Economists and the restaurant industry offer input on the minimum wage debate

With support from the Obama administration, Congress is contemplating an increase in the minimum wage, in small annual steps to $10.10 per hour by 2016. After that, the minimum wage would rise automatically with inflation.

A group of several hundred economists signed a letter of support sponsored by the Economic Policy Institute. The letter said the proposal would help 17 million workers directly, and perhaps another 11 million workers by boosting wage expectations at the low end of the labor market. The letter said the weight of recent research shows "that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market."

A competing group of several hundred economists signed a letter of opposition. The letter says the consequence of the minimum wage proposal is "that business owners saddled with a higher cost of labor will need to cut costs, or pass the increase to their consumers in order to make ends meet. Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance."

In my own profession, several leading agricultural and applied economists signed each letter.

The New York Times this week pointed out that the letter of opposition was not really written by Vernon Smith, the lead signatory, who is a Nobel-winning economist. The letter was circulated by a firm hired by the National Restaurant Association (NRA), which has much to lose from the new minimum wage proposal. Smith is quoted saying he hadn't known who originated the statement, but he didn't mind that it turned out to be the restaurant industry, because the content of the letter is what mattered.

I asked a couple of my favorite agricultural and applied economists who had signed each letter if they wanted to respond to the controversy. One who signed the letter of support just confirmed that he supported the proposed minimum wage increase, but preferred not to say more.

Dan Sumner, a leading food policy thinker and economist at UC Davis, who signed the letter of opposition, gave this response. I had asked him if he felt "ill-used" by the restaurant industry. His email tackles the concern that the NRA support was non-transparent, discusses anti-poverty policies he judges superior to the minimum wage, and casts the minimum wage unfavorably in the context of other governmental efforts to set prices.

Parke:

I just assumed the min wage letter was developed and circulated by an interest group. Interest groups are the ones with enough interest to organize such an effort.

But, like Lucas and Smith, the proposition and argument itself is what matters to me. I have no connection with fast food places.

I put the minimum wage in the category with farm subsidies as a silly policy ill-targeted and worse than worthless for three reasons.

a. It uses policy resources, effort and attention, that would be better spent doing effective things to help the poor, such as earned income credits or targeted education programs or quality day-care or ...

b. It sends the signal that government price fixing is good policy more broadly. I know from my own specialty that government-set prices are generally bad policy. Thinking we can fix labor market problems or ill-trained workers or any other problem by having members of Congress set some favored price based on what their favorite lobby says it should be just encourages shoddy thinking.

(You will recall that is my problem with the press and the Congress continuing to act as though food stamps had anything to do with food. The reason I like the SNAP program is that is is unrelated to nutrition and the nanny notion that the feds should tell people how to spend their money, even charity.)

c. Minimum wage is so ill targeted as a poverty program and really does make it harder for some poor gal with very little to offer to get that first job. If I have to pay $10 anyway I can turn her away and hire only her sharper cousin, who already had a leg up.

Anyway, that's my off the cuff thinking.

By the way, the interest groups I have least time for are the ideological lobby groups and NGOs that seem to be very loose with the facts and analysis. These range from Heritage to HSUS to the Union of Concerned Scientists. My sense is these folks are just as likely to have an underlying bias to everything they do, and they pretend they act in the "public interest" relative to firms and groups of firms who have clear financial motivations.

Dan

USDA estimates that 31% of the food supply is lost and uneaten

A new report from USDA's Economic Research Service finds:

In the United States, 31 percent—or 133 billion pounds—of the 430 billion pounds of the available food supply at the retail and consumer levels in 2010 went uneaten. The estimated value of this food loss was $161.6 billion using retail prices. For the first time, ERS estimated the calories associated with food loss: 141 trillion in 2010, or 1,249 calories per capita per day.

How grains and oilseeds flow through the U.S. food economy

The U.S. Bureau of Economic Analysis (BEA) recently (in December 2013) announced the once-every-five-years release of benchmark national input-output accounts, showing how resources flow from one industry to the next in the U.S. economy.

For people interested in the economics of the food system, some graduate students and colleagues and I last year developed a tool in Tufts' Visual Understanding Environment (VUE) for interactively illustrating such input-output flows. A working paper (#44) describes the tool. A previous blog post shows an example. The visualization tag at this blog collects other posts about interesting food policy data illustrations.

In this video, I use the new BEA benchmark input-output data to describe how grain and oilseeds flow through the food economy. Before making the video, I rounded the numbers to the nearest billion dollars and deleted some negligible small resource flows, so serious students of these data will want to refer to the original files from BEA. Because the numbers likely will be illegible in the video player embedded in the blog post, I've included a link to the original video, which you can download and play with higher resolution on your computer's own video program (such as Windows Media Player or the Mac equivalent).

Food policy advocates and "personal responsibility"

In an interview with Jayson Lusk, author of the Food Police, the Casual Kitchen blog today asks: 'Why is it that many food policy advocates strongly dislike the phrase "personal responsibility"?'

Jayson's answer, expressing a balanced sense of personal responsibility combined with awareness of environmental influences, is fine.  It is worth adding that many food policy advocates talk about "personal responsibility" all the time.  Just do a search for "Michelle Obama" and "personal responsibility."  You will find the topic thoroughly covered by the Cato Institute (an institution rarely accused of being part of the "Food Police"!).  You will find a lively discussion of how much the Obamas emphasize "personal responsibility" in tough non-pandering commencement speeches.  The Obamas' views, with a mix of personal responsibility and public purpose, sound a lot like Jayson's.

The Casual Kitchen, and Jayson too, can win arguments any time they like against the almost satirically narrow-minded caricature of the "Food Police" that they have set up.  But, perhaps it will become boring after a time to knock down row upon row of carnival dolls sitting on a shelf.  If so, they will want to engage in greater detail the issues that Michelle Obama raises in her speeches for the "Let's Move" campaign.  Here is a good speech to begin with.