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Thursday, July 11, 2019

The Effects on Employment and Family Income of Increasing the Federal Minimum Wage

Justin Falk Congressional Budget Office

Date Posted:: July 11, 2019
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Raising the federal minimum wage to $15 by 2025 would result in a 0.8% reduction in employment, equating to 1.3m fewer jobs in an average week, according to @CBOWashington. Real family income is expected to decline by 0.1%, or $9bn.

The Congressional Budget Office (CBO) projects that raising the federal minimum wage to $15 by 2025 would result in a 0.8% reduction in employment, equating to 1.3m fewer jobs in an average week. While 17m workers earning below $15 per hour would see wage increases, and an additional 10m workers slightly above this threshold would also benefit, these gains are offset by higher joblessness and increased consumer prices due to elevated labor costs. Consequently, real family income is expected to decline by 0.1%, or $9bn, as businesses pass on costs and reduce output, impacting the nation's capital stock.

Takeaways by Macro Roundup^® AI

CBO projects that raising the federal minimum wage to $15 by 2025 would cut employment by 0.8%, equal to 1.3m fewer jobs in an average week.
CBO estimates 17m workers earning below $15 per hour would see wage increases, along with an additional 10m workers earning slightly above that threshold.
CBO projects real family income would fall by 0.1%, or $9bn, as higher joblessness and consumer prices offset wage gains and businesses reduce output, affecting the nation's capital stock.

"...Effects of the $15 Option on Employment and Income. According to CBO’s median estimate, under the $15 option, 1.3 million workers who would otherwise be employed would be jobless in an average week in 2025. (That would equal a 0.8 percent reduction in the number of employed workers.) CBO estimates that there is about a two-thirds chance that the change in employment would lie between about zero and a reduction of 3.7 million workers (see Table 1). In addition, in an average week in 2025, the $15 option would increase the wages of 17 million workers whose wages would otherwise be below $15 per hour, CBO estimates. The wages of many of the 10 million workers whose wages would be slightly above the new federal minimum would also increase..... The $15 option would affect family income in a variety of ways. In CBO’s estimation, it would: Boost workers’ earnings through higher wages, though some of those higher earnings would be offset by higher rates of joblessness; Reduce business income and raise prices as higher labor costs were absorbed by business owners and then passed on to consumers; and Reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital (such as buildings, machines, and technologies). On the basis of those effects and CBO’s estimate of the median effect on employment, the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent...."

Nabeel Alsalam, David Burk, William Carrington, and Justin Falk, "The Effects on Employment and Family Income of Increasing the Federal Minimum Wage," Congressional Budget Office, July 8, 2019, https://www.cbo.gov/publication/55410

More evidence-this time from CBO-that higher (even much higher) minimum wages largely do what they’re supposed to do

Jared Bernstein On The Economy

Date Posted:: July 11, 2019
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CBO estimates that raising the federal minimum wage to $15/hr by 2025 would increase pay of 27.3m workers, boost incomes of poor families by 5% & reduce poverty by 1.3m people.

Raising the federal minimum wage to $15/hr by 2025 is projected to increase the pay of 27.3m workers, or 17% of the workforce, according to the CBO. This policy would boost incomes of poor families by 5% and reduce poverty by 1.3m people, thereby decreasing inequality as these gains are partially funded by reduced profits. While CBO estimates a potential job loss of 1.3m workers weekly in 2025, the range of employment impact is between 0 and -3.7m, indicating uncertainty in job-loss effects. The report challenges the classical model that assumes mandated pay raises harm all affected, suggesting that benefits of such wage increases outweigh the costs. This provides policymakers with evidence supporting higher minimum wages as a tool to enhance living standards, reduce poverty, and combat inequality.

Takeaways by Macro Roundup^® AI

CBO projects that raising the federal minimum wage to $15/hr by 2025 would increase pay for 27.3m workers, or 17% of the workforce.
CBO estimates the $15/hr minimum wage would raise poor families' incomes by 5% and lift 1.3m people out of poverty, with gains partially funded by reduced profits.
CBO's estimate of 1.3m jobs lost weekly in 2025 sits within a range of 0 to -3.7m, indicating uncertainty in the employment effects.

