California governor Jerry Brown has proposed a $15 minimum wage by 2022. If the legislation passes, it will wreak havoc on city budgets, state budgets, businesses, and jobs.
Please consider California Moves Toward $15-an-Hour Minimum Wage.
Gov. Jerry Brown’s administration has told leaders in the Democratic-controlled state Legislature he supports boosting the state’s minimum wage to $15 by 2022, a person familiar with the matter said. The approach would give the governor some control over an issue that looked set to be decided directly by voters in November.
Moving ahead with the plan would give the most populous U.S. state the nation’s highest minimum pay floor. The minimum wage in California is now $10 an hour, already one of the highest of any state, though some cities have set higher minimum levels.
States appear to be the next battleground. Lawmakers in New York are in advanced discussions to bring that state’s minimum wage to $15 an hour, from $9 now. Gov. Andrew Cuomo, a Democrat, is trying to include a vote in the Legislature on the measure as part of the state’s budget, due April 1, although details are still under negotiation.
The proposed increases have met resistance from business groups and Republicans—including presidential front-runner Donald Trump—who say they will lead to fewer jobs for low-skilled Americans. Critics say they are an inefficient way to help the poor, as many minimum-wage earners are high-school students or others without dependents.
Of particular concern is the magnitude of the proposed increase. Previous hikes have generally been more gradual, and large swaths of big states like California have a low cost of living and fragile economies.
“I think there’s going to be job loss everywhere,” said David Neumark, an economist at the University of California, Irvine. “You get out of the big cities and California is not a rich place at all.”
The plan, which was outlined to legislative leaders by Mr. Brown’s office last week, would raise the wage from $10 an hour to $10.50 on Jan. 1, 2017, followed by a 50-cent increase in 2018, the person familiar with the proposal said. Yearly $1 increases would continue through 2022, the person said.
Minimum Wage Hikes Kill Jobs
Proponents of such legislation claim hikes don’t hurt jobs. They point to job growth and studies as proof.
However, it’s a mindless argument, because no one can prove what would have happened had there not been wage hikes. The fact of the matter is employment goes up over time simply because of population growth.
Cities and municipalities will be affected, even poor cities that can least afford such wages.
Stores that are marginally profitable at one pay scale may not be marginal at another. Proponents claim businesses can raise prices. But some businesses cannot do so without losing business. And if prices go up, those on fixed income will get clobbered.
Already there is pressure on businesses to automate workers away. This move is guaranteed to increase the pressure on businesses to automate; it’s guaranteed to slow the expansion of retail stores and restaurants; it’s guaranteed to slow the growth in jobs, and it’s guaranteed to put pressure on cities to raise taxes.
Logically speaking, there’s not a single good thing one can say about forcing the minimum wage up to $15.00.
Mike “Mish” Shedlock
Where now does a teenager go to get the requisite work experience necessary to survive in the real world? A $15/hour minimum would freeze them out of the work force since there are many college graduates working service jobs that do not make much more than that and millions of retirees looking for extra income. The 40-50% unemployment rate for Blacks and Hispanics under 25 says it all.
If you are a teenager and non-liberal, GTFO of California. Heck, if you are non-hispanic, non-liberal, and non-feminist, do the same. Not that teenagers bother to read Mish, but their parents might. Again, GTFO of California, or join the movement to secede in Northern California.
If anyone reading this takes this advice, may I also say DO NOT VOTE FOR THE SAME POLICIES IN YOUR DESTINATION STATE.
Emphasis is intended. There’s nothing worse than a self-righteous Californian blithely lying about why he/she/it left and then turning their new state/locality into the same cesspool with the same laws/regs.
Otherwise, for those favoring policies on the left, may I suggest that San Francisco or San Jose are wonderful places to live and you should move now?
Pretty silly. Logic and facts are irrelevant to Progressives. I mean they KNOW what’s right so anything to the contrary is, by definition, wrong.
“Stores that are marginally profitable at one pay scale many not be marginal at another. Businesses can raise prices the proponents says.”
And watch sales slip slip away.
The bottom 70% to 80% have live hand to mouth as is. A wage increase will only worsen their plight.
All those bricks and mortar service jobs would be eliminated once the steady price increases take effect; and they will take effect immediately after the first increase! The black market will become increasingly more competitive and will eventually deprive tax revenue from the state.
