Minimum Wage: Evidence and Effects

- If it's that simple, let's just raise the wage a lot and then everyone will make a lot of money. Okay. It's obviously not that simple. I was actually asked to be on the Daily Show to talk about minimum wage. This when my kids were in high school, and there were two things that came out of this. One is they said, you gotta be ready to be a little bit funny. And I started looking at minimum wage jokes and there weren't any, but there are some fairly lame cartoons of which this is one. So I'll show you a few of those. The other is, after we had this long conversation, I said, fine, I'll come on the show. I said, will you send me a ticket? And they said, no, you have to pay. And I said, you have millions of viewers, why do I have to pay? And I turned them down and my kids have still 15 years later, not forgiven me anyways. But you get the point here, you know, if it's that simple, let's just raise the wage a lot and then everyone will make a lot of money. Okay. It's obviously not that simple. Okay, so a little bit of economic theory. Nothing fancy, no graphs, definitely no equations. What does the economic theory tell us about what the minimum wage ought to do or might do? Well, in general, we all have this experience. When things get more expensive, we tend to use less of them, except in the odd context, right, of of gift and goods, which the economists know about. But don't worry about it. You know, we tax gasoline to discourage use. We tax cigarettes a lot. And it's in some states to discourage use, the people who are very sensitive to price, like kids who don't have a lot of money. Research shows are very responsive to cigarette taxes. If you have a lot of money, maybe you don't care. You know, we do things in reverse. We subsidize things we wanna happen. We subsidize green technology. We have tax breaks on electric cars, at least for a little longer. And on solar installations. And the idea is, of course we make it cheaper. And then people, you know, substitute towards that. So that suggests right off the bat that if I pass a law that raises the cost of low wage labor, there might be a problem. 'cause firms who are the people who hire those workers might say, wait a second, you just made, of all the things I use to produce what I produce, you just made low wage workers more expensive, and might I find other ways to produce things? Now does this apply to labor? I'm not sure I'm supposed to point with this there. Oops, sorry, what? There we go. Does it apply to labor? It's a little more complicated, right? No one, we, you know, we buy cigarettes if you smoke or whatever else is gasoline to drive or alcohol or food because we consume it directly and we like it and it gives us utility. No one hires labor just to hire labor businesses, hire labor to make stuff that they can sell to people and then make money on that. So it's, we call a derived demand. So it might be a little more complicated than that. Okay? But it's not really, so here's this, here's the, here's like three weeks of undergraduate labor. Boil down to one slide. What happens when the minimum wage goes up? Okay? So by law and in the US, people pretty much obey the minimum wage law. Low-skilled labor becomes more expensive, okay? Those who are, you know, whose wages were previously below, what is now a higher minimum wage that raises the cost of production to the firm. If I don't make any change, my low wage workers now cost me more. Causes firms to reduce the use of low-skilled labor and maybe find other inputs. Maybe I use two high school graduates instead of three high school dropouts. I'm sure you've been to fast food restaurants with kiosks now where you order, right? That's a probably a response to higher to higher labor costs. That's what we call the substitution effect. So firms substitute away from low skilled labor, but even though firms do that, their costs still rise. And that means consumers have to pay more. And in general, for most goods, when prices of things go up, people buy a little less of it. So that increases overall demand for firms. Okay? So California has this fast food minimum wage. Almost surely it's raised the price of fast food and reduced demand for fast food a little bit, especially when there's another sector that's so close that's not fast food or the minimum wage hasn't gone up anyway. So these higher costs go up. Consumers demand less firms kind of shrink the entire scale of their operations. Maybe both low skilled labor and high skilled labor. That's called the scale effect. But both of these for low skilled workers are in the same direction, right? The relative prices going up, you use a little less. And then firms have higher costs. They use a little less of everything, including low skilled labor. So in the standard model that's unambiguous. Economists are fond of writing down models that say, wait, something else can happen. So there's some exceptions. First of all, it's not that all employment falls, right? If skilled labor might do better, 'cause you might substitute towards the more skilled workers. You know, if you make, if you're on a hundred thousand dollars a year salary, the minimum wage for the most part is gonna have no effect on you. Sometimes