Jared Bernstein, "More evidence-this time from CBO-that higher (even much higher) minimum wages largely do what they’re supposed to do,"On The Economy, July 8, 2019, http://jaredbernsteinblog.com/more-evidence-this-time-from-cbo-that-higher-even-much-higher-minimum-wages-largely-do-what-theyre-supposed-to-do/

".... Raising the federal minimum wage to $15 per hour by 2025 would lift the pay of 27.3 million workers—17 percent of the workforce—according to a new report from the Congressional Budget Office. It would raise the incomes of poor families by 5 percent and thus reduce the number of people in poverty by 1.3 million. Since these low-end gains would be partially financed out of profits, the increase in the wage floor would reduce inequality. CBO also estimates that “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.” Because economists’ estimates of the job-loss effects from minimum wage increase are so wide-ranging—some studies find little-to-no job loss impacts; other find more—CBO estimates that there’s a two-thirds chance that the actual change in employment is between 0 and -3.7 million. Interestingly, -1.3 million is not the midpoint between 0 and -3.7, suggesting the budget office gave a bit more weight to studies finding less evidence of job-loss effects.The simple, classical model—raise pay by mandate and everyone affected gets hurt—is clearly wrong, as the CBO report shows. Just how wrong is it is something we’ll continue to argue about.But in the meantime, policy makers who want to improve the living standards of low-wage workers, reduce poverty, and push back on inequality can rest assured that, as the budget office’s new report shows, the evidence is on their side. The benefits of the increase—even a significant increase like this one—far outweigh the costs....."

Bernstein on CBO report

Steve: So in that table three they show that the change in employment in a average week @ 15 will be -.5mm for less then high school, -.8mm for high school/some college, -.1mm for college, so that's -1.4mm, which ~ lines up with their -1.3mm (they note that numbers don't always sum do to rounding)

Ed CommentIt would likely be in a footnote. That's how CBO hides stuff.
More evidence-this time from CBO-that higher (even much higher) minimum wages largely do what they’re supposed to do.
Raising the federal minimum wage to $15 per hour by 2025 would lift the pay of 27.3 million workers—17 percent of the workforce—according to a new report from the Congressional Budget Office. It would raise the incomes of poor families by 5 percent and thus reduce the number of people in poverty by 1.3 million. Since these low-end gains would be partially financed out of profits, the increase in the wage floor would reduce inequality.
CBO also estimates that “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.” Because economists’ estimates of the job-loss effects from minimum wage increase are so wide-ranging—some studies find little-to-no job loss impacts; other find more—CBO estimates that there’s a two-thirds chance that the actual change in employment is between 0 and -3.7 million. Interestingly, -1.3 million is not the midpoint between 0 and -3.7, suggesting the budget office gave a bit more weight to studies finding less evidence of job-loss effects.
Thus spoke Zarathustra the CBO. Should this lead objective policy makers to embrace or eschew the policy to increase the federal minimum wage to $15 in 2025 (assume for this exercise that “objective policy makers” exist)?
I’d give a solid push towards embrace. It’s a progressive policy that’s long been shown to largely hit its goals of boosting the earnings of low-wage workers whose families seriously need the income. Yes, the report warns that some will be hurt by the increase, but the best research suggests their job-loss estimate may be too high. Moreover, even if they’re right, the ratio of helped-to-hurt is 21 (27.3m/1.3m). And given the extent of turnover in the low-wage labor market, many of those 1.3 million workers will eventually find new jobs, jobs which pay a lot better than their old ones.
Full disclosure: I’ve long advocated for minimum wage increases, so my “embrace” won’t surprise those who’ve followed that work. But the reason why I—and, more importantly, progressive institutions like the Economic Policy Institute, CBPP, CAP, and many others—have long advocated for minimum wage increases is that a deep body of uniquely high-quality research finds that prior increases have had their intended effects of raising low-wage workers’ incomes without leading to significant job loss.
But isn’t the $15 minimum wage a lot more ambitious than prior increases (the CBO report also simulates $10 and $12 increases)? It is, and as such, it will have a much larger “bite” than prior increases, meaning it will apply to a larger share of low-wage workers than past increases. Figure 4 in the report shows that the 1991 increase directly affected about 6 percent of workers; this one could affect almost 14 percent.
To evaluate this concern, go back to my comment about “uniquely high-quality research.” By that I mean that because so many states and cities have implemented higher wage floors on their own—there are over 130 such cases over the last few decades—researchers have been able to conduct many more experimental-type studies than in virtually any other area of economics, comparing outcomes in places that raised their wage floor to outcomes in places that did not. Moreover, some of these increases have had comparable bites to the $15 wage simulated by CBO, as shown by this new paper by Godoey and Reich.
The importance of this new report relative to today’s CBO release is that G&R focus especially on high-impact (large bite) increases. They find “positive wage effects but do not detect adverse effects on employment, weekly hours or annual weeks worked. We do not find negative employment effects among women, blacks and/or Hispanics. We do find substantial declines in household and child poverty.”
No single study will end this debate, but as someone who’s been in this debate for about 30 years, believe me: especially since the path-breaking work of the late (man, that’s still painful to write) Alan Krueger and David Card, the evidence from this sort of controlled study has changed many economists’ and policy makers’ views on minimum wages.
The simple, classical model—raise pay by mandate and everyone affected gets hurt—is clearly wrong, as the CBO report shows. Just how wrong is it is something we’ll continue to argue about. But in the meantime, policy makers who want to improve the living standards of low-wage workers, reduce poverty, and push back on inequality can rest assured that, as the budget office’s new report shows, the evidence is on their side. The benefits of the increase—even a significant increase like this one—far outweigh the costs.
Ed Comment:By 2 unknowns I mean the loss is 1.3mm in total but that could be 2.0 mm loss for the least skilled and 0.7mm gain for others, for a net loss of 1.3mm. The 2 unknowns being 2.0 and 0.7. Similarly it could be 3.9 loss (ie 3x1.3) and 2.6 gain. I find that CBO minimizes the bad news by leaving it hidden.
Steve:Got it, okay clearly they have the numbers given this projection, "....The $15 option would alter employment more for some groups than for others. Almost 50 percent of the newly jobless workers in a given week—600,000 of 1.3 million—would be teenagers (some of whom would live in families with income well above the poverty threshold). Employment would also fall disproportionately among part-time workers and adults without a high school diploma...." going though the back pages now, they don't seem to have a compositional breakdown of that 1.3 by educational attainment that's capturing say people with high school degree's substituting for the non-high school workers.