Wow, what a great idea?!
The timed phase-in of this increase gives business a good lead time to introduce more automation. Oh, and what state is the technology capital of America? This should speed up innovation with new start-ups forming to address replacing even more of the service industry.
Economic illiterates with the power to dictate wage rates.
What could go wrong?
lol.
Thank God you and I are in the upper-Middle or Lower-Upper class!! Maybe even in the middle-Upper??
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What a joke! By 2020 $15 hour will be like $9-10 now. No living wage. Let them eat cake or s–t. Let them work 2-3 jobs to support a family. Especially the single mothers. And no welfare, no food stamps, no health insurance. Better yet, do not allow them to have kids, cheaper that way!! You and I were born on the right side of the road–what luck!!
These poor, poor business people making fewer profits. MY HEART BLEEDS FOR THEM. At least the main CEOs and lackey pols are plundering enough to keep ahead of inflation and avoid BIG taxes, by moving over seas.
Have you seen the video: The Veneer of Justice , all about the DOJ and Goldman. A must watch. Please google it and then I’d like to hear your feedback. Or reread,
The NEW Confessions of an Economic Hit Man, by John Perkins (Updated and expanded–even suggestions for change). The Empire strikes back, even in the USA–see Zero Hedge today
But then no BILL BLACK this time. No, No. Too Big to Fail! Too Big to jail!
Give me a break! And now Too Big to Tax (inversions!)
Poor, poor little rich businesmen!! Let’s say a prayer for them.
Ken Pollinger, Ph.D. A bleeding -heart liberal, verging on radicalism.
Mish, I admire your analyses generally and follow you religiously but I must say that I believe you have a hidden bias somewhere in your bones.
No hidden agenda
Real World economics
“These poor, poor business people making fewer profits. MY HEART BLEEDS FOR THEM. At least the main CEOs and lackey pols are plundering enough to keep ahead of inflation and avoid BIG taxes, by moving over seas.”
I can drive up the street and look at all the businesses lining both sides. A lot of them, small businesses. I wonder how many of them can’t afford lower profits. You miss the forest of businesses for the big corporate trees.
you should focus your obvious energy on the “By 2020 $15 hour will be like $9-10 now” issue. That is a problem. Which will only be made worse by ever increasing government meddling and the bailouts put inn place to cover them up.
A $1500/hr minimum wage, OTOH, would be good. If for no other reason than to teach brainwashed, economically illiterate progressives in sheltered jobs, what banning employers from paying a proper, market clearing wage, does for potential employees’ employment prospects.
No worker can be paid more than they contribute to a business in anything other than the very short term.
Is that too hard to understand?
The most consistent deflationary metric is the lower buying power of the poor and middle class. 15 bucks will barely keep up with expenses. It’s hopeless race to bottom
Well, I thought it might be a bad thing, until I read this:
“I think there’s going to be job loss everywhere,” said David Neumark, an economist at the University of California, Irvine.”
Now I know this will lead to massive job gains.
So, 1.3 percent of workers now making minimum wage will break the state with a raise to $15 an hour? Wouldn’t bank on that. In fact, not many folks have ever gotten rich shorting California.
My guess is the California economy will remain in the world’s top 7 or 8 for a long time to come, in spite of this piddly wage hike.
Where are you pulling your 1.3% number?
Anyways, that is the wrong number. Anyone in the work force making between $10/hr and $15/hr will be getting a raise … or canned.
Yes, and all those people now working harder with more responsibility therefore earning two to four dollars an hour above minimum wage employees, will be pissed off that those former 10 dollar an hour employees are making the same money as they are, doing less with less responsibility and less time devoted to their employer.
You stated the reason why the citys and states are for it, to raise taxes.
They are going broke and know it.
If you want all people to make a minimum wage, just propose a ballot measure. Tax all workers, call it a minimum wage tax, and give a certain amount to the less fortunate. That way the greedy businesses can’t bribe their way out of a minimum wage law. And we know YOU are not greedy.
In San Francisco an English speaking illegal get $30. an hour. No stats to back that, just experience.
