Darn, I was just about to cover this subject in the substack that'll go out tomorrow AM. That's OK, I've got some other angles on it. As I mentioned in a comment on some previous post of yours, the appendix of my book (available separately free on request) was a detailed thrashing of the Card/Krueger study.
The issue of the Mom and Pops ("M+Ps") was one of the many distortions of the truth that the study contained. The C/K study covered what happened during nine months in the year 1992. Thirty years ago in the US franchised fast food was still a new and hot industry, gaining market share from the previously nearly universal M+Ps, collectively known at the time as "greasy spoons.". The C/K study did not cover M+Ps, even though the increase in minimum wage in NJ applied to them too, because they found that they couldn't get the owners to waste time on the phone answering their detailed surveys. And within the fast food world, they had the same problem with McDonalds, the most expensive franchise to buy, and the owners there also had no time to waste.
So what the study actually covered was only the non-McDonalds segment of the fast food industry, a very curated, as they say, sample. Also, in those pre-Amazon days, nearly everything bought at retail was bought at retail stores, where much of the staff was paid the minimum wage, and their wages went up too. C/K didn't look at what happened there, nor at the many factories still around in the pre-Chinese imports days with loads of minimum wage workers. So far from being a universal study, it measured only a tiny portion of the establishments which were affected by the rise in minimum wages in NJ, compared to PA where the minimum was unchanged.
In any event, I believe that the lack of layoffs in the NJ fast food restaurants despite the mandated increase in wages reflected several things, none of the backing the argument that raising minimum wages won't cause a loss of employment. The biggest was probably the fact that the M+Ps were all folding under the pressure of the franchised operations, which offered predictable quality and were helped by national TV advertising.
Red Sector A, Evil Capitalist Bastards, must pay 20 bucks per hour for labour.
Blue Sector B, Mom & Pop, must pay only 16.00 per hour.
The Oppressed and Exploited Workers have a choice;
Slice buns, mix salads and accept 16 from the M&Ps, or press buttons, pull levers for the ECBs, and get 20.
Which is a 25% premium to the OEWs.
The ECBs get far more applications from the OEWs, and can afford to be extremely selective in handing out the extra 25%.
The M&Ps get the muppets.
To get away from the muppets, M&Ps must begin to compete with the ECBs on compensation, increasing their overall offer to the OEWs.
M&Ps end up just as fucked as they would have been if there were no differential in the MW required between sectors.
Given enough time, I'd expect that compensation offered would split, with a bit of a step change between two clusters; the OEWs at 20-22, and Whip-Cracking Overseers at 25-28 say.
Edit: mixed up the CA MW with the WA MW given in the post.
Darn, I was just about to cover this subject in the substack that'll go out tomorrow AM. That's OK, I've got some other angles on it. As I mentioned in a comment on some previous post of yours, the appendix of my book (available separately free on request) was a detailed thrashing of the Card/Krueger study.
The issue of the Mom and Pops ("M+Ps") was one of the many distortions of the truth that the study contained. The C/K study covered what happened during nine months in the year 1992. Thirty years ago in the US franchised fast food was still a new and hot industry, gaining market share from the previously nearly universal M+Ps, collectively known at the time as "greasy spoons.". The C/K study did not cover M+Ps, even though the increase in minimum wage in NJ applied to them too, because they found that they couldn't get the owners to waste time on the phone answering their detailed surveys. And within the fast food world, they had the same problem with McDonalds, the most expensive franchise to buy, and the owners there also had no time to waste.
So what the study actually covered was only the non-McDonalds segment of the fast food industry, a very curated, as they say, sample. Also, in those pre-Amazon days, nearly everything bought at retail was bought at retail stores, where much of the staff was paid the minimum wage, and their wages went up too. C/K didn't look at what happened there, nor at the many factories still around in the pre-Chinese imports days with loads of minimum wage workers. So far from being a universal study, it measured only a tiny portion of the establishments which were affected by the rise in minimum wages in NJ, compared to PA where the minimum was unchanged.
In any event, I believe that the lack of layoffs in the NJ fast food restaurants despite the mandated increase in wages reflected several things, none of the backing the argument that raising minimum wages won't cause a loss of employment. The biggest was probably the fact that the M+Ps were all folding under the pressure of the franchised operations, which offered predictable quality and were helped by national TV advertising.
OK, so;
One industry, two sectors.
Red Sector A, Evil Capitalist Bastards, must pay 20 bucks per hour for labour.
Blue Sector B, Mom & Pop, must pay only 16.00 per hour.
The Oppressed and Exploited Workers have a choice;
Slice buns, mix salads and accept 16 from the M&Ps, or press buttons, pull levers for the ECBs, and get 20.
Which is a 25% premium to the OEWs.
The ECBs get far more applications from the OEWs, and can afford to be extremely selective in handing out the extra 25%.
The M&Ps get the muppets.
To get away from the muppets, M&Ps must begin to compete with the ECBs on compensation, increasing their overall offer to the OEWs.
M&Ps end up just as fucked as they would have been if there were no differential in the MW required between sectors.
Given enough time, I'd expect that compensation offered would split, with a bit of a step change between two clusters; the OEWs at 20-22, and Whip-Cracking Overseers at 25-28 say.
Edit: mixed up the CA MW with the WA MW given in the post.