The Budget and Economic Outlook: 2014 to 2024

CBO Staff Congressional Budget Office

Date Posted:: July 11, 2019
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ACA will reduce total hours worked on net by 1.4-2% btw 2017-2024, primarily due to workers opting to supply less labor in response to new taxes & incentives, as well as financial benefits.

The ACA is projected to reduce total hours worked by 1.5-2% from 2017 to 2024, primarily due to workers opting to supply less labor in response to new taxes and incentives, as well as financial benefits. This reduction will largely affect lower-wage workers, leading to a smaller proportional decrease in aggregate compensation, estimated at about 1% over the same period. The decline in hours worked equates to a reduction of approximately 2m full-time-equivalent workers in 2017, increasing to 2.5m by 2024. This change is attributed mainly to a decrease in labor supply rather than demand, manifesting as reduced labor force participation and hours worked, rather than increased unemployment or underemployment.

Takeaways by Macro Roundup^® AI

The Affordable Care Act is projected to reduce total hours worked by 1.5–2% from 2017 to 2024, equivalent to about 2m full-time-equivalent workers in 2017 rising to 2.5m by 2024.
The projected decline stems mainly from workers choosing to supply less labor in response to new taxes, incentives, and financial benefits, rather than from reduced labor demand.
Because the reduction falls largely on lower-wage workers, aggregate compensation is estimated to fall by about 1% over 2017–2024, a smaller proportional decline than hours worked, appearing as lower labor force participation and hours rather than higher unemployment or underemployment.

"... CBO estimates thatthe ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive. Because the largest declines in labor supply will probably occur among lower-wage workers, the reduction in aggregate compensation (wages, salaries, and fringe benefits) and the impact on the overall economy will be proportionally smaller than the reduction in hours worked. Specifically, CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017-2024 period, compared with what it would have been otherwise. Although such effects are likely to continue after 2024 (the end of the current 10-year budget window), CBO has not estimated their magnitude or duration over a longer period. The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA. The decline in fulltime-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours; however, CBO has not tried to quantify those two components of the overall effect. The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).