Here is a challenge to all you miserly “so called” social activists- What is with this tepid $15/hour limp-wristed proposals? Be generous! Make the minimum wage something worthwhile, say $300/an hour! Think of all the good that could be done with the higher income tax revenue! (Think of the children.)If $15 is good, wouldn’t $1,500 be better? Just do it right and be done with it!
Every few years you come back with a new higher minimum wage proposal. What, you like lobbying for this? Just get it done for the century- $20,000/hour!
As you can see from MY argument, I have far more compassion and I care far more for the welfare of the poor among us than you do. Be more virtuous, and demand more! What could go wrong?
The other day I asked a guy who runs a financial services office in the area how much he pays his college grad hires. He said $15/hr. I asked him if he has trouble finding college grads at that wage. He said he had applications piled 8″ high on his desk.
How are they going to justify paying a fry basket shaker without a high school degree the same wage as a college grad with $60,000 in student debt?
Should be interesting to watch (from a distance).
First we must find out how much you (and I) are willing to pay for a “hamburger” that tastes like sawdust with ketchup.
The only one who benefits are labor unions whose pay scales are tied to the minimum wage (so no need to bargain for the increase), and the Federal government as they pay out less in EIC and OBAMACARE subsidies. So, that $5 increase will be nearly eaten up.
Actually Labor Unions will be the big losers, and in Southern California some labor unions have opposed cities raising minimum wages for just that reason. There are a lot of low wage union jobs which are not much different than the minimum wage. Unions worked hard to rope in these low-paid workers, but if the state is going to automatically raise the wages 5% or 10% per year there is no need for the union. I expect some business groups will support the higher minimum wage as a way to get rid of the unions in certain place-based industries which cannot move to Mexico or China.
Low wage workers often pay more in union fees than in other taxes. Many unions lose representation elections with low-paid California workers for that reason. That is an established fact in California, even without guaranteed state-mandated wage hikes. This is a death-knell for union expansion, and a recipe for union membership contraction. Likely the governor knows this.
If you read James Grant’s book, “The Forgotten Depression: 1921: The Crash That Cured Itself,” (Amazon has some used copies for a penny plus shipping) you will learn this “higher-wages stimulate the economy” nostrum was Herbert Hoover’s grand idea (Harding took a pass on it in 1921 when Hoover was Sec. of Commerce, but as president he got to implement it in 1930). I think Grant makes an irrefutable case that Hoover’s high wage stimulus policy, which FDR continued, was a factor behind the greatly prolonged high unemployment of the 1930s. Most likely the governor does not know that he is channeling Herbert Hoover.
No God fearing participant on this board would ever work for minimum wage. A wage akin to economic slavery where you can barely feed/clothes/shelter yourself let alone a dependent. Where you can apply for credit cards at 28.8%, subprime car loans at 14.5% and 100K student loans from bogus on-line colleges where the debt chokes you so much you can barely breathe. Then, if that doesn’t bring you down, you face derogatory profiling from COPS and the Establishment who generally treat your poverty like it’s a communicable disease brought on by your lazy dumb donkey part. All you need to do is work harder, be smarter and endeavor to be just like us.
As if our own wealth doesn’t, in large part, come from excessive borrowing, CB largesse and slave wages paid to most humans living on this planet. We are exceptional, we are the entitled!
“No God fearing participant on this board would ever work for minimum wage.’
The skill level of the people here, is likely above minimum wage. Why would you expect people here to be working for minimum wage?
Secondly, you don’t know what participants here would do. One size doesn’t fit all.
“No God fearing participant on this board would ever work for minimum wage. ”
I did when I was 16 years old. At $3.35 per hour, I was cheap enough for my boss to give me a try. As a 16 year old, I knew NOTHING… not even how to work a cash register, so I had to be trained from scratch.
After about 3 months, having proved to be reliable and being able to work without supervision, I got a raise. The raise wasn’t out of kindness… my boss didn’t want me going to another employer. This was during the boom in the 1980s and retail jobs were still largely staffed by teenagers (instead of illegals). Myself and the other guys there used to have other store owner come in and try to hire us away.
Always chasing your tail. Wages go up a dollar, prices increase to cover it. Better to look at the tax structure.
