When a small group of activists in 2014 proposed a $15 per hour minimum wage, it seemed almost preposterous. But on Tuesday, Los Angeles, the state’s largest city and the nation’s second largest city, approved a plan to raise the city’s minimum to $15 per hour by 2020. They join a trend that is sweeping across the country.
The plan increases what is now a $9 an hour base wage up to $15 per hour by 2020. That will impact 800,000 workers. Los Angeles joins Chicago, San Francisco, and Seattle as major cities that have already approved similar increases.
“Make no mistake,” said Councilmember Paul Krekorian. “Today the city of Los Angeles, the second biggest city in the nation, is leading the nation.”
The vote was 14 to 1 with Mayor Eric Garcetti prepared to sign the wage increase into law. The first stage will increase wages to $10.50 by July 2016.
The LA Times called it: “The vote was the latest show of organized labor’s clout at City Hall. During nearly a year of often emotional debate, labor leaders never gave ground on their central demand that the minimum wage rise to at least $15.”
Maria Elena Durazo, former head of the Los Angeles County Federation of Labor, called it part of a national effort to alleviate poverty. “Without a doubt, it was a very big victory.”
Labor leaders were a bit frustrated with the gradual timeline, but, as the Times reports, “the harshest criticism of the law came from business groups, which warned lawmakers that the mandate would force employers to lay off workers or leave the city altogether.”
“The very people [council members’] rhetoric claims to help with this action, it’s going to hurt,” said Ruben Gonzalez, the Los Angeles Area Chamber of Commerce’s senior vice president for public policy and political affairs.
The Times noted that Mr. Gonzalez predicted that “many businesses would absorb their new labor costs by laying off employees, reducing work hours or moving out of the city entirely.”
“It’s simple math,” Mr. Gonzalez said. “There is simply not enough room, enough margin in these businesses to absorb a 50-plus percent increase in labor costs over a short period of time.”
The Sacramento Business Journal explored “How a $15 minimum wage in Los Angeles could impact Sacramento.”
It was earlier reported that the Sacramento City Council will investigate the issue in June. Mayor Kevin Johnson wishes to complete the city budget first, before taking up the issue of minimum wage.
The Business Journal quotes Josh Wood of the building advocacy, Region Builders, Inc., which “has begun organizing an opposition to the campaign to raise wages to $15. A wage floor at that size would hurt Sacramento in its efforts to compete economically with surrounding cities, as well as other regions of California, he said.”
He told the Business Journal, “If we decide to follow this route, we are taking away our competitive advantage against these areas and limiting economic growth.”
On the other hand, Tamie Dramer, director of the community group Organize Sacramento, “said the Los Angeles action came out of a recognition among residents and political leaders that $15 wage ‘is a real answer to very big problems that we have.’ She hopes to convince local lawmakers that $15 is the correct amount, and work with the city council to determine the appropriate phase-in timeline.”
“I’m hoping that people can understand that there are different pathways to $15 (per hour) and we are hoping to work with the mayor and city council to find the appropriate pathway for Sacramento to get to $15,” she said.
As the Vanguard reported in April, polling showed strong support for a wage hike to $13.50 an hour and even solid support for the $15 an hour that groups favor and cities like Seattle have already imposed.
The San Francisco polling firm, David Binder Research, found that in their survey of 500 Sacramento voters, “70 percent of Sacramento voters would support a measure to raise the city’s minimum wage to $13.50 an hour. And 58 percent of voters said they would approve raising Sacramento’s wage floor to $15 an hour over three years.”
With Los Angeles joining big cities like San Francisco and Oakland in a minimum wage hike, it makes it more likely that the state will act to further increase the statewide minimum wage.
The state came close last June to passing a $13 an hour minimum wage, only to have it die unexpectedly in the Assembly labor committee.
Senate Bill 935, authored by Senator Mark Leno, would have raised the minimum wage in three steps, starting at $11 an hour in 2015 and increasing an additional $1 per hour in both 2016 and 2017. Beginning in 2018, the minimum wage would be adjusted annually to the rate of inflation. SB 935 was co-sponsored by the Women’s Foundation of California and SEIU (Service Employees International Union) California State Council.
“Increasing the minimum wage is critically important to millions of hard-working Californians and their families who live in poverty and are forced to rely on the state’s social safety net programs despite being employed full time,” said Senator Leno, D-San Francisco who sponsored the legislation along with Assemblymember Luis Alejo. “By giving low-income workers the pay and respect they deserve, we will also address the growing inequality within our communities, which is a roadblock to economic recovery and a drain on already limited taxpayer resources.”