the minimum wage could be non-binding, right? We might intro, we might raise the minimum wage where essentially there's, there's virtually nobody at that minimum wage at the already, no one detectable in the data, in which case it just won't have an effect. The most complicated kind of models are these sort of, they're a little hard to to explain, but essentially there's frictions in the labor market. People don't move job to job in response to wages as quickly as we think they do. Competitive markets sort of have, you know, sand in the gears in some sense. And things don't move as quickly and in those kind of models. And that could happen for a lot of reasons. The prediction doesn't always hold. And that's why I said at the end of the day, you have to actually look at the evidence, right? And that's, I would say true, true of everything but here as well. Okay, so, so what do we know? Okay, so this, I I wanna warn you, this is, I could talk about this for, you know, for, for, for a semester. There's a huge literature, hundreds of pages. It's also a contested literature. I'm talking, I'm gonna give you my take, I'll give you a sense of why it's contested. But obviously if you're interested in this, you know, dig in and, and you'll find people who disagree with me. And you can form your own opinion obviously. So there's an earlier set of studies that kind of ran their course. And this was driven by kind of what, what kind of data we had in around the late 1980s, what we call time series data, just aggregate series. Like what is the teen employment rate for the US as a whole. People look at teens 'cause they're affected by the minimum wages a lot by the minimum wage, a lot those kind of studies. And then you're just sort of studying for the country as a whole. How is employment evolving? How is the minimum wage evolving? And those studies pretty uniformly led to this kind of what they call consensus effect, an elasticity of about minus 0.1 or minus 0.2. What is an elasticity? For those who don't know? It says it right here. If the elasticity is minus point, 0.1 to minus 0.2, when the minimum wage is up 10%, teen employment falls by one to 2%. So it's the ratio of the kind of the, the latter, the latter number, the one or 2% over the 10%, hence the 0.1 or 0.2. And it's negative 'cause employment falls. So that's where when I was really finishing graduate school and starting out on this, that's kind of where the state of state of knowledge was over time. And I, you know, this has happened throughout my career and it, it just seems to accelerate more and more. We have more and more and richer and richer and richer data and labor. Economists and others came to realize that the problem with looking at an aggregate time series is, oh, what else is going on? Right? What would've happened if the minimum wage hadn't gone up? So the minimum wage went up in the late sixties and teen employment fell. Well, we also had little things like the Vietnam War, right? Which affected young people's decisions, especially stay in school, right? 'cause for a while you could avoid the draft if you, if you went to college, we had big changes in social programs that may have changed work incentives. And when you're looking at sort of the, just the evolution of things over time, you can't tell. So we've increasingly, and this is done in all public policy research, even outside of economics, started to use kind of comparisons states and now cities where the policy changes in one place but not another place. And as long as those two places are kind of evolving similarly, except for the policy, we have a better, what we call counterfactual. So the very famous Cardinal Krueger minimum wage study, some of you may have run across it an undergraduate course. They looked at New Jersey where the minimum wage went up. They looked at kind of eastern Pennsylvania, which for those from the east coast know is maybe everyone does. It's next to New Jersey. Kind of an integrated market, you know, close together, somewhat urban, not that much, but more than Western Pennsylvania. And they said, well, things are probably evolving similarly on both sides of the board, or the minimum wage went up on one side, not the other. That's a very small flavor of, of what we do. The US is a great place to do this because as I said, we have a lot of state minimum wages. This is just gives you the number of states that were above the federal over time. So if you go to the international research and there's labor economists in other countries, there's a lot of 'em in Europe. They still write a lot of papers on minimum wages in the US because in Europe, most European countries, it's still a, it's just a national minimum wage. It's kind of hard to figure out what's going on, right? The US is this kind of great laboratory for doing this. So there's been an evolution of work and an avalanche, you might say 30 years doing this kind of cross state approach. But the question is still far from settled. Here's some quotes. A state, a statewide, this is from a little while back, a statewide $15 minimum wage is a, is a is a bad idea. Why a $15 minimum wage is a good idea. Okay? That's where the media, we're not surprised when the media sources disagree. But even