CBO Staff, "The Budget and Economic Outlook: 2014 to 2024," Congressional Budget Office, February 2014, http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf

The Effects of a Minimum-Wage Increase on Employment and Family Income

CBO Staff Congressional Budget Office

Date Posted:: July 11, 2019
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CBO estimates that $10.10 and $9.00 minimum wage options would reduce employment by ~500,000 or 100,000 workers.

The CBO [Congressional Budget Office] projects that implementing a $10.10 minimum wage could reduce total employment by about 500,000 workers, or 0.3%, while a $9.00 option might lead to a reduction of 100,000 workers. These estimates consider the number of low-wage workers affected, their employment responsiveness to wage increases, and the resultant change in demand for goods and services. The elasticity for directly affected teenagers is estimated to be 4.5 times higher than for adults, indicating a greater sensitivity to wage changes among younger workers. Despite uncertainties, CBO suggests a two-thirds probability that the actual employment impact will range from a slight reduction to a loss of 1m workers, highlighting the complex interplay between wage policies and labor market dynamics.

Takeaways by Macro Roundup^® AI

CBO projects a $10.10 minimum wage could reduce total employment by about 500,000 workers, or 0.3%, while a $9.00 option might reduce employment by about 100,000 workers.
CBO estimates the employment elasticity for directly affected teenagers is 4.5 times that for adults.
CBO assigns a two-thirds probability that the actual employment effect ranges from a slight reduction to a loss of 1m workers.

CBO's 2014 tack on minimum wage employment elasticities

".....Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers... Elasticities for Directly Affected Teenagers......CBO calculated those conversion factors using CPS data from 1979 through 2009. The CPS data indicate that past increases in the minimum wage typically affected about a third of employed teenagers and were typically about 50 percent higher than the average of the wage changes necessary for compliance with the new minimum. Thus, elasticities for directly affected teenagers are about 4.5 times higher, CBO estimates, than the teen-employment elasticities with respect to the change in the applicable minimum wage discussed in the previous section.....Elasticities for Directly Affected Adults.....Much less research has been conducted on the responsiveness of adult employment to minimum-wage increases than on the responsiveness of teenage employment. Using the available information,CBO concluded that the elasticity for directly affected adults was about one-third of the elasticity for directly affected teenagers, and the agency applied that proportional adjustment to the central estimates and likely ranges of elasticities for teens discussed above. Some studies have found large elasticities for particular groups of adults, such as high school dropouts or African Americans in their 20s, but most of the adults who would be affected by the $9.00 and $10.10 options would not fall into those categories. A study that tracked directly affected adults regardless of their education, age, or race suggests that their employment is less sensitive to increases in the minimum wage than that of directly affected teenagers. One explanation for that lower degree of responsiveness is that employers facing an excess of workers or of job applicants tend to favor adults over teenagers. Supporting that explanation is research suggesting that encouraging employment among low-wage parents reduces employment among younger, childless adults...... How CBO Estimated the Total Effects of the Options on Employment.....CBO’s central estimates that the $10.10 and $9.00 options would reduce employment by roughly 500,000 and 100,000 workers, respectively, were based on four main factors. Two were discussed above: the number of low-wage workers directly affected by the options and the responsiveness of the employment of low-wage workers to increases in minimum wages. The remaining two factors were the change in the wages of directly affected workers and the increase in demand for goods and services caused by each option. To calculate the total effect on employment, CBO multiplied estimates of the first three factors together for teenagers; did the same for adults; added the results; and then added an amount to account for the fourth factor. To reflect the considerable uncertainty in estimating the total employment effect, CBO also reported a range within which, in the agency’s assessment, there was about a two-thirds chance that the actual effect would lie...."

CBO Staff, "The Effects of a Minimum-Wage Increase on Employment and Family Income," Congressional Budget Office, February 2014, https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44995-MinimumWage_OneColumn.pdf

Friday, July 12, 2019

Minimum Wage Employment Effects and Labor Market Concentration

Emiliano Huet-Vaughn Social Science Research Network

Date Posted:: July 12, 2019
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Minimum Wage Employment Effects Vary By Labor Market Concentration. A 10% rise in the minimum wage boosts employment by ~3.5% in highly concentrated markets but reduces it by 2% in less concentrated ones. @EmilianoHuetVaughn

A recent study reveals that the impact of minimum wage increases on employment varies significantly with labor market concentration. A 10% rise in the minimum wage boosts employment by ~3.5% in highly concentrated markets but reduces it by 2% in less concentrated ones. The employment elasticity of the minimum wage is significantly positive in the most concentrated third of labor markets, with estimates around 0.35, while it is negative at -0.2 in the least concentrated third. These findings suggest that monopsony power, indicated by market concentration, plays a crucial role in modulating minimum wage effects, offering insights into the mixed results seen in previous studies. The study underscores the importance of considering labor market concentration when assessing the employment effects of minimum wage policies, as it can significantly alter outcomes.

