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Jennifer Medina reports at the NYT that the the city council of nation’s second-largest city voted by a 14-1 margin to increase its minimum wage to $15 an hour by 2020, in what is perhaps the most significant victory so far in the national push to raise the minimum wage. Several other cities, including San Francisco, Seattle and Oakland, Calif., have already approved increases, and dozens more are considering doing the same.
In 2014, a number of Republican-leaning states like Alaska and South Dakota also raised their state-level minimum wage by referendum. The impact is likely to be particularly strong in Los Angeles, where, according to some estimates, more than 40 percent of the city’s work force earns less than $15 an hour. “The proposal will bring wages up in a way we haven’t seen since the 1960s," says Michael Reich. "There’s a sense spreading that this is the new norm, especially in areas that have high costs of housing.”
It's important to remember that the minimum wage hike comes at a significant direct cost to business — well over a $1 billion a year, according to the mayor's analysis — and it would be foolish to pretend that it won't lead to some job losses and business closures. Critics say the increase will turn the city into a “wage island,” pushing businesses away into nearby places where they can pay employees less. “They are asking businesses to foot the bill on a social experiment that they would never do on their own employees,” says Stuart Waldman, president of the Valley Industry and Commerce Association, a trade group that represents companies and other organizations in Southern California. “A lot of businesses aren’t going to make it. It’s great that this is an increase for some employees, but the sad truth is that a lot of employees are going to lose their jobs.”
(Score: 1, Interesting) by Anonymous Coward on Wednesday May 20 2015, @02:36PM
When minimum wage increased my rent went up and the price of everything increased. Why would this be any different. Businesses will adjust to the higher costs by increasing prices. Landlords will adjust to tenants and potential tenants with higher incomes by increasing rent prices.
I said this before and will say it again. When you have a city with 10k inhabitants and only 1k homes that averages out to 10 occupants per home. It creates parking congestion and traffic problems. Overpopulation problems can't simply be fixed by changing some arbitrary numbers attached to our currency. Currency is just a medium of exchange and the numbers are meaningless without the value we ascribe to those numbers. That value is subject to change.
(Score: 5, Informative) by MichaelDavidCrawford on Wednesday May 20 2015, @02:47PM
Look up The Big Mac index.
Those who reside in countries with higher minimum wages typically work fewer hours to afford a meal.
While you will cost your employer more money if the minimum wage is increased, you will also have more disposable income. You'll be able to spend money on things that you otherwise would not have been able to. Those merchants will benefit.
Yes I Have No Bananas. [gofundme.com]
(Score: 2) by PizzaRollPlinkett on Wednesday May 20 2015, @02:48PM
Basically everyone will "price in" the new amount, and it won't really help. I know that Wal-Mart tracks purchases by minimum-wage workers, because I've seen articles over the years about how they stock their stores and know when peak demand will be at the times when these people get paid and when they get benefit checks. So they could easily raise commodity prices. Rents will also go up. Rents are priced at a percent of the average income for an area in different social classes. So everyone already knows the demographics and how much they make, and will price things accordingly. If minimum wage went up and all other prices stayed the same, people might come out ahead, but others who want their money will adjust pricing. The net effect will, ironically, be a further widening of the income gap between the bottom and the top. We'll see the law of unintended consequences playing out.
(E-mail me if you want a pizza roll!)
(Score: 2) by kaszz on Wednesday May 20 2015, @02:56PM
Unless the minimum wage salary rises faster than prices?
(Score: 1, Informative) by Anonymous Coward on Wednesday May 20 2015, @03:28PM
No, it will not. Raising prices are known as inflation, and mean money loses value. This doesn't affect those who just spend the money as they earn it, but it affects those who have either debt (which will be devalues, making it easier to repay it) or savings (which are also devalued). So the net effect is that wealth is transferred from those with savings to those with debt.
Actually, most likely another process will occur: Just because the minimum wages are raised, probably the other wages will not be raised proportionally. Which in effect also means that those with larger salaries lose out, because they get an effective wage cut through inflation.
(Score: 0) by Anonymous Coward on Wednesday May 20 2015, @09:25PM
Thank you for nailing it.
(Score: 2) by jmorris on Wednesday May 20 2015, @11:00PM
probably the other wages will not be raised proportionally.