you go to economists, you can find the same contradictory quotes. So it's, it's, it's, I think I'll, I'll tell you, I think it should be more settled, but, but it isn't. My co-author and I bill washer at the Fed. It works at the Fed. We did a big review, we wrote a book published in 2008 and we said most of the studies find negative effects. The ones we think are kind of more reliable, more likely to find negative effects. And that old elasticity of minus 0.1 to minus 0.2, that is you raise the minimum wage by 10%. Low skilled employment declines by one to 2%, still kind of still kind of held up. Then there's this whole debate about this, and I don't want to get into this too much because it takes up a lot of time. So I'm actually gonna skip over these slides for the most part. But basically there's a big argument, and it's kind of boils down to a lot of statistics in econometrics of whether it makes the most sense to look at kind of like this card and Kruger thing, just a, a, you know, two sides of a border where we think other things are changing similarly, but the minimum wage changes differently or whether other approaches work better. And there's a lot of other approaches. And for the econometricians, which none of you are yet, but some of you have had some, I realize there's some issues to get into. But the bottom line is the following, and I'm gonna skip these slides and just jump to here. When you do these sort of card kruger type close controls strategies, you tend to find no effective employment. But all the other strategies that are meant to solve the same problem do. And furthermore, these close controls have other problems. And here's just a a, here's a way to think about the problem, which, which might cement this. So, so suppose I take two states that are close, well, they share a border, so obviously they're close to each other and they're pretty similar culturally. So Arkansas has a, a high minimum a, a higher minimum wage than the federal and Arkansas, I always mix up Mississippi and Alabama, but I think borders of Mississippi, I think I have that right, right? 'cause the Mississippi okay borders Mississippi. Mississippi still is the federal minimum wage. My geography's wrong, I apologize. And now you say why does Arkansas minimum wage and Mississippi doesn't? Well those are very similar states. They vote the same way. Voters share a lot of the same views. And it might be that the minimum wage is higher in Arkansas 'cause Arkansas's economy is doing better and politicians know that minimum wages are popular. Even Republicans favor minimum wage increases. I don't mean even Republicans mean its, and there's sort of bipartisan support in polls for higher minimum wages. People like the idea. So politicians like to do things, people like, but if you know there's a cost, you do it when the economy's doing well, now you ask why does California have a high minimum wage and Mississippi doesn't? Well that's not just because of recent changes in economic conditions. California has a host of very progressive policies going back a hundred years, right? So completely different political cultures, you know, the, the more different than most random pairs of countries in Europe perhaps. So that kind of variation that's driven by old historical cultural, political stuff may give us a much better quote unquote experiment for just isolating the minimum wage went up. But it's not because economic conditions changed that can kind of get confounded. So that's sort of what goes on in this literature. That's a more subtle point. If you wanna ask about it later, we can talk about it more later. This is weirder and, and this I kind of stumbled on a few years ago, working with a graduate student, it's not at all surprising. The economics is social science. It's not a natural science. The natural science, you know, every experiment on the same thing should get the same answer, right? There's, there are there, there really are physical laws, economics where we don't do real experiments for the most part, especially on minimum wages. So we have different kind of studies and they sometimes reach different answers. And that's not surprising that studies contradict. The weird thing is you go and read summaries of what the literature says and people summarize things very differently. And I, I didn't quite realize this till we dug into this paper. You could see the, the quotes there, but, sorry, oh, grab my, you know, Paul Krugman, there's no evidence to raising minimum, minimum wage cross jobs, at least when the starting point is as low as it is in modern America, New York times 2015, he actually had a column 10 years earlier saying the optimal minimum wage is zero. So he changed his mind. Anyways, at the bottom there's con there's considerable support for the, for the competitive market hypothesis that the effect of minimum wage would result in lower employment. Now both of these studies note, they're not saying, my opinion is they're saying this is what the research says, right? And we sort of ran into this and said, alright, we should try to straighten this out here. So a grad student and I spent a lot of time surveying authors of papers asking them what their conclusions were. Also kind of, of course