Marissa Mayer could walk away with $37 million if Yahoo gets sold. How will the poor girl survive on such a paltry sum? She’d have to work a mere 2,466,666 hours at a California minimum wage job,,,just about 281 years.
http://money.cnn.com/2016/03/28/technology/marissa-mayer-golden-parachute-yahoo/index.html?iid=hp-toplead-dom
I support this change. This is a change in the state of California and I believe California has every right to make this change. Otherwise, I think there is no place in the US FEDERAL legislature for a similar rule.
$15 is the minimum wage in Australia. They have a 3% GDP. It is a virtuous cycle since folks have disposable income to buy stuff. USA now has the GIG economy where folks have to work 2-3 jobs just to make ends meet. Millenials live at home, do not marry, do not buy houses, do not buy cars, etc.
Nonsense
but believe what you want
It’s very difficult to get a simple job in Australia because of this minimum wage law. Most affected are immigrants and young jobseekers who have to do a lot of unpaid work to get experience. I know several people who looked very hard for many months to find a job like stocking shelves at the supermarket. Plus $15 an hour in cities like Sydney and Melbourne is something like $5 in South Carolina.
Besides there are lots of exceptions for the minimum wage. Apprentices for example earn less.
Australia has lower wages for teenagers which is also based on the job type and their skill level. Most of your no skill jobs like fast food in Oz land is still staffed by teens.
I own a small manufacturing in the outskirts of Riverside County. 20 people in shop, 3 in office, 2 service guys plus myself. Our product is a highly labor intensive but low skill mature product. The shop guys are semi literate , good people raising families and hard workers, but they have low skills. their other options are landscaping or warehouse.
they own small houses and get by with $2,000 cars. Their kids all get their asses whupped to do better, and the kids mostly do well. they don’t waste money, rarely go out to dinner and spend a lot of time at church functions.
Average Pay is $11.48 an hour. The new guys make $10 and the older guys make $15-$16.
going from $11.48 to $15 isn’t just the pay, it’s an increase in FICA, Workmen’s comp, etc etc .
The typical net income of my business and my competitors is 3% in a bad year and 7% in a good year. Wages are about 30% of Revenues. Increase from 11.48 to 15 is a 30% increase. 30% increase on a 30% cost Equals a 9% hit.
This takes a positive 3-7% net income manufacturing business and makes it a Minus 6% to minus 2% net income business.
Guess what the result will be
1) Shrink business to just my 2 service guys and layoff 22 people
2) shut entire operation down and layoff 25 people
3) move to Nevada
4) move to Mexico
BTW – this business pays a total of $400,000 to $750,000 in various taxes and other extractions to the Government.
There are likely a few hundred thousand similar small shops like mine in California.
…and if you squeak by I do not think your $15 per hour employees will be happy to see the new employees making the same wage as them.
There Is ZERO chance that my Enterprise will squeak by. This is a mature product using a lot of hours low skilled labor. There have been well funded attempts to automate over the last 50 years and every single automation attempt failed.
We of course improve productivity by a couple percent per year similar to everyone in modern manufacturing, but that just keeps us at the 3-7% net income.
We love what we do and are proud of what we make. No debt.
But a 30% wage increase ( and as you rightly mention the senior guys will also deserve a raise to keep their dignity ) is going to eliminate at least 22 jobs. possibly 25.
My 2 service guys are highly skilled and productivr, they earn $35 an hour and I am able to pay them this rate because they produce $90 an hour.
My shop guys produce $35 an hour and get paid accordingly.
a local Hamburger chain with long history in Seattle starts workers our at $13.75/hr with more raises to come-they also contribute to a college fund.
They seem to be always crowded and are making bank-never heard them yapping about the $15 minimum wage-they do this on their own, not by law.
Go ask small business in Seattle about he 15 dollar wage experiment. Nothing else needs to be said.
There will be other corresponding adjustments. Retail rents will likely fall, very small family businesses will gain an advantage while large chain stores will shrink or become more “efficient”, the use of robots will grow, the importance of internet sales will continue to increase and there will be still more part-time temp jobs. The strength of unions will probably decrease as public institutions have less money to pay in blackmail.
This will be the greatest thing to promote automation that has been done in awhile. For example, I would expect a huge acceleration in development of fast food self-service order taking equipment and cooking equipment. Will any of those automation jobs be in the US, though?