Graph of a non-linear system.
Source: NROC
Ever heard of the butterfly effect, when a miniscule change in an input to an algorithm results in monstrous changes to the outputs? This is an example of a non-linear system. WaPo’s Wonkblog has a report on two recent studies of Seattle’s raising of its minimum wage to $15/hour, and how those two studies came to different conclusions:
When Seattle officials voted three years ago to incrementally boost the city’s minimum wage up to $15 an hour, they’d hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.
The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.
The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city. The study, published as a working paper Monday by the National Bureau of Economic Research, has not yet been peer reviewed.
While on the other hand …
“I think they underestimate hugely the wage gains, and they overestimate hugely the employment loss,” said Michael Reich, an economist at the University of California, Berkeley who was part of a group that published its own study of the minimum wage in Seattle last week.
Reich’s study uses more conventional methods in research on the minimum wage, relying on a publicly available federal survey. His group’s data did not allow the researchers to distinguish between high- and low-wage workers at a given firm, but they were able to separate large firms’ locations in Seattle from those outside the city.
Their results from the University of California accorded with past research. The minimum wage increased wages for workers in the restaurant industry, without reducing employment overall — in contrast to the findings from the University of Washington.
Past research (Card & Krueger, 1994, with replications) had suggested that raising the minimum wage brought more benefits than costs for the average worker, just to round out the background.
The balance of the entry discusses, with a lot of hand waving, the differences in methodology and how that may have caused the two studies to come to divergent results. I shan’t go over them, as I don’t really have the qualifications. What interests me is two things.
First, the entire question of minimum wage and raising it strikes me as an instance of a non-linear system. In one situation, some small factor of value X may make raising the minimum wage a non-sequitur – such factors as the mix of businesses, the schooling available to the working poor. And then there’s the measurements themselves, just to gum up the works.
Secondly, there’s the politics. Ideologues are notoriously blunt objects, willing to bash themselves bloody to remain true to their principles. Non-linear systems, though, rarely behave how the ideologues want them to behave, for ideologues are unsubtle people. But that won’t stop them, and they’re the ones in power these days, at least on the GOP side of things. We can look forward to a lot of banner waving and proclamations of victory in the light of this study – with little reference to the more important academic battle (properly, critique) waged on this paper. Indeed, in the unhappy chance that it ends up on Retraction Watch, would the ideologues who celebrated it acknowledge the failure of their paper?
No.
And that’s how you know ideologues are not your friends.
Update: a mention of this paper has already surfaced on WCCO TV, last night. I don’t see the story on their website, but it’s a poor website.