reading things ourselves and, and seeing what we thought their conclusions were, making sure they kind of said the same thing. We thought, excuse me, and this is my favorite graph I've ever produced because it's very clear, this is all the studies over on the left, you can't read that. It's just the author's, you know, author year combinations. But each of those horizontal bars is the estimated elasticity from minimum wage study. The zero line is, or zeros obviously. And you can see they're almost all negative, right? You know, 80, 80 plus percent of them are negative. There's a couple big outliers on the right, the biggest one there that goes all the way out to 0.7 when we were serving the authors and said, you know, we're re we're doing the survey, what would you say is the, the elasticity from your study that you're most comfortable with? They said, we ac we actually don't believe that paper anymore. So you kind, but we decided to leave it in because that seemed a little dishonest. Anyways, so the evidence really points to most studies saying employment declines. What do I want to, I just wanna skip over some of those. If you zoom in on the studies that really try to focus on low wage workers. So, so some studies do teenagers, some do high school dropouts, some do minority high school dropouts. Why? Because those are on average low wage groups. That's where we expect the minimum wage effect to show up. These studies actually look at low wage workers in particular. It's a little trickier because if you're not working, I don't know if you're a low wage worker, but if you do, you find even more overwhelming evidence that that employment falls when the minimum wage goes up. So my view is, it's pretty clear that the literature kind of overwhelmingly says a higher minimum wage reduces employment. Okay, I'm gonna skip this and I'm gonna skip this. Okay, so I think this is a, a a, a nice accurate reflection. My second lame cartoon, you know, two outta three people like a minimum wage hike because two of 'em get a raise and one of 'em lost this job. And you might say, well two winners, one loser, but wait a second, you know the wage increase is nice, but if it's 15%, it's 15%. Losing a job is a hundred percent right? So it doesn't take many job losers to you might think offset wage, you know, smallish wage gains for a lot of people. Okay? So does it higher minimum wage help low wage workers? The answer is some of them, but not all of them. It's not a free lunch. There's a trade off here, okay? Now I will say, some folks hear that conclusion, minimum wage reduces employment and say end of story, we clearly shouldn't raise the minimum wage, right? So this is the bus California business lobby car, a cartoon about them. They have this kind of a top 10 job killers thing they put out every year and they, they always point to this evidence and say, you know, the sky is falling 'cause the minimum wage is going up. Well it might be, but just because a regulation costs somebody a job doesn't mean it's a bad idea, right? We do things for other reasons, right? We pass legislation to try to reduce carbon emissions because we think there's problems from too much carbon emissions. Now is someone who works in an oil refinery probably gonna face worse job prospects because of that? Yeah, for sure. Right? But we might still decide it's okay to do that, but we, but, but you know, but that's an explicit discussion. And, and and cal calculation may be too strong a word, but at least weighing we have to do of the cost and benefits and decide is this worthwhile? And clearly, you know, we do that in some cases, and I was just on a call yesterday with a bunch of California business leaders who are convinced we don't do it nearly enough. We just passed a lot of regulations without asking whether they're delivering any good. And that's true. So what is the benefit here that we should be thinking about? I, you know, it strikes me the, the most, the most important one is back to our like facts that that motivate the higher minimum in wage, maybe the minimum wage reduces poverty, right? Ted Kennedy, famous senator from the famous family we're not as, no, I don't think anyone's as crazy as, as the the famous name for that family right now, but that's the way it goes. He, every year I think introduced legislation to, to raise the minimum wage. And he says this is from his biography, the minimum wage is one of the first and is still one of the best anti-poverty programs we have. And I think it's true that if you really dig deep into why people advocate for higher minimum wages, this is really the reason, right? And it goes back to what I showed you before, that poverty rates, you know, are fairly persistent in the US despite the country on average getting richer. So lemme show you a calculation. So this is here, here's what I'm doing here. I am looking at data where I have everyone who works and their wages and I also know what family they're in and how, how much income their family has. So the left hand column says income the needs, that's the ratio of your family income to what the poverty line says your needs are. The poverty line is different depending on how big your family is, which kind of makes sense, right? So, so if income, the needs is exactly one, you're right at the poverty line, if income, the needs is below one, you're below the poverty line, I you're poor. And if you're well above one, you're better off. And then I'm saying, okay, let's look at low wage workers and let's suppose we just raise them up to the minimum wage. No other changes, hours don't fall, employment are fall. Really simple calculation. There'd be this big increase in the wage bill, right? 