Takeaways by Macro Roundup^® AI

A 10% minimum wage increase raises employment by roughly 3.5% in highly concentrated labor markets while reducing it by 2% in less concentrated markets, according to the study.
The study estimates the employment elasticity of the minimum wage at about 0.35 in the most concentrated third of labor markets and -0.2 in the least concentrated third.
The study suggests that monopsony power, indicated by labor market concentration, modulates minimum wage effects and offers insight into the mixed employment results of previous studies.

when it rains it pours, released Wednesday new paper finds that increases in minimum wages can increases employment in the most concentrated labor markets. paper found a 10% increase in the minimum wage had no effect on average, but increases employment by ~3.5% in the most concentrated labor markets while decreases employment by 2% in the least concentrated markets

"...Economic theory predicts that the minimum wage reduces employment in a competitive labor market. However, empirical evidence has often failed to find a negative impact. The common explanation: monopsony power by the firm. In this paper, we present the first direct empirical evidence showing labor market concentration - a key determinant of monopsony power - modulates the impact of the minimum wage on employment in the general merchandise sector in the US, a key employer of workers affected by the minimum wage. We find a robust and significant increase in the employment elasticity with respect to the minimum wage in more concentrated occupational labor markets. In the most concentrated third of these, the minimum wage employment elasticity is even estimated to be significantly positive....Our results indicate that, consistent with theory, more concentrated labor markets exhibit more positive employment effects from the minimum wage. This is true for a variety of specifications, and when separatelyusing concentration measures for three different minimum wage heavy occupational labor markets: stock clerks, retail sales, and cashiers. To give a sense of scale, a standard deviation increase in the measure of labor market concentration is associated with a significant 0.2 increase in the employment elasticity of the minimum wage. The results are robust to a number of sensitivity tests. One important concern is omitted variable bias: there may be a variable correlated with concentration that causally modulates the impact of the minimum wage on employment. We note that, even if it were the case, concentration is still a useful proxy for this variable and can allow policy makers to predict the effects of a minimum wage increase. We are nevertheless interested in testing for potential alternative mechanisms that explain the heterogeneity of the minimum wage employment effects and we focus on two key candidates for the omitted variable: population density and productivity, which are both correlated with HHI and could also modulate minimum wage effects. We find that results are robust to allowing for a different effect of the minimum wage by both population density and a productivity proxy (economy-wide earnings in an area conditional on population). This robustness test supports our main findings: concentration has a significant modulating effect on the employment elasticity of the minimum wage even after we allow other key variables to have their own modulating effects.Overall, then, our results indicate the size and sign of the minimum wage’s employment effects vary substantially on the basis of underlying labor market concentration. Employment elasticities of the minimum wage are significantly negative with point estimates of approximately -0.2 for the 33% of least concentrated labor markets, approximately zero for the middle concentration group, and significantly positive with point estimates of approximately 0.35 for the 33% of most concentrated of labor markets (which are very concentrated by typical measures). The related own-wage elasticity of labor demand, which we also derive, spans the range of comparable elasticities estimated in the minimum wage literature (see Figure 6), with the 33% of least concentrated markets on the outer left (i.e. the most negative) of the prior work’s estimate range, the 33% of most concentrated markets forming the outer rightward bound (most positive) of this range, and, the middle third’s estimates being close to zero.This indicates that differences in the degree of monopsony power could play an important role in accounting for the divergent elasticity estimates in prior studies, drawn from a wide range of labor markets that, themselves, have differences in underlying market concentration.....Compared to the existing literature, these results yield related own-wage elasticity of labor demand estimates for the lowest tercile of labor market concentration on par with the lowest estimates from the minimum wage literature, effects close to zero and statistically insignificant for the middle tercile, and, positive estimates that are larger than most in the literature for the highest tercile. The findings, thus, offer an empirically-founded candidate explanation as to why null employment effects from the minimum wage abound in the literature (due to the averaging of real underlying positive and negative effects), as well as insight into why we may see significant variation in the employment effect of the minimum wage across studies (due, in part, to differing underlying levels of labor market concentration in a studies’ settings). In total, these results suggest that labor market concentration, unmeasured and (empirically) overlooked in prior minimum wage research, is a key variable in moderating the cost of minimum wage policy, and, that the employment effects of a minimum wage increase should be assessed with this heterogeneity in mind. Additionally, the results bolster the evidence for monopsony power in the labor market by demonstrating that key policy effects conform to the predictions of the monopsony model...."

