Posts by Goldy

Walmart CEO on raising wages: “Bottom line – it’s working.”

Walmart CEO on raising wages: “Bottom line – it’s working.”

Last week, when Walmart forecast slow sales growth for this year and a drop in profits for the next, Wall Street responded with the biggest one-day plunge in the company’s stock in 17 years. “The reaction by the market – while not what we’d hoped – was not entirely surprising,”  Walmart president & CEO Doug McMillon admitted in a blog post while recommitting to his plan to heavily invest in people and technology: “These investments are critical to our current and future success as a company. Simply put, it’s the right thing to do.” And we will continue investing in our people.  Today we shared details around the $1.5 billion investment we will make next year to bring the wage for current associates to at least $10 in the U.S. The return from the initial investment of more than $1 billion we made earlier this year is encouraging. We have seen associate engagement and customer satisfaction scores increase dramatically over the past eight months and comp sales are increasing. Bottom line – it’s working. During its decades-long climb to the top of the retail food chain, Walmart has made itself the poster child for a parasitic low-wage business model that leaves full-time wage earners reliant on government assistance just to scrape by. So if raising wages well above the current federal minimum of $7.25 can work for Walmart, it’s hard to argue it couldn’t work for the rest of the economy as well.

Does automation kill jobs? Forbes says Yes! And No! (But shhhh, don’t tell minimum wage workers, really, no.)

Does automation kill jobs? Forbes says Yes! And No! (But shhhh, don’t tell minimum wage workers, really, no.)

Forbes blogger Tim Worstall sure does love himself a vigorous debate—so much so that he’s taken to arguing with himself on the job destroying/creating impact of automation. When it comes to raising wages (minimum or otherwise) the dystopian Worstall repeatedly warns that if you raise the cost of labor, employers are going to respond with automation, leading to painful job losses for the very same low-wage workers the minimum wage is trying to help. Seems straightforward enough. Yet at the same time, the utopian Worstall consistently shrugs off automation-related job losses as all part of the healthy process of creative destruction. Dystopian Worstall : Higher wages means that automation becomes, relatively, more profitable. And it is to automation that most jobs go to die, not trade or international competition. Utopian Worstall : We’ve coped with this sort of thing before. There’s no reason at all to think that it’s going to be different this time. The increasing computerisation, roboticisation, of the economy is no more than a slight uptick in the normal rate of job destruction. Dystopian Worstall : So, their first change is going to be looking at greater automation. This raises the productivity of the labor that they do employ, which is great. But it also means that for any given level of output they will be employing less labor: That’s what automation and higher productivity both mean. So, job losses coming here. Utopian Worstall : What happens when the robots get good enough to come and steal all our jobs? There’s various possible responses to this, from screaming in fright and running from the room in Luddite panic all the way through to denying, flat out, that it can possibly ever happen. I’m in that second camp myself. Dystopian Worstall : Raise the price of human labour and people will substitute away from it to using more capital and more machinery. Things formerly
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Only Seattleites Get to Decide Whether Seattle’s $15 Minimum Wage Succeeds or Fails

Only Seattleites Get to Decide Whether Seattle’s $15 Minimum Wage Succeeds or Fails

I recently took some time to preemptively fend off future attacks on Seattle’s $15 minimum wage ordinance, pointing out that our local economy is currently so outlandishly strong that there’s almost nowhere for unemployment to go but up. Seattle’s current 3.15% unemployment rate has never proven to be sustainable in the past, and is unlikely to prove sustainable into the future. So when we do eventually see a bump in unemployment—and we will (be it in absolute terms or just relative to the larger state economy)—it will on its own be evidence of absolutely nothing. As I explained last week: The real measure of Seattle’s minimum wage experiment is not whether our jobs numbers tick up or down relative to some cherry-picked starting point or some arbitrary low-wage city comparison. The real measure of success is whether Seattle can sustain a reasonably healthy and robust economy while providing all our workers a livable wage. And if that seems like an intentionally vague metric, well, that’s exactly the point: I reject the very notion that numbers alone can provide an objective measure of what is ultimately a subjective experience. For example, let’s say through some sort of statistical magic you really could divine that Seattle’s unemployment rate would otherwise be a half point lower if not for the “disemployment effect” of our higher minimum wage. Would that prove our $15 minimum wage a failure? Or might Seattleites be perfectly willing to choose, say, a $15 minimum wage and 3.65% unemployment over a $10 minimum wage and 3.15% unemployment? Of course, we make economic choices like this all the time. Charged with balancing inflation versus unemployment, the Federal Reserve has long tilted toward maintaining low inflation, routinely adjusting interest rates and money supply accordingly. The fed could choose to raise its inflation target above 2% in pursuit of a tighter labor market and higher wages. But despite decades of stagnant wages, it hasn’t.
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Seattle’s Unemployment Rate Falls to Seasonally Adjusted 3.15%