'cause everyone who below the minimum wage would go from whatever the making to the minimum wage. And then we say, okay, take that, that big aggregate increase in wages, which families does it go to, okay? And what this table says is 85% of that higher wage bill is gonna go to poor families, families with income that needs less than one. If you look at those numbers, you say, well this looks like a really well targeted policy, right? We're raising wages, yeah, there's other changes going on and this is a static, what we call a static simulation. But all that money is going to poor families, great. Or almost all of it. That's what we're trying to do. Here's the problem. This is 1939, okay? Here's what it looks like as time marches forward. So you come out to the last column, which is not quite the last year, but it's 2022 and you can see, you see the 85, the first column hasn't changed, but now the share of those increased wages, I think the next table just highlights those a little bit, right? The share of those increased wages that goes to poor families is now 16%, not 85%. Conversely, the bottom right, the share that's going to families three times the poverty line or above is 37%. Now three times the poverty line does not make you rich. It's actually, it's fairly close to median family income. It's a little less, but you know, but it's sort of the top half, roughly speaking, the top half of the income distribution. So what does it say that more of the minimum wage gains go to the top half of the income distribution in terms of families than to poor families. Okay? Why does this happen? Why does this change so much over time? Right? Well back in 1939, there was essentially no safety net, right? You worked or you had nothing. Pretty much there's some local general assistance, obviously there's charity, but where the federal government was not involved in providing income support to low income families, we now provide income support in all kinds of ways to low income families. And every rich western country does right now, you know, we all have, we all have policies that you might think they're too generous. You might think they're too stingy. We can argue about it. But we all have policies that in one way or another, well structured or not kind of assure some resources for the lowest income families. So we have a lot more of that than we did in 1939 when we essentially had none in addition, two other things, there's a lot more families with more than one worker, one worker in the family. Usually the male, unless it was a single female, used to be very much the norm. And now it's not two or three workers per family, IT spouse and sometimes a teenager is very much the norm and they might be low wage, right? But not in a low income family. So that's like those of you who may be, some of you are higher income families who maybe had a minimum wage job when you were 15 or 16 years old, right? And that really didn't exist back in 1939. But now there's a lot of that. One way to think about this is call that 1620 just to round it, you know, roughly speaking what that says is to get a dollar to poor families, we have to kinda raise the wage bill for employers by $5 ballpark, right? That's really inefficient. Now, most distributional policies, they entail some inefficiencies when we try to, we do some tax and redistribution policy to get money to poor families. You know, Josh probably knows these numbers better than me, but I think they, they probably cost about a dollar 30, a dollar 40, maybe a dollar 50. And we say, okay, we're willing to do that. You know, you might, you you might disagree, you know, but we, you know, all again, all the western countries do that to some extent. $5 to get a dollar to a poor family sounds like a really expensive proposition relative to other policies. And it's, this is from an op-ed, i i, I didn't draw the cartoon, I only wrote the op-ed about sort of making the point that minimum wages don't target poor families very well. Obama was throwing, I think the debate then was over 10, 10 minimum wage. It's not true that none of them hit the poor family target, but it's the Wall Street Journal. So they exaggerate a little bit, but you get the idea. Okay? Now, I haven't actually told you what the research shows, like the research unemployment effects, if I kind run the regressions, labor economists run, do minimum wages reduce poverty? And the answer is no. Almost all studies find kind of no effect. They don't increase it, they don't decrease. It's kind of a wash. And again, there's winners and losers, right? Some people are in higher wages, they're better off, other people have some hours reduced work, a little less, they're worse off. And it kind of washes out to roughly a zero effect. And that's kind of the nature, the nature