Arkansas and Missouri Minimum Wage Increases Contextualized

Arkansas and Missouri voted to raise minimum wages. Time to worry? Here’s a graphical depiction of CPI-deflated minimum wage up to September, and into 2021.

Figure 1: Minimum wage for Arkansas (blue), Missouri (red) and Minnesota (green), all in 2017$, calculated using CPI-U. Observations for 2018M10- use CPI forecasts from CBO, cubic interpolation from quarterly to monthly. Source: Github, BLS via FRED, CBO, Budget and Economic Outlook, August 2018, and author’s calculations.

Notice while Missouri in particular faces a rapid increase in the real minimum wage, the actual level attained by 2021 is comparable to levels attained in 1980 (and won’t nearly match those in the 1960’s).

In addition, the rapidity of the ascent even in Arkansas does not match that of Minnesota in 2014. As recently documented in Chinn and Johnston (2018), the evidence is mixed with regard to negative impacts on employment. It’s not clear to me at all that (1) fast food employment will decline, (2) youth employment will decline, and (3) restaurant prices will increase.

More on likely outcomes from this meta-analysis.

17 thoughts on “Arkansas and Missouri Minimum Wage Increases Contextualized

  1. Moses Herzog

    Some horrid news tonight. Hopefully this isn’t as bad as the first appearances indicate. There was a grown man who looked like not a guy who cries easily and he was understandably losing it. This would be upsetting to children, so maybe like under age 13 for sure shouldn’t click this link:

    This has some similarities to the Florida shooting in the gay club some while back. Not exactly the same obviously, but some similarities.

    1. pgl

      I had to text my son as he lives near there. He was fortunately sleeping as he had to be at work early today. 12 innocent people were murdered.

      1. Moses Herzog

        There were some young folks who pretty much dropped everything and left their cell phones in that Grill/Bar. So they couldn’t call their parents and let them know they had escaped until reaching out to other friends with phones. So you know some parents were in near torture waiting to know if they were safe. When I knocked off it was extremely late and they still had guys with guns scouting the roof.

        Former Marine with mental health issues. White male. Gee, never seen this one play out, have we?? But no “nice” suburban town can have a mental health hospital nearby. It’s important they be shipped to a federal prison 50 miles away from the suburbs where they will never get treatment for their illness. Well snobby white suburbia that turns up your nose to mental hospitals nearby, look what happened to your white kids at the bar and grill. Enjoying how this scenario plays out when you and your chosen politicians refuse to provide people with mental health services?? Just keep/continue going down this road and see what happens. David Long isn’t going to be the end of this, nor was David Long the original. It’s also interesting to note, David Long was majoring in sports medicine. People with underlying/dormant psychological problems often major in psychology or other majors closely related. “Why??” Because they are searching out on their own the answers to their inner problems.

  2. Moses Herzog

    We had some GREAT journalists in years past (remember Sam Donaldson pressing Ronald Reagan??), who asked things called “follow up” questions, when leaders gave them a BS reply that didn’t answer the ORIGINAL question. Now we have mostly Frat boys and debutante brats who are afraid what DC party they’re not going to be invited to if they press leaders too hard. They’re afraid they won’t get to sit at “the cool kids” table. Guess what?? We may have ONE of those great journalists left. His name is Jim Acosta.

    1. Moses Herzog

      Funny when (not speaking of Jim Acosta here, or Yamiche Alcindor, but speaking more generally) characters on a TV show have more courage than the real life versions. But I guess in this fictional scene Murphy Brown is also the rare one who actually wants to perform HER JOB. So I guess it was oddly realistic in that sense.

  3. 2slugbaits

    Is it a bad thing if youth unemployment increases? Maybe it depends on what you mean by “youth”. If you mean 18-22, then probably yes. If 14-17, then probably no.

    1. baffling

      agreed. teenagers still in high school should not be working-they should be in school studying and preparing for the next 60 years of life. sure, for some families they may need the income-but it is to the detriment long term for many of those students. the same could be said for college students. work should be secondary to their education. at those ages, they gain far more from education than they can ever get from a minimum wage job.