José Azar, Emiliano Huet-Vaughn, Ioana Elena Marinescu, Bledi Taska and Till Von Wachter, "Minimum Wage Employment Effects and Labor Market Concentration," Social Science Research Network, July 10, 2019, https://papers.ssrn.com/sol3/papers.cfmabstract_id=3416016

US economy can take 15 wage floor in its stride

Martin Sandbu Financial Times

Date Posted:: July 12, 2019
Is Database:: Database

The US economy is well-positioned to absorb a $15 minimum wage due to its robust growth & labor market dynamics. With GDP expanding at 2.9% & unemployment at 3.7%, the economic environment is conducive to wage increases.

The US economy is well-positioned to absorb a $15 minimum wage due to its robust growth and labor market dynamics. With GDP expanding at an annual rate of 2.9% and unemployment at a historic low of 3.7%, the economic environment is conducive to wage increases. The Congressional Budget Office [CBO] projects that a $15 wage could lift 1.3m workers out of poverty while increasing wages for 17m workers, representing a significant boost in consumer spending power. Although some job losses are anticipated, the net effect on employment is expected to be minimal, with potential job reductions offset by increased demand and productivity gains. Additionally, inflationary pressures remain subdued, with CPI rising at just 1.6%, providing further room for wage adjustments without triggering significant price hikes. Overall, the macroeconomic indicators suggest that the US economy can integrate a $15 wage floor without major disruptions.

Takeaways by Macro Roundup^® AI

The Congressional Budget Office projects a $15 federal minimum wage would lift 1.3m workers out of poverty and raise wages for 17m workers.
The US economy is positioned to absorb a $15 wage floor, with GDP expanding at a 2.9% annual rate and unemployment at 3.7%.
Consumer price inflation running at 1.6% leaves room for wage increases without significant price rises, and anticipated job losses are expected to be offset by increased demand and productivity gains.

Martin Sandbu, "US economy can take $15 wage floor in its stride,"Financial Times, July 11, 2019, https://www.ft.com/content/294037fc-a24d-11e9-974c-ad1c6ab5efd1

Sandbu on CBO in FT, will have to read the new study he cites as well

Ed Comment:“power of employers to keep wages well below the value of employees’ work — for example, because the local labour market for certain kinds of jobs is so concentrated that workers have no choice where to work” Where is that? It remote counties I would presume. No surprise, “In counties where the employers of such workers are most competitive (least concentrated), wage floor increases reduce their number, whereas in places where few employers offer most of the jobs and hence have a lot of market power, higher wage floors go with more employment.” Where do most people live? In cities by far. Moreover, if you pay higher wages and real estate is tight, in cities for example, the landlords capture the increase, not the employees.

"....The main explanation why minimum wage rises need not harm job opportunities has to do with the power of employers to keep wages well below the value of employees’ work — for example, because the local labour market for certain kinds of jobs is so concentrated that workers have no choice where to work. When a minimum wage mandates employers to pay more than the value a worker produces, it is natural to expect them not to hire such a worker at all. But this motivation disappears when unequal bargaining power has left market wages below workers’ level of productivity. In such a situation, employers will still benefit from employing people, but a bigger part of that benefit will go to the worker instead, depending on how high the legal wage floor is. An implication of this is that minimum wages will have different effects in different places, depending on the local productivity level and balance of power between employers and workers. Economists Ioana Marinescu, Bledi Taska and Till Von Wachter prove precisely this in A study of county-by-county US labour markets for stock clerks, retail salespeople and cashiers. In counties where the employers of such workers are most competitive (least concentrated), wage floor increases reduce their number, whereas in places where few employers offer most of the jobs and hence have a lot of market power, higher wage floors go with more employment. Here is one conclusion for policymakers (from one of the authors’ Twitter thread that usefully summarises the results): “minimum wage effects can vary substantially with employer market power This lends support to a flexible minimum wage policy that adapts to local conditions.”But note that this argument does not justify the claim that minimum wage rises should be less aggressive in places with lower wages. If anything, it is the other way round: if low wages reflect greater employer market power, these areas can take more aggressive minimum wage policy. There may be a point where raising legal wage floors starts to hurt employment. But the US, at least, is far from that point...."