of the beast. And that that result is very robust in the literature. There's really only one study that's an exception and it's somebody who always finds minimum wage effects of great effects. But there's a lot of other papers that just don't find an effect on poverty. I want to, I have 20, okay, I'm, I'm, I'm wrap up quickly. This is another, this is a a a, I'm not gonna explain the slide in detail, but I was, I was lucky enough to get access to really detailed tax data in Israel for reasons that are kind of random. But I knew the, I had the tax return of the employer and I also had all the workers who worked for that firm. Okay? Now people used to say, God, it kind of seems like the minimum wage is gonna fall on employers who don't make a lot. Now Walmart maybe, okay, there's some big employers who are low, but they're not, they actually pay above the minimum wage. But you know, the corner laundromat. The corner diner as opposed to to bigger employers, right? And the people who run those businesses typically operate on pretty small margins. I put in a new HVAC machine in a house and I was negotiating with the guy from the heating company and he said, you know, our margins are single digits, right? That's low, right? And you raise them minimum wage and your margins are single digits. A lot of that margin may go poof if you don't, if you don't do something about it. So I, I don't wanna, so basically with these data we could actually see employers income and workers who are affected by the minimum wage simultaneously, which is very unusual. I don't know of another data set where you can do this. And what you find is that, as you might expect, it's the low income employers. Don't worry about the numbers so much, I'll just tell you the story 'cause I wanna move on. But it's the low income employers low, I mean people who own businesses make more than other people. So, but among business owners, it's the lower income ones who are paying for the minimum wage. And there are both hiring businesses, business owners aren't paying for it. And workers who are higher income who make as much as the owners of these companies. So in Israel, big tech sector, so there's people in the right hand column are like the high earning workers and firms that don't have a lot of minimum wage workers. They're tech workers and engineers and stuff like that. They make just as much as the people who own maybe a small business. And the people in the business are paying for the minimum wage and the high income workers aren't. So there's what we call an incidence problem of who's paying for this. One might argue that if you're gonna do, if you're gonna think about the minimum wage as a redistribution of policy to try to reduce poverty, you know the people who make more should pay for it. And good policy generally says whatever you decide on, we can decide on the tax rate. But then if you and I have the same income, we should pay the same rate, which people should be treated the same. And that's really not happening with the minimum wage. Minimum wage also increases prices and it raises the price of KFC more than it raises the price of private jets and yachts. 'cause there aren't any minimum wage workers building yachts. So point being in Tom McCurdy who was here has some of the best evidence on this. That the, the prices, the prices that go up are things that low income families spend more of their money on than high income families. So this is a like, you know, my last lame cartoon, you know, it's complicated. The guy on the left is complaining everyone's ugly in this picture. I don't know why but complaining about prices. One guy saying you got a raise, the other guy just got lost, just lost a job. And the point is, there are trade-offs and you can't avoid any. Economists love to say that because it's true. The minimum wage is not a free lunch. So I just wanna go let, make one last point. Is it as hopeless as it seems? 'cause that sounds pretty discouraging. I said there's rising inequality. I said poverty is not declining very much or maybe not declining at all depending on who you ask. Probably declining some but not, not, not dramatically. Changes in the economy for sure have disadvantaged, less skilled workers don't know what AI is gonna do. We'll find out, it's ironic that coders seem to be suffering the most so far. Maybe we'll hear more about that at dinner tonight. But in general, longer term trade and other policy, other technological change have disadvantaged low wage workers. We worry about families having low income. So how do we kind of get more income to low income families so their kids can thrive and all that stuff without discouraging work. 'cause if we think if we just give people money and the research kind of bears us out, well then they don't work and that's a bad thing. Well we have a solution in the US it's called the earned income tax credit. So this is a policy that was not created for this reason strangely enough. But essentially what the EITC does is if you work, and especially if you have kids, you get essentially a top up on your income and it's big, it's up, it's 40%, right? Which is a lot of money. So you make $20,000, right? You have two kids, right? You get another 8,000 F you, you're typically not paying any your federal income tax at that rate and you're getting a check for $8,000. It's a lot of money. This has become bigger than what we typically used to call welfare programs. We spend a lot of money on this space. 