Last Call For Wage Slaves, Con't

Five Thirty Eight's Ben Casselman and Kathryn Casteel take a look at the relative uncharted economics of Seattle's $13 minimum wage on the way to $15, and reminds us that what may work economically in King County and SeaTac may not work for say, Bracken County, Kentucky.

As cities across the country pushed their minimum wages to untested heights in recent years, some economists began to ask: How high is too high? 

Seattle, with its highest-in-the-country minimum wage,1 may have hit that limit. 

In January 2016, Seattle’s minimum wage jumped from $11 an hour to $13 for large employers, the second big increase in less than a year. New research released Monday by a team of economists at the University of Washington suggests the wage hike may have come at a significant cost: The increase led to steep declines in employment for low-wage workers, and a drop in hours for those who kept their jobs. Crucially, the negative impact of lost jobs and hours more than offset the benefits of higher wages — on average, low-wage workers earned $125 per month less because of the higher wage, a small but significant decline. 

“The goal of this policy was to deliver higher incomes to people who were struggling to make ends meet in the city,” said Jacob Vigdor, a University of Washington economist who was one of the study’s authors. “You’ve got to watch out because at some point you run the risk of harming the people you set out to help.” 

The paper’s findings are preliminary and have not yet been subjected to peer review. And the authors stressed that even if their results hold up, their research leaves important questions unanswered, particularly about how the minimum wage has affected individual workers and businesses. The paper does not, for example, address whether displaced workers might have found jobs in other cities or with companies such as Uber that are not included in their data. 

Still, despite such caveats, the new research is likely to have big political implications at a time when the minimum wage has returned to the center of the economic policy debate. In recent years, cities and states across the country have passed laws and ordinances that will push their minimum wages as high as $15 over the next several years. During last year’s presidential campaign, Hillary Clinton called for the federal minimum wage to be raised to $12, and she faced pressure from activists to propose $15 instead. (The federal minimum wage is now $7.25 an hour.) Recently, however, the minimum-wage movement has faced backlash from conservatives, with legislatures in some states moving to block cities from increasing their local minimums.

The reality is while an $11 minimum wage had little to no deleterious effects, going to $13 is beginning to cause issues in at least one study.

Monday’s report looks at the impact of the second wage increase under the law: the January 2016 hike to $13 an hour for large employers. This time, the findings look very different: Compared to a counterfactual in which Seattle didn’t raise its minimum wage, the number of hours worked by low-wage workers (those earning less than $19 an hour) fell by 9.4 percent over the first nine months of 2016, and the number of low-wage jobs fell by 6.8 percent. Cumulatively, those add up to the losses of 5,000 jobs and 3.5 million hours of work. The average low-wage employee, they found, saw his or her monthly paycheck shrink by $125, or 6.6 percent. 

The study is far from the last word on the impact of Seattle’s law, let alone the $15 minimum wage movement more generally. Indeed, just last week another study used similar methods to reach seemingly the opposite conclusion: A report from the Institute for Research on Labor and Employment at the University of California, Berkeley, found that Seattle’s minimum wage, “raises pay without costing jobs,” as a press release on the study announced. 

The Berkeley study, however, looked exclusively at the restaurant industry. That has been a common practice in minimum-wage research, because the industry is one of the largest employers of low-wage workers. But the University of Washington study suggests a possible flaw in that approach: That research, too, found essentially no job losses in the restaurant sector as a result of the city’s minimum wage hike. That suggests that studies that focused on the restaurant industry might have missed larger effects in other sectors. (Michael Reich, one of the authors of the Berkeley study, said he was confident in his findings. Bernstein said focusing on restaurants, especially fast food, was a widely accepted approach that was well grounded in economic theory.) 

The Washington study has one big advantage over most past research: The authors had access to detailed data on the hours and earnings of nearly all employees in Washington state, allowing them to measure the effects of the minimum wage much more directly than is possible with less complete datasets.3 But the study has its own weaknesses. Because the researchers had data only for Washington state, they had only a limited pool of places they could compare Seattle to — a key step for figuring out the effects of the minimum wage policy. (The Berkeley paper, by contrast, compared Seattle to similar communities across the country.4) 

The Washington researchers also had to exclude many multilocation businesses, which means their sample could leave out major low-wage employers such as fast-food chains. Reich, in a letter to Seattle’s mayor responding to the study, called the findings “not credible” in part because they differed so much from those of past research. But Jeffrey Clemens, an economist at the University of California, San Diego who has studied the minimum wage, said it isn’t surprising that Seattle’s minimum wage would have an unusually big impact because it is so much higher than most other minimums. 