In the general case you are right, minimum wage increases tend to increase unemployment and compress the difference between the new minimum and the median. In this case it will tend to do that to a lesser extent because it only covers LA. As a Blue Hellhole LA has large union membership, especially in the massive government sector, with wages strictly tied to the minimum wage. When all those people get perfectly proportional increases along with the minimum rising it will probably pretty much drag the price of everything else along with it that can vary locally such as labor, housing, etc.
(Score: 1, Touché) by Anonymous Coward on Thursday May 21 2015, @05:02AM
[Citation Needed]
(Score: 2) by FatPhil on Thursday May 21 2015, @09:33AM
And that's a good thing how?
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 0) by Anonymous Coward on Thursday May 21 2015, @10:26AM
It would if there were minimum wage raises on a regular schedule (so you could expect there to be another minimum wage raise after you've taken your debt). But as a singular event, it doesn't have that potential: You cannot plan on it occurring.
Of course, inflation in general has that effect. An face it, the current monetary system in inflationary in nature, regardless of minimum wages. And debt is how money is created in this system.
So if you don't want inflation and a debt based economy, it is the monetary system you should worry about, not the minimum wages. On the other hand, if you are OK with the monetary system then you should also be OK with the inflationary effect of raising minimal wages.
(Score: 2) by VLM on Wednesday May 20 2015, @03:45PM
Rents will also go up
Capital inflation is something nobody ever talks about, it is always considered a universal good by the mass media. CRE, residential, obviously they would go up, but increased economic activity etc also means plain ole commercial space would tend to rise, it would all go up.
Obviously higher rents and higher revenues means property prices will rise, and if the media/etc sees that as a universal good, its odd they never mention it in the debate.
If you look at the big pix, interest rates tend toward the norm which tends to collapse asset prices, so one way to work against that would be a fiscal tool that inherently raises asset prices to compensate. I suspect when the fed rate starts rising "fo real" is about when you see calls for the fed wage to go up to try to compensate for interest related asset price deflation.
Or giving it numbers, say you got a piece of CRE that can pull $1M in revenue and $100K in rent at a loan rate of (low)% you you do a lot of net present value mumbo jumbo and get an asset sale price of $10M (all made up easy numbers). Now interest rates start to rise, which given a fixed cash flow would mean the sales price MUST drop in order to pay the higher interest rate mortgage using the same revenue/rent. But you could lift the sales price by boosting the revenue... so what if interest rate related payments have doubled, if revenue also doubled... so you can keep selling that box of air for $10M (or more?) because the bank might demand $200K in mortgage interest but thats OK because the location is now pulling in $2M of revenue.
Its an interesting strategy for keeping the real estate bubble percolating.
(Score: 0) by Anonymous Coward on Wednesday May 20 2015, @04:43PM
Because even California's minimum wage hasn't historically kept pace with inflation? This is the first time I'm aware of that a minimum wage increase will actually outpace inflation over six years...
(Score: 3, Insightful) by Leebert on Wednesday May 20 2015, @04:59PM
I'm curious where and when this occurred. Could you please share?
(Score: 0) by Anonymous Coward on Wednesday May 20 2015, @11:23PM
California. When minimum wage went up after about three to four months or so I noticed that fast food prices, for instance (and essentially the price of everything) went up. The local taco bell (and all of them around here) charges more for tacos (as one example) and for ... just about everything else. Even chicken sandwiches and just about everything went up. Even food from Costco and various grocery stores went up. My rent also went up at the beginning of this year as well. Didn't happen right away but after a few months I started noticing a gradual hike in everything. I pay attention.
(Score: 0) by Anonymous Coward on Wednesday May 20 2015, @11:25PM
(that is chicken sandwiches from fast food restaurants that sell them and even the ones you buy from Costco in packages).
The good news is we own a business and our customers aren't as price aversive now that they make more. We simply stick it back to the customer ... hence negating the effect of everything getting more expensive on us ...
(Score: 2) by Leebert on Thursday May 21 2015, @12:26AM
Interesting; thank you. I'm guessing (based on this table [ca.gov] that you were referring to July 2014?
(Score: 0) by Anonymous Coward on Thursday May 21 2015, @02:35AM
Yeah, when it went up to $9/hour.