Seattle’s Unemployment Rate Falls to Seasonally Adjusted 3.15%

Earlier this week I gave a thrashing to Forbes blogger Mike Patton for suggesting that an April through July rise in Seattle’s non-seasonally adjusted unemployment rate represented the early “negative financial consequences” of the city’s $15 minimum wage ordinance. Which was just plain stupid . The non-seasonally adjusted unemployment rate always bottoms out in April before rising over the next two or three months as high school and college graduates enter the labor market. Always. But in case Patton is interested in digging his hole even deeper, he should take a look at the Bureau of Labor Statistics’ latest city-level numbers: Seattle’s non-seasonally adjusted unemployment rate fell to 3.3 percent in August, while the July numbers have been revised down from 3.7 to 3.6. And seasonally adjusted, the Seattle’s unemployment rate is even more impressive—a mere 3.15 percent! That’s the lowest rate since April 2008, and just 0.3 points higher than the city’s freakish 2.85 percent February 2008 rate, just before the housing bubble popped, dragging the global economy into the Great Recession. By comparison, during the entire length of our extended dot.com boom, Seattle’s seasonally adjusted unemployment rate never dipped below 3.5 percent. (And yes, we’re talking about just the city proper here, not the bullshitty three-county Seattle-Tacoma-Bellevue MSA.) I emphasize the historical comparison (this BLS data set only goes back as far as 1990) not to boast about Seattle’s extraordinarily strong jobs market, but to warn observers that this likely isn’t sustainable. Minimum wage critics are looking for any uptick in unemployment as evidence of the detrimental effect of our $15 minimum wage ordinance, but we’ve really got nowhere to go but up. Think back again to the heady days of the dot.com boom when everybody in Seattle was getting rich: our unemployment rate bounced between 3.5 percent 4.25 percent for more than three years. And that was great!
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Lies, Damn Lies, and the Idiots Claiming Seattle Is Losing Jobs

Lies, Damn Lies, and the Idiots Claiming Seattle Is Losing Jobs

In his online bio, Forbes contributing blogger Mike Patton claims to provide “simple, straight-forward and unbiased analysis.” Well, he got “simple” right, in the sense that his analysis is simplistic. As for “straight-forward” and “unbiased,” not so much. Turning his analytical prowess toward the effects of Seattle’s $15 minimum wage, Patton looked at the city’s unemployment numbers and determined that “ the early results are in :” Almost six months have passed since the first wage hike (April 1, 2015). Although it’s early, thus far the data doesn’t bode well for supporters of this law. … The following graph contains Seattle’s unemployment rate from January 1, 2014 to July 31, 2015. I have marked two important dates and included the unemployment rate at those times. When the law was signed, May 1, 2014, Seattle’s unemployment rate was 3.70%. When the first wage hike occurred, April 1, 2015, unemployment was 3.0%. Since then, unemployment has risen steadily while the national average has trended lower. “If I had to guess,” Patton haphazardly guesses, “I’d say the unemployment rate will likely trend higher for several years as businesses seek ways to mitigate the negative financial consequences of this law.” Wow. I mean, just wow. We’ve seen a lot of shoddy analysis in the service of slandering Seattle’s $15 minimum wage ordinance, but Patton’s work is downright embarrassing. Patton looks at Seattle’s low unemployment rate in April of both 2014 and 2015, and the subsequent rate jumps after the city first passes and then implements its minimum wage ordinance as “clear” evidence that Seattle’s “unemployment rate has been rising.” And apparently, he conducted this simple, straight-forward, and unbiased analysis by Googling “Seattle unemployment rate” and grabbing a chart from Ycharts.com (Ycharts is the second hit on Google’s results page after a post from even-stupider Forbes blogger Tim Worstall). But any idiot clicking through that Google link to Ychart’s initial five year chart should instantly see
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Skunkworks Stinker of the Day: Donald Trump

Skunkworks Stinker of the Day: Donald Trump

Republican presidential frontrunner Donald Trump insists that his tax cut plan  would increase tax revenues , because growth! “Overall, it’s going to be a tremendous incentive to grow the economy and we’re going to take in the same or more money. And I think we’re going to have something that’s going to be spectacular,” Trump said. “We’re going to grow the economy so much.” Which would be great. Except, this trickle-down fantasy  never, ever works . That said, it’s not luck Trump’s tax plan is any stupider than any of the other Republican tax plans. So there’s that.