Even if the Washington study stands up to scrutiny — and it will get lots more scrutiny — it carries important caveats. Vigdor cautioned that the study makes no claims about individual workers: It is possible, for example, that workers who lost their jobs after the wage hike quickly found other jobs outside of Seattle, or that they made up for lost hours by driving for Uber. Neither shift would show up in the researchers’ data.

It's a cautionary tale, but again the categories of jobs and employers in the studies are not complete. What this really means is that we don't know what Seattle's minimum wage hikes will mean truly without more data and more expansive research.  Meanwhile, several other cities are set to join Seattle soon at that $15 point, and we'll have more data in more locations pretty rapidly over the next several years.

I know that's all pretty clinical when we're talking about a living wage for Americans out there working every day to put food on the table, but the issue has to be dealt with in a country where the federal minimum wage isn't a livable wage in any single county in the US.  That has to increase.  The question is "by how much".  We have one set of data points, but right now we're still largely in the "here be macroeconomic dragons" section of the chart.

However, keep in mind that the answer as long as the GOP is in charge is "it will never increase because we think that's already too high."

World War 3.0

The next evolution of warfare is being carried out in Ukraine today as the country's internet-enabled infrastructure is being systematically crippled by network attacks

Ukraine’s national bank, state power company and largest airport are among the targets of a huge cyber attack on government infrastructure. 

Rozenko Pavlo, the deputy Prime Minister, said he and other members of the Ukrainian government were unable to access their computers. 

“We also have a network 'down',” he wrote. “This image is being displayed by all computers of the government.” 

The photo showed his PC displaying a message claiming a disk “contains errors and needs to be prepared”, urging the user not to turn it off. 

Images from other affected computers and disabled cash points showed what appeared to be ransomware, demanding a payment of $300 (£235) in Bitcoin to re-gain access to encrypted files. 

Analysts said the virus, named Petrwrap or Petya, appeared to work similarly to the WannaCry ransomware that infected more than 230,000 computers in 150 countries last month. 

Ukrainian state-run aircraft manufacturer Antonov was among the companies hit, along with power distributorUkrenergo, which said the attack did not affect power supplies. 

The National Bank of Ukraine said an “unknown virus” was to blame, saying several unnamed Ukrainian banks were affected along with financial firms.

“As a result of cyber attacks, these banks have difficulties with customer service and banking operations,” a statement said.

No shots fired, no soldiers parachuting in, no tanks rolling across the roads, but still billions in damage.  And there really shouldn't be any question as to who's behind it.

The secretary of Ukraine's security council said there were signs of Russian involvement in a wave of cyberattacks that hit Ukrainian institutions on Tuesday, including banks and the state power distributor.

"Already on first analysis of the virus it is possible to talk of Russian fingerprints," the National Security and Defense Council quoted Secretary Oleksandr Turchynov as saying.

This is how wars will be fought going forward: critical transportation, corporate, medical, economic, logistic, and electrical infrastructure systems all crashed at once.  Of course, there will be plenty of old fashioned shooting and bombing too, but the era of including a cyber component of warfare in skirmishes between nation-states is upon us.

After all, our good friends the Russians know damn good and well that internet warfare works.

Just ask Donald Trump.

To Heller In A Handbasket

So the theory goes that vulnerable Nevada GOP Senator Dean Heller announced his opposition over the weekend to the Trumpcare Senate bill, and that some behind-the-scenes stuff would happen where Heller would get permission to vote no on it from Mitch McConnell and the bill still passes the Senate with 51 GOP votes instead of 52 when he has to face voters in 2018.  Heller can then say "Well I heard you and I voted no on it" and gets John McCain Maverick Points™, which he can trade in for another term.  That's the theory anyway, and I'm sure that's what Heller was expecting.

That theory just got burned to the ground this week along with possibly Dean Heller's career as the White House has now declared open season on his head.

A new campaign by top White House allies targeting the GOP’s most vulnerable senator over health care sends a loud message to those resistant to the Trump agenda: We’re coming after you. 

America First Policies, a White House-backed outside group led by the president’s top campaign advisers, has launched a $1 million attack against Sen. Dean Heller of Nevada, who on Friday announced that he opposed the Senate’s recently unveiled Obamacare repeal plan.

