're talking small job shops are doing it, and they don't want to pay the folks who tend to the robots/feed them parts/etc., any decent money either.

The end game is nigh.

Keep your powder dry, this won't go well.

Deplorable's picture

China is in for a shitstorm when they start replacing their minions with robots.

LindseyNarratesWordress's picture

Mr. Depolorable, China has been doing it, for AT LEAST two years, now:  http://www.youtube.com/watch?v=aVMYcYyq-5Y

 

Lindsey

AGuy's picture

"Working in manufacturing, I'm seeing a huge, as in colossal, push towards robots."

Just be the guy that maintains, upgrades, or programs the robots and you be fine. If you handle product movement, you probably don't have much time left.

Business Darwinism: The workers that are best able to adapt to change will prevail.

darkpool2's picture

What ?????....private sector employers recognize that women and minorities aren't worth as much?.....say it ain't so

PT's picture

... and they would not let go of all that dead wood until forced to pay the producers what they are worth.  Face it.  There is no maximum wage law.  They could have paid the producers what they were worth years ago, but instead they chose to under-pay the producers plus hire a lot of dead wood.  Just goes to show that when something is too cheap, people go and waste it.

chrsn's picture

I appreciate your showing us the facts, but we all know the forces behind this don't give a shit about the actual consequences.

It is about feelings and perception, not results

johnjkiii's picture

No, it's actually about appealing to the stupidity of the sheeple who will then vote to keep the Bernie's of the world employed in the cushy, high paid political jobs where Bernie et al get to vote on which law they have to obey, how high they can push their own wages & perks and - most important - which laws they are not sunject to. By the time the morons figure it out Bernie will be retired on the beach somewhere laughing is as off.

aloha_snakbar's picture

And I am sure that somewhere in there it is the 'white mans' fault...

EternalAnusocracy's picture

I always chuckle when I read comments like yours which assumes that whites are some sort of "power holders" or elites.  Most of the "whites" are struggling to pay the bills that keep coming, and are barely surviving.  The whites is a totally bullshit label to shut people up.  There  is no actual white priviledge.  The so called minorities use this "white priviledge" label to butter up the whites, when the fact is that 80% of the whites in USA are just hand to mouth wage slaves, just like most blacks, Mexicans and the rest of the hodge podge that constitutes these United States.  The richest nation in the world is mostly made up of very fat, unhealthy, somewhat disabled, hand to mouth, barely surviving wage slaves, or EBT princelings, or welfare queens, who would be as poor as a sub-saharan bushman, if the government handlouts stopped.  So, please cut out the "white man" label as if "the white man" is some fucking guy flush with cash, and smokng a Cuban cigar.  The white man is practically the same as any other man -- barely surviving from month to month.  

GoldenDonuts's picture

Uhhhhhh, I think that he was being sarcastic.

Moe Howard's picture

This should not need to be explained on ZH.

 

IMHO of course.

JuliaS's picture

This is one area where we don't have to lift a finger. These people are destroying themselves with their own good intentions.

EternalAnusocracy's picture

Why is a STUDY needed to learn the obvious?  Who pays for these "studies" which always conclude the obvious?  

Kulafarmer's picture

Give them exactly what they ask for then fire them all!
Let a machine do what is a waste of money to pay some baboon with no education and almost no skills, the machine will work 24/7 with no complaints

RopeADope's picture

This study is garbage if it does not account for the effect already mentioned on Zerohedge.

http://www.zerohedge.com/news/2012-11-27/when-work-punished-tragedy-amer...

rockstone's picture

Good. I've changed my position. Make it even higher.