80, $90 billion right? Now, what does it do? It subsidizes work, right? If you work, remember what I said, then you get paid more. It encourages you to work instead of just giving you money, which might discourage you from working. And the research shows it has, does what you expect. More people work because of the EITC. The program is most impactful for single mothers, which is a large share of the poor population, right? 'cause you A, you have kids and B, you have one adult makes you more likely poor. C you're female. Which unfortunately also makes you likely to be lower wage. So all those reasons, single, single mothers are highly overrepresented among the poor. The EITC is great for them 'cause it pays you more if you have kids and it pays you more based on low family income, which because you're only one adult, you unfortunately have it. So it, it really works effectively and it's based unlike the minimum wage, it's based on family income. You don't get the EITC because you're a low wage worker. If you're in a high income family, you only get it if you're a, you work and B, your family is low income. So when you ask where the money is going, how much is going to poor families or low income families, unlike for the minimum wage, the targeting is it's never perfect, but it's pretty close. Okay, so which policy is better than redistribution grounds? I think it's kind of clear the minimum wage costs some jobs that has an immediate effect. There's also something I didn't talk about, which is one of the principle sources of earnings growth as you work through your career is the return to experience. Your paid people's pay goes up with experience because you acquire skills and learn things. And if the minimum wage is keeping you outta the labor market at a low age, it kind of shuts you outta that sort of lower rung of the ladder. You might say there's evidence that happens. The minimum wage doesn't really target the poor. And that last slide I shared from the Israeli tax data doesn't redistribute from the richest, which you may not wanna tax the rich very much. That's a, that's an open question. But if you're doing redistribution, that's probably where the money should come from. The ITC targets the poor, effectively, it encourages work and that actually has long run effects that are beneficial as well. And it's financed by taxes. I think this is another, there's a puzzle of, if everything I'm saying is true, why do people keep raising, why do policy makers keep raising the minimum wage? It's really hard to raise taxes, right? In con national level of virtually impossible we might say. And I would say make the EITC more generous than it is. That'll help solve some of the problems we have. And they'll say, yeah, we've gotta raise taxes to do that. If you do that you gotta cut 'em somewhere else. We've sort of tied ourselves in knots, the minimum wage, I just passed the law, right? Congress doesn't have to come up with the money, somebody does. Obviously they sort of forget that, but Congress doesn't, doesn't add to the deficit at least directly. So I think politically it's much more, it's, it's much more palatable. But the ITC works a lot better. I probably never get invited back after putting up an a OC picture. But this is her famous, her famous mom address that says tax the rich, which I believe she's being, she took as a gift and is having to pay money back for as a fine. But anyways, I'm not endorsing taxing the rich generally. But if I'd be more sympathetic if it said, although it wouldn't fit on the dress and instead of raising the minimum wage, but, but she didn't, she didn't choose to say that. So conclusions, minimum wage helps some people for sure. It's not that some people aren't better off, they are, but it has negative consequences for others. Very little. Essentially no evidence that it reduces poverty. And this alternative policy, the ITC, which we did kind of stumble on, but who cares, works really well, targets poor people, encourages work, encourages long-term earnings growth. And aside from the constraint on raising taxes could be made more generous. If we think, and some people do that the labor market is sort of shifting to what we call polarization. You know, more high wage jobs that are high wage, more low wage jobs that are low wage in the middle hollowing out, then we are gonna face a problem that people at the bottom may not have. The level of income, the level of resources that as a rich society, we think they should have. Well, I would argue know, I I'm, I don't wanna say the sky's the limit on the ITC 'cause the sky probably isn't the limit, but we could make it a lot more aggressive. People would then be getting part of their income from, from work and part from the government. But they'd be induced to work. The money would go to poor families. And I don't know we're gonna be in 10 or 20 years, but we might, we might well be in a position where the ITC is a lot higher. We will see. So I will stop there and happy to take questions.