That included a Twitter and digital ad campaign targeting the senator, including a video that accuses him of “standing with” House Minority Leader Nancy Pelosi, a reviled figure in conservative circles. 

“Unacceptable,” the video says. “If you’re opposed to this bill, we’re opposed to you.” 

America First Policies is set to expand its campaign early this week with TV ads that will go after the Nevada senator. 

The offensive aims both to punish Heller and to sway his vote, and it is a stunning act of political retaliation against a member of the president’s own party — one who faces a perilous path to reelection in 2018. Senior Republicans, many of whom are deeply worried about Heller’s political standing and increasingly nervous about the midterms, were shocked and spent the weekend measuring the possible fallout.

It's one thing to say "Sorry Dean, nobody's getting a pass on this one, we need a united vote" and quite another thing to spend a million bucks to take out ads going after somebody in your own party. I'm trying to imagine the Obama White House doing this to Joe Manchin or something and I just can't.  It's ludicrous.

But the cold calculus is there: there are a lot more vulnerable Dems in 2018 in red states (ten of them!) then there are blue state Republicans, which currently consists solely of Dean Heller.  Losing Heller at this point is a calculated risk to make sure there are no surprises on this Senate bill vote.  I guess the White House figures there will still be a net gain of Senate Republicans in 2018 even if Heller loses, and frankly they're probably correct.

Also, it's still early enough to primary Heller off the island.  Former Utah GOP Sen. Bob Bennett only realized how awful the Trump GOP was on his deathbed last year after the Tea Party primaried him out of a career in 2010.  Heller's only finding out now that loyalty to Dear Leader or Else is the name of the game.

But that leaves the question of "What about the other GOP senators who are holding out?"  Maine's Susan Collins, Wisconsin's Ron Johnson, and Alaska's Lisa Murkowski have all come out against the bill as too cruel, and Utah's Mike Lee, Texas's Ted Cruz and my local blockhead Rand Paul have come out saying the bill is not cruel enough.  None of those senators face re-election in 2018, so ads aren't going to matter.

But cold hard cash certainly will.  It's time for the "Let's Make A Deal" phase of the Senate GOP healthcare bill!

White House and Capitol Hill officials are exploring potential deals to divvy up billions of dollars to individual senators’ priorities in a wide-ranging bid to secure votes for the imperiled GOP health care bill. 

A Congressional Budget office score that projected 22 million fewer Americans would have insurance under the plan sent some members fleeing Monday and left the bill in jeopardy of failing to have enough votes to even be called to the Senate floor this week.

But Republicans in the White House and in Congress were pleasantly surprised that the bill included more savings than they expected — and are trying to figure out if they can dole it out for votes. 

The Senate has about $188 billion to play with. 

Among the possible changes: More spending for health savings accounts to appease conservatives such as Sen. Ted Cruz and Sen. Mike Lee, according to three people familiar with the matter, and some additional Medicaid and opioid spending for moderates. 

"We are still working with leadership to change the base bill," a Lee aide said. 

Lee, Cruz and others on the right have been looking to wipe out as much of Obamacare as possible and replace it with health savings accounts, group plans and selling insurance across state lines, among other ideas. It’s not clear if the Senate parliamentarian would allow all of those proposals through under strict reconciliation rules. And Lee will likely require far more dramatic changes to be won over. 

Meanwhile, senators from Medicaid expansion states huddled after the CBO score revealed the nearly $200 billion in savings to see if they could get GOP leaders to put more money into Medicaid and to thwart drug addiction. Those modifications may take place on the Senate floor, but Republicans are divided on how to use the money.

Let's keep in mind that this "windfall in savings" of nearly $200 billion comes from throwing tens of millions of people off Medicaid coverage.  Mitch McConnell is then going to turn around and take that money and try to bribe GOP senators with it.

That's how Republicans operate.

StupidiNews!

• The Congressional Budget Office estimates that 22 million Americans would lose their health insurance by 2026 under the Senate GOP's health care bill.
• A package of sanctions against Russia that passed by near unanimous margins in the Senate remains stalled in the House, which may never take up a vote on the measure.
• A new Pew study finds the standing of the United States abroad has plummeted rapidly since Donald Trump took office, particularly among America's closest allies and neighbors.
• GOP Sen. Bob Corker and Democratic Sen. Mark Warner are pushing a new bipartisan plan to break up mortgage giants Freddie Mac and Fannie Mae.
• "Pharma Bro" Martin Shkreli faced his first day in federal court for securities fraud on Monday as jury selection in the trial gets underway this week.