Lochner, Anyone? Franchise Association Lawsuit Has Always Been About a Helluva Lot More than $15

Lochner, Anyone? Franchise Association Lawsuit Has Always Been About a Helluva Lot More than $15

There was more good news on the minimum wage front today when a three-judge panel of the 9th US Circuit Court of Appeals affirmed a district court’s denial of a preliminary injunction which the International Franchise Association had sought in an effort to block enforcement of Seattle’s $15 minimum wage ordinance: The panel held that IFA did not show that it was likely to succeed on the merits or that a preliminary injunction was in the public interest. Rejecting IFA’s claims that the Seattle ordinance violated the dormant Commerce Clause, the panel determined that there was insufficient evidence of a burden on interstate commerce. Rejecting IFA’s claim brought under the Equal Protection Clause, the panel held that the district court did not err in finding a legitimate purpose in the classification and a rational relationship between franchisees and their classification as large employers. The panel further rejected IFA’s First Amendment challenge after determining that the Seattle ordinance was not motivated by a desire to suppress speech, the conduct at issue was not franchisee expression, and the ordinance did not have the effect of targeting expressive activity. The panel also held that ordinance was not preempted by the Lanham Act and did not violate the Washington state constitution. You know, as expected. As I wrote when the suit was first filed back in June 2014, the IFA’s claims have always been “ downright laughable .” But I won’t be laughing if the US Supreme Court decides to hear the IFA’s inevitable appeal, because this lawsuit has always been about a helluva more than $15. At first glance, the IFA’s claims look like a grab bag of grasped straws. But when you look at who’s litigating the claims—arch-conservative former Solicitor General Paul Clement— a more devious legal strategy starts to emerge . And of particular concern is Clement’s appeal to the dormant Commerce Clause and the Equal Protection Clause of the 14th Amendment—making arguments
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What’s the Matter with Kansas? It’s an Economic Shit Show, That’s What

What’s the Matter with Kansas? It’s an Economic Shit Show, That’s What

By now, most of you are probably familiar with the budgetary disaster that Kansas Governor Sam Brownback’s massive tax cuts have created in the Sunflower State: Double-digit percent annual budget deficits as far as the eye can see. Brownback’s pitch was familiar—cut taxes deep enough and the resulting economic boom would more than replace the hit to state coffers. But it didn’t work. Because it never works. Dr. Laffer’s Patented Low-Tax Elixir is pure economic snake oil. Still, Brownback and his supporters have continued to argue, give his plan time to work and the lower corporate and personal income tax rates would surely draw businesses and jobs to the state. Well, now we know  that’s not happening either : Gov. Sam Brownback’s income tax-cut plan to spur job growth in Kansas has become a full-time disaster. On Friday, the state announced it had lost 3,000 total jobs in August. That’s on top of the 5,100 jobs lost in July. Here’s even more dire news: The Sunflower State in the past 12 months gained a total of a puny 1,000 new jobs. That’s the fourth worst record in the entire United States, at .1 percent employment growth for the entire last year. In terms of job gains/losses over the past 12 months, only West Virginia, North Dakota, and Alaska have performed worse—all states whose core fossil fuel extraction industries have been hard hit by the collapse in energy prices. Meanwhile, neighboring Missouri has added a robust 30,800 jobs over the past 12 months, despite its higher tax rates. And in case you’re wondering, Washington added 92,200 jobs from August 2014 through August 2015, including 12,100 jobs in food services and drinking places, despite our highest in the nation minimum wage! Hmm. If Brownback wants to grow jobs, maybe he should consider raising the minimum wage rather than cutting taxes? I’m just sayin’.

Skunkworks Stinker of the Day: the American People

Skunkworks Stinker of the Day: the American People

Anything to keep out the white walkers, I guess : 41 percent of Americans say that if a wall is built along the Mexican border, one should also be erected on the Canadian one. And yes, the same percentage favors a wall erected along the nation’s southern border. Oy. I mean, oy. As a Washingtonian, it makes me want to build a wall on our state’s southern border.

AEI Economist Mark Perry Proves Low Minimum Wage Kills Jobs!

AEI Economist Mark Perry Proves Low Minimum Wage Kills Jobs!

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
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