  4. pgl

    Here is a radical proposal. Set the minimum wage at $12/hour as of January 2019 and then index it! I’ve seen versions of this idea endorsed by even conservative economists.

    1. Moses Herzog

      @pgl WOW, even I didn’t think Alex Jones would sink that low. Shows how naive I am, eh?? I guess it’s not the first time Jones has doctored footage or staged interactions with actors before. Maybe Alex Jones has a large picture of Joseph Goebbels hanging in his “Infowars” office?? Along with Goebbels biographies stacked up on his bedside nightstand??? I’m getting damned near to regretting defending him when he got booted off the social media sites. Not there yet, but close.

      Here’s a different type of example (the interviewee here is all too real) where Alex Jones got one of his braindead “correspondents”, usually with no university degree or journalism credentials whatsoever, to go out and try to ambush people randomly who they think are “easy targets” to embarrass on camera. Then they use the few ambushed examples to say “See!!! These dirty liberals are all like this guy!!!!!” Here is one, that unfortunately for Alex Jones was all too real as they found out their random target was slightly sharper than their joke “reporter”:

      One thing Alex Jones very rarely discusses with listeners is how he himself choses to live in Austin Texas, a university town, and hands down the most liberal city in all of the state of Texas. Michael Savage of radio loudmouth fame, also lives (and has lived for DECADES) in San Francisco—so let’s see if our resident “rocket scientists” on this blog, PeakIgnorance and CoRev can do the calculus on that one.

      1. Moses Herzog

        “choses to live”. Wow, that was one of my better ones. [ takes a bow ] I’m a true Okie now. Finally earned it.

  5. Erik

    ” It’s not clear to me at all that (1) fast food employment will decline, (2) youth employment will decline, and (3) restaurant prices will increase.” – MC

    Then that suggests the return to capital will decrease for low wage shops.

    A long time ago (early 1980s) when the United Farm Workers of America AFL-CIO won higher wages for field workers, e.g., $7/hr, many corporate farms in California reacted by mechanizing and reducing the number of seasonal employees. In this case, if I am not mistaken, the minimum wage laws do not apply to agriculture.

    It would appear that minimum wage increases in the service sector do not provide any additional incentive to further automate or otherwise increase productivity.

    On the other hand, in the spirit of the efficiency wage hypothesis, higher minimum wages could reduce turn over rates and the reduction in hiring costs would offset somewhat the hike in the minimum wage though no empirical evidence exists to support this notion.

    1. 2slugbaits

      Erik It’s also the case that some employers will rely less upon overtime. A lot of fast food restaurants rely upon a core of workers who put in 60 hours a week and then a cadre of part-time workers to cover peak times. So overtime is really just budgeted into the planned wage bill. For example, if a core worker’s marginal product is worth $11.67/hr and the minimum wage is $10/hr, then management will schedule 40 hours at $10/hr and $20 hours at $15/hr (overtime). So the total wage bill will be $700 over 60 labor hours, or $11.67/hr. A higher minimum wage increases the cost of overtime, so we might expect those part-time workers to pick up more hours and the core workers scaled back to 40 hours.

    2. spencer

      Eric, agricultural workers have a separate minimum wage that is lower than the minimum wage for everyone else.

      OK, tell me why it is bad that restaurant owners resort to practices that raise restaurant productivity. This is the way
      we raise our standard of living and has been true since the start of the industrial revolution.

      Why do you think we are better off cutting our standard of living to the levels found in Bangladesh?
      Do not try to get out of that accusation because cheap labor is what people like you propose as the solution for everything.
      Do you really believe that farm mechanization in California was a bad thing that made us all worse off? That is what you are claiming.

  6. Erik

    spencer: I did not make any of the claims that you state I did but I do thank you for your comment. If you would like to comment on the economic rationale behind a lower minimum wage for the agricultural sector as opposed to the usual political rent seeking argument, I am all ears.

    2slugsbait: Interesting comment. Employers may have more leeway to adjust to a legislated input price increase than I had previously thought.

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