A Record Expansions Surprise Winners: The Low-Skilled

Grep Ip Wall Street Journal

Date Posted:: July 12, 2019
Is Database:: Database

Employment rates for workers with less than a high school diploma have been growing faster than those for college graduates, marking a significant shift in labor market dynamics.

Employment rates for workers with less than a high school diploma have been growing faster than those for college graduates, marking a significant shift in labor market dynamics. Between 2008 and 2010, the employment rate for college-educated workers dropped 2.5 percentage points but began recovering steadily, nearing prerecession levels by last year. In contrast, the rate for those with a high school diploma or less fell 6 percentage points and only started a sustained recovery in 2014. Inflation-adjusted wages for less-educated workers initially fell more sharply but rebounded more strongly, recovering all lost ground by last year. This trend is partly due to employers adjusting recruitment criteria based on economic cycles, often upskilling during high unemployment periods and relaxing requirements when labor demand increases, as seen in local booms like the shale oil-fracking boom.

Takeaways by Macro Roundup^® AI

Employment rates for workers with less than a high school diploma have been growing faster than those for college graduates, marking a shift in labor market dynamics.
The employment rate for workers with a high school diploma or less fell 6 percentage points between 2008 and 2010 and began a sustained recovery only in 2014, versus a 2.5-point drop and steady recovery for college graduates, who neared prerecession levels.
Inflation-adjusted wages for less-educated workers fell more sharply but rebounded more strongly, recovering all lost ground, partly because employers relax recruitment requirements when labor demand rises, as in the shale oil-fracking boom.

"....The Fed’s semiannual monetary policy report released last week noted that the share of people aged 25 to 54 years with at least a college degree who were employed dropped 2.5 percentage points between 2008 and 2010. It then began a steady recovery, and by last year was close to its prerecession peak. For workers with just a high-school diploma or less, the ratio plunged 6 percentage points and didn’t begin a sustained recovery until 2014. Wage data paint a similar picture. Adjusted for inflation, wages of workers with just high school or less initially fell much more sharply than for college-educated workers and then bounced back more strongly, and by last year had recovered all the lost ground. Fed researchers found this has happened in all business cycles since at least 1980. This might be partly due to a long-term shift in demand from less- to more-skilled labor. Yet in individual states where local booms and busts are probably less influenced by those national trends, they found an even starker hit to lower-educated workers in recessions. It takes on average eight years for them to fully recover. The traditional explanation for why some workers are fired first and hired last is that employers hoard their most valued and difficult-to-replace workers. New data offer a more nuanced explanation: employers and workers change their recruitment behavior over the course of the cycle. In a 2016 study, Alicia Sasser Modestino of Northeastern University and two co-authors observed that as unemployment soared between 2007 and 2010, the percentage of job postings requiring a bachelor’s degree on Burning Glass, a website that aggregates job postings, rose more than 10 percentage points. That share then fell over the next four years. The same thing happened with postings requiring at least five years’ experience. This wasn’t because high-skilled occupations or industries had become more important; the authors found that even within the same company posting the same job, hiring criteria became tighter as unemployment rose and easier as it fell. In counties that benefited most from the shale oil-fracking boom, local demand for labor shot up. As a result, manufacturing, agriculture and timber companies, which weren’t benefiting from the fracking boom, still relaxed their education and experience requirements. This suggests that when unemployment is high and labor is plentiful, employers opportunistically “upskill”—they raise the requirements of jobs, for example demanding a bachelor’s degree when an associate’s degree or experience used to be sufficient...."

