Tuesday, December 03, 2013

Speed Blogging, Tuesday Dec 3 2013: On Rosa Parks, the Federal Minimum Wage And Saudi Women

1.  Sunday marked the 58th anniversary of the day Rosa Parks refused to give up her street in a public bus in Montgomery, Alabama.  She was not the first person to defy the racial segregation laws:

Others had taken similar steps in the twentieth century, including Irene Morgan in 1946, Sarah Louise Keys in 1955, and the members of the Browder v. Gayle lawsuit (Claudette Colvin, Aurelia Browder, Susie McDonald, and Mary Louise Smith) arrested months before Parks. NAACP organizers believed that Parks was the best candidate for seeing through a court challenge after her arrest for civil disobedience in violating Alabama segregation laws though eventually her case became bogged down in the state courts.[2][3]

But neither did her work for justice  limit itself just to that one event, and, no, she wasn't just "too tired" to get up and move to a different part of the bus.  She was protesting the unfairness of segregation.

2.  This article on why raising the minimum wage might not increase unemployment is necessary reading.*  Some economists argue that if we raise the federal minimum wage then fewer people can have those minimum wage jobs.  Seems to make sense, right?  When the price of something (here labor) rises, the buyers (here the employers) will choose less of it.

That's the case inside the simple competitive model of a labor market.  But more realistic models point out reasons why the duh-obvious!  increase in unemployment might not come about, after all:

But how can minimum wages rise without causing job losses? For starters, if the demand for burgers is not price sensitive, some of the cost increase can be passed on to customers without substantially reducing demand or jobs. Existing research suggests that if you raise the minimum wage by 10 percent, you can expect the price of a $3 burger to rise by a few cents, which is enough to absorb a sizable part of the wage increase. 
Going beyond simple supply and demand, economic models are getting better at incorporating frictions caused by the costs of finding jobs and filling vacancies, which turn out to be quite important when analyzing labor markets. There are good jobs and bad jobs at the low end of the labor market, and movements between these lead to vacancies and turnover. 
If McDonald’s is required to pay a higher wage, fewer of its workers will leave to take other jobs. This means fewer vacancies at McDonald’s, and it means other employers are more likely to fill their job openings from the ranks of the unemployed — both of which can help keep unemployment down. So while higher costs may dissuade some employers from creating new positions, it also helps other employers recruit and retain workers. Moderate increases in the minimum wage, in other words, can reduce vacancies and turnover instead of killing jobs. In a follow-up study using our bordering areas methodology, we provide empirical evidence for this argument: while overall employment in low-wage sectors does not change much following a minimum-wage increase, worker turnover falls sharply as workers stay with their jobs longer.

Bolds are mine, and the bolded parts explain the two main reasons why employment might not be much affected by a higher minimum wage.  The "fewer vacancies" reason is about worker turnover, ultimately.  Worker turnover is expensive for firms (because of the need to find new workers when old ones leave and because it takes time to train a new worker and the worker is not terribly productive while learning the job).  If a higher minimum wage rate makes workers more likely to stay at the job, the turnover-related costs drop, and the firm may not feel the pressure to cut back on its labor force.

3.  While Saudi women still cannot legally drive, they now get some support to join the labor force:

The kingdom’s restrictions on women have long drawn the condemnation of rights groups, most recently after dozens of women drew headlines by defying a ban on driving.
But some women’s rights advocates here say that the international attention given to small numbers of women getting behind the wheel overshadows the deep, if gradual, shifts in Saudi society as more women work, broadening their range of experience, helping to run organizations and earning a degree of economic independence.
Although the effort has been promoted by the Ministry of Labor as part of a campaign to reduce unemployment and the dependence on foreign workers, it has butted up against strict social codes. The percentage of Saudi women who work remains minuscule by world standards, at about 15 percent.
Among those strict social codes is probably the code of gender segregation.  Which brings us a full circle in this speed blogging post.

*Depending on the source one uses, somewhere between slightly over half to two-thirds of minimum wage workers are female.  Black women and Latinas are somewhat overrepresented in this group of female minimum wage workers: " Black women were just under 13 percent and Hispanic women were just under 14 percent of all employed women in 2012,[3] but more than 15 percent of women who made minimum wage were black and more than 18 percent were Hispanic."  The industries most likely to offer minimum wages for full-time work are the restaurant and hospitality industries.