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The Minimum Wage Only Kills Jobs If You Let It

19th February 2014

There’s a lot being made of this CBO report that raising the national minimum wage to $10.10 an hour will reduce employment by 500,000 jobs over the next two years. I find it strange that a incremental minimum wage increase would cost so many jobs in such a short time horizon. I am sure there will be professionals who question the methodology and the exactness of that figure, since it has become all but impossible to untease ideological priors from any discussion of bolstering the wage floor.

It’s important to remember that government policy does’t exist in an isolated vacuum. Even if the CBO is correct and there are ultra-low paying jobs not created due to additional capital requirements, it only means that. There is nothing to say that the government can’t just enact another program creating an additional 500,000 jobs, say by just employing a bunch people. Government policy is a constant interplay of varying institutions and sets of laws. We have made an active choice to run the economy below full employment, costing millions of job. I want a report about how many millions of fewer jobs we have by not simply employing millions of people. Nothing is isolated; if you are overly concerned about the consequences of raising the minimum wage, think of a way to mitigate those results, don’t scrap the whole idea.

Nick DeBoer is a digital archivist and the lead writer at Metric Hour. You can find him on Twitter at @NickDeBoer.

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Spain Contemplates Time Zone Change

19th February 2014

The Spanish evening usually begins around 10pm, as people in some neighboring countries are preparing for bed. Primetime television is scheduled similarly to American late night, not wrapping up until after 1am. Surveys show nearly a quarter of Spain’s population remains awake watching television in that last hour after midnight.

Still lodged deeply in an economic depression, government officials have openly contemplated rolling the country’s clock back permanently. A leading recommendation would move things an hour, putting Spain on Coordinated University Time (the modern successor to Greenwich Mean Time). That would create a geographic time cohort with Portugal and Great Britain, replacing the current grouping with Germany, France, and Italy.

Jim Yardley at The Times with the call:

“We want to see a more efficient culture,” said Ignacio Buqueras, the most outspoken advocate of changing the Spanish schedule. “Spain has to break the bad habits it has accumulated over the past 40 or 50 years.”

For the moment, Spain’s government is treating the campaign seriously. In September, a parliamentary commission recommended that the government turn back the clocks an hour and introduce a regular eight-hour workday. As yet, the government has not taken any action.

A workday abbreviated by siestas is a Spanish cliché, yet it is not necessarily rooted in reality. Instead, many urban Spaniards complain of a never-ending workday that begins in the morning but is interrupted by a traditional late-morning break and then interrupted again by the midday lunch. If workers return to their desks at 4 p.m. (lunch starts at 2), many people say, they end up working well into the evening, especially if the boss takes a long break and then works late.

This isn’t too dissimilar from the shifted-clock challenges blamed for eroding productivity in software startups. In fact, it’s reminiscent of the Manager’s/Maker’s schedule concept popularized by Y-Combinator co-founder Paul Graham in 2009:

[The “Manager’s Schedule”] is embodied in the traditional appointment book, with each day cut into one hour intervals. You can block off several hours for a single task if you need to, but by default you change what you’re doing every hour.

Most powerful people are on the manager’s schedule. It’s the schedule of command. But there’s another way of using time that’s common among people who make things, like programmers and writers. They generally prefer to use time in units of half a day at least. You can’t write or program well in units of an hour. That’s barely enough time to get started.

When you’re operating on the maker’s schedule, meetings are a disaster. A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in. Plus you have to remember to go to the meeting. That’s no problem for someone on the manager’s schedule. There’s always something coming on the next hour; the only question is what. But when someone on the maker’s schedule has a meeting, they have to think about it.

For someone on the maker’s schedule, having a meeting is like throwing an exception. It doesn’t merely cause you to switch from one task to another; it changes the mode in which you work.

The Spanish probably aren’t grinding away at existentialist hangovers produced by procrastinating on application development, but there is some commonality here. By virtue of their dominance over the continent’s monetary policy, Germany and France pick economic winners and losers (they have a tendency to pick themselves as winners), and they have even more leverage over Madrid. Spain sends 29% of its total exports to those two nations alone, and isn’t in a position to set business schedule any more than the frustrated designer stuck on a manager’s clock.

Later in his essay, Graham proposes ways that a non-traditional work schedule can be arranged in order to comply with both traditional business process demands and less orthodox personal preference accommodations. And that should be the policy structure in Spain, too. Portugal and the United Kingdom are far smaller trading partners, making it a real gamble to estimate the impact of changing the time, shifting macroeconomic venue at a time when conditions are already quite poor.

But in the same way that the Americans have chosen quantitative easing in the absence of adequate fiscal stimulus (blocked by social oddities, indeed), Spanish popular interest in changing the time zone may just be a part of a kitchen sink strategy toward recovery policy. With very limited influence over monetary policy, and no real negotiating leverage on sovereign debt, this is a country near the extent of its economic pain tolerance, trying to rescue its nationally popular social traditions from their internationally incongruous consequences. That’s not such a foreign idea. We see the social cost of increasing global connectedness in the Midwest all the time. We should be culturally empathetic about that.

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The Restaurant Associations Are Lying

18th February 2014

Welcome to foodservice, an often shameless foray into late nineteenth century labor conditions, actively working to keep wages depressed. The most impressive of these accomplishments on the part of restauranteurs is the tipped minimum wage, a figure that hasn’t seen any increase in 22 years. The industry associations have aggressively guarded this carve-out, using their own think tank to pump out citations long before that was standard political practice. (In this case, with a moniker straight out of Orwell’s nightmares, it’s the Economic Policies Institute.)