Grep Ip, "A Record Expansion’s Surprise Winners: The Low-Skilled,"Wall Street Journal, July 10, 2019, https://www.wsj.com/articles/a-record-expansions-surprise-winners-the-low-skilled-11562763602

U.S. Budget Gap Widened 23 in First Nine Months of Fiscal Year

Kate Davidson Wall Street Journal

Date Posted:: July 12, 2019
Is Database:: Database

The U.S. budget gap expanded by 23% in the first nine months of the fiscal year, reaching $747bn, driven by increased federal spending and modest revenue growth.

The U.S. budget gap expanded by 23% in the first nine months of the fiscal year, reaching $747bn, driven by a combination of increased federal spending and modest revenue growth. Government tax receipts rose 3% to $2.6tn, bolstered by a notable rise in corporate tax revenue, yet this was insufficient to counterbalance the 7% increase in federal outlays, which totaled $3.3tn. The surge in spending was primarily attributed to higher military expenditures and rising interest payments on national debt. Both revenues and expenditures set records for this period, underscoring the fiscal challenges faced by policymakers as they navigate the implications of sustained budget deficits.

Takeaways by Macro Roundup^® AI

The U.S. budget gap widened 23% to $747bn in the first nine months of the fiscal year, as a 7% rise in federal outlays outpaced 3% growth in tax receipts.
Federal spending reached $3.3tn over the period, with the increase attributed primarily to higher military expenditures and rising interest payments on the national debt.
Government tax receipts rose to $2.6tn, helped by a rise in corporate tax revenue, with both revenues and outlays setting records for this nine-month period.

deficit ~ back to July '13 level. what's the Nixon quip, "We are all Keynesians now"

U.S. Budget Gap Widened 23 in First Nine Months of Fiscal Year: Extended Excerpt Image 1

"...Government tax receipts rose again in June but not enough to offset higher federal spending, which pushed the U.S. budget gap to $747 billion for the first nine months of the fiscal year. The Treasury Department said Thursday the deficit grew 23% from October through June, compared with the same period a year earlier. The government collected $2.6 trillion in receipts, a 3% increase, reflecting a substantial increase last month in corporate tax revenue, which had been running below Congressional Budget Office projections so far this year. Higher spending on the military and interest on the debt drove federal outlays up 7%, to $3.3 trillion since the start of the fiscal year, the Treasury said. Both revenues and outlays set a record for this point in the fiscal year...." Kate Davidson, "U.S. Budget Gap Widened 23% in First Nine Months of Fiscal Year,"Wall Street Journal, July 11, 2019, https://www.wsj.com/articles/u-s-budget-gap-widened-23-in-first-nine-months-of-fiscal-year-11562868054

Raising the federal minimum wage to $15 by 2025 would result in a 0.8% reduction in employment, equating to 1.3m fewer jobs in an average week, according to @CBOWashington. Real family income is expected to decline by 0.1%, or $9bn.

Does raising the federal minimum wage reduce employment and family income?

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CBO estimates that raising the federal minimum wage to $15/hr by 2025 would increase pay of 27.3m workers, boost incomes of poor families by 5% & reduce poverty by 1.3m people.

Does a higher minimum wage reduce poverty despite job losses?

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ACA will reduce total hours worked on net by 1.4-2% btw 2017-2024, primarily due to workers opting to supply less labor in response to new taxes & incentives, as well as financial benefits.

Does health insurance reform reduce the amount of labor workers supply?

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CBO estimates that $10.10 and $9.00 minimum wage options would reduce employment by ~500,000 or 100,000 workers.

How much does raising the minimum wage reduce employment?

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Minimum Wage Employment Effects Vary By Labor Market Concentration. A 10% rise in the minimum wage boosts employment by ~3.5% in highly concentrated markets but reduces it by 2% in less concentrated ones. @EmilianoHuetVaughn

Does employer wage-setting power determine how minimum wages affect employment?

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The US economy is well-positioned to absorb a $15 minimum wage due to its robust growth & labor market dynamics. With GDP expanding at 2.9% & unemployment at 3.7%, the economic environment is conducive to wage increases.

Can the US economy absorb a $15 minimum wage?

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Employment rates for workers with less than a high school diploma have been growing faster than those for college graduates, marking a significant shift in labor market dynamics.

Do long expansions benefit less-educated workers more than college graduates?

Takeaways by Macro Roundup® AI

The U.S. budget gap expanded by 23% in the first nine months of the fiscal year, reaching $747bn, driven by increased federal spending and modest revenue growth.

Is spending growth outpacing tax receipts and widening the budget deficit?

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