The restaurant lobby is at the forefront of resisting an effort in Michigan that would float both the tipped and standard (regular?) minimum wages across the state. The Grand Rapids Business Journal reported on the pushback:

The [Michigan Restaurant Association] said only seven states have eliminated the tipped minimum wage, which in Michigan is now $2.65 an hour. If the Raise Michigan organization has its way, tipped workers would get an 85 cent raise every year until their minimum wage reaches $9.50. Michigan’s minimum wage for all other workers is now $7.40 an hour but also would go up to $9.50 under the proposal…

Brian DeBano, president and CEO of the MRA, said in a statement released the same day the Raise Michigan proposal came out that the MRA believes “this is the wrong plan at the wrong time for Michigan’s fragile economy. With participation in the work force at a 35-year low and Obamacare only adding to that problem, why make it even harder to get a job? Make no mistake, this government mandated wage hike that completely eliminates the tipped minimum wage will not only increase menu prices and cost Michigan jobs — it will put many restaurants out of business.”

Although the tip worker minimum wage is $2.65, nobody makes less than the standard minimum wage of $7.40, according to Jeff Lobdell, principal owner of Restaurant Partners, which has 16 restaurants and food service businesses from Traverse City to Kalamazoo.“If they ever make less than $7.40 an hour, the business makes up the difference,” explained Lobdell. He said that is part of the state law. “Virtually all servers average $15 to $20 an hour” with their tips included, said Lobdell.

There’s a lot of horse shit in the restaurant association’s concern-trolling. The workforce being at a 35-year low has virtually no interaction with the hiring of workers in the service industry. The tipped minimum works by requiring the employer to contribute $2.13/hour towards the server reaching the $7.25/hour overall minimum, paying the difference only when $5.12 in hourly tips are not reached. Consumers, through tipping, already bear all costs, and it seems like a reach to think that they’d balk at prices with higher, more stable minimums already baked in.

But past the tired Affordable Care Act scare and false imperative of a loose labor market, this really comes down to an industry that is generally unwilling to promote the economic stability of its workforce. For as much as the association wants to promote wages of $15-20/hour, the income volatility invites serious cash flow challenges, and says nothing of the hidden risk premiums tucked in the absence of meaningful stability and limited options for avoiding replaceability.

Paying a proper minimum wage will provide stability to a sector of the economy that is growing, cannot be outsourced, and is in desperate need of compensation commensurate to growth over the past two decades. Raising the minimum wage cannot just be about retail workers and fastfood chains, it needs to encompass all sectors. Otherwise it’s just not a minimum.

Nick DeBoer is a digital archivist and the lead writer at Metric Hour. You can find him on Twitter at @NickDeBoer.

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The Incarceration Carousel

13th February 2014

@nickdeboer

I have always found the idea of levying fines in criminal cases rather curious. Financial penalties are a clearly useful tool for disincentivizing minor infractions, but in criminal proceedings, it seems bizarre that the consequence of depriving a person of their freedom isn’t already a sufficient disincentive. It’s also twisted given the demographic realities of the United States and its penal system: those imprisoned are often the least able to pay, or have even committed offenses stemming from the condition of their poverty. If you want to see an example of something that exacerbates the carousel of poverty, look no further than this practice.

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To The Moon! (Or At Least the 1980s)

12th February 2014

By purchase volume, American Express, Chase, Bank of America, and Citibank comprise almost two-thirds of credit card issuance in the United States. Commercially ubiquitous credit companies like Capital One and Discover make the top 15, along with the servicers of popular retailer-specific cards like Barclays and GE Capital. These are the financial institutions that recruit cardholders and manage carried balances (termed “issuing banks”), but as we probably know from watching television, there is another entirely separate set of corporations like Visa and MasterCard also involved with each transaction.

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Privacy, Price, and Promotional Asterisks

12th February 2014

The Washington Post reported yesterday on the increased broadband Internet service competition in and around Austin following Google’s announcement that it would build out gigabit service to the area. Grande Communications, launched in a handful of neighborhoods, plans to expand its service offering at $65 a month, pricing it at parity with broadband contracts that are ten times slower. It’s a laudable demonstration of market competition’s positive power. Grande’s price undercuts Google’s planned Gbps service by $5/mo and an equivalent AT&T performance tier by $35/mo. But a shocking note on that latter offering is buried by the lede: AT&T will match Google’s price if you submit to its data gathering program. 

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A Brief Adventure in Artificial Scarcity

11th February 2014

@nickdeboer

If you haven’t been engrossed in the ongoing saga of Flappy Birds, I’m sorry, but we admit to watching closely with sidelined amazement. After amazing initial success, the game was pulled down over the weekend. The developer told The Verge he made the decision because the game was too addicting. Cynically, this does sound like the most brilliant marketing tactic ever, but no, he’s actually being serious:

“But it happened to become an addictive product. I think it has become a problem,” explains Nguyen. To solve that, Nguyen removed the app last weekend, and he notes “it’s gone forever.”

The popularity of the game, which Nguyen revealed to The Verge generates on average $50,000 per day from in-app ads, appears to have had its negatives. “My life has not been as comfortable as I was before,” says Nguyen. “I couldn’t sleep.”

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