Last year there was an abortive local effort to increase Davis’ minimum wage to $15 an hour. However, those efforts were revived by outgoing executive secretary of the Sacramento Central Labor Council Bill Camp, who last December said that local labor leaders will ask voters in Sacramento and Davis to approve a minimum hourly wage of $15 in 2016.
—David M. Greenwald reporting
Very good news.
Very good news if you want small business to lay of employees, cut work hours, raise prices or just go out of business. Then you also have the added bonus of unaffordable/unavailable child care.
Just take a look at the effect of the minimum wage increase in Oakland.
It’s not just businesses that employee low wage employees. There are many social service organizations such as homeless shelters, child care centers, elder care, and health care services that would be affected. A drastic increase in the minimum wage would force cutbacks in these social services unless taxpayers and charitable donors were willing to drastically increase the funding for these services.
and it’s very good news for those that want to price the Michael Browns and Freddie Grays of the world out of the labor market.
I made what for me was a new discovery today. I learned that Australia handles this issue differently. They apparently have a “junior” and “senior” minimum wage which are substantially different. This addresses the issue that posters have cited here that some entry level employees are teens still supported by their parents who do not need the higher wage since they are essentially working for spending money or entry level experience. Older workers are assumed to be supporting themselves and thus in need of a higher wage.
I am wondering what people’s thoughts are about this kind of arrangement, especially those of you who own and/or operate small businesses.
It doesn’t matter what small business owners think. The SEIU refuses to consider exemptions to the $15 minimum.
Don
What is missing from your post is any real consideration of the question I was asking. My request was for potentially thoughtful reflections from those of you who have voiced concerns about minimum wage changes about a different approach not whether or not you thought it would be supported or opposed.
It is very imprudent for business owners to take public positions on this issue.
As someone who worked at Jack in the Box in high school to pay for a marching band trip, and also my clothes, but was totally supported by my parents, Australia’s approach makes a lot of sense. (I made $1.75 an hour back then!)
My son works in a restaurant in San Francisco and is only able to support himself because his wage is $15 an hour. Any less, and we would be helping him. If he did not have parents in a position to help him, he would be on food stamps. He shares a tiny studio with a roommate.
The taxpayers are paying for low wages, one way or another. Everyone in this country who is willing to work deserves a living wage.
Tia, it is something to chew on, at least it is a new idea (at least to me). So I’ll mull it over.
I believe the Free Market is still – by far – the best method for raising wages and for assisting all people. Who makes $10 an hour? Someone new to the work world, and someone with very limited skills. A smart, hard-working person, be they young or a new immigrant or new entrant to the workforce, will work their way up. Years ago: I recall a new Thai immigrant at one fast food store who worked there for several years while her English improved. She was helpful, a hard worker, and eager. One day I went into a Whole-Foods-Like grocery store, and there she was with her vibrant smile, working at a new job which likely paid twice the wage and provided benefits.
I guess the good news here is that it will be phased in over 5 years, if that is any help. But jobs will be lost, and businesses will close.
Los Angeles is one city of many that leads the nation in a massive underground economy which distorts the market. Tens of millions of low skilled and illegal immigrants eviscerate any gains made by these superficial tinkerings.
Less regulations, smart regulations, less red tape and fewer taxes would spur an economic boom like what happened during the Ronald Reagan years. At one point we were creating 700,000 new jobs every month! Instead, we are doing the opposite.
For sisterhood, her son probably lives in San Francisco for the same reason many do. They want to have fun and party. He could live in Midtown Sacramento and have a bigger, brighter, safer living situation, save money and ride a bike to work, but Sac isn’t The City. He could also extend his education, and / or gain more skills, a trade, or start a business.
I could readily support the concept you outline. Worked 8/6 as a summer camp staff member @ $60/week in the mid-70’s, but had no expenses for food, shelter… the experience was great, taught me good working/leadership skills, and was a significant factor on my resume for my first “real” job. Youth need that more than $15/hr and being locked out of the job experience market because their education has not been completed, and they have little/no experience.
Unions won’t go for it tho’, and most “progressives” wouldn’t go for it either. One of the reasons I generally have disgust for “true unions”. A blanket minimum wage is disastrous for entry-level folk.
Tia… given your criticism of Don, you should criticize me too, as I failed to identify myself as NOT a small business owner. Didn’t r\fully realize the criteria you had for comments from folk. My sincere apology.
Statewide, such initiatives should do wonders for the robotics manufacturing industry. Don’t know that it will have quite the intended results in the agricultural fields, or for those who look to such jobs as their pathway towards the American dream. I guess the legislature could craft legislation to limit the use of such equipment.
Bingo. Say I have 100 employees with average pay rates of $12.00 per hour. Simple math puts that at $2.47 million per year in just wage expense. You just increased by salary expense by 35% when including the tax increase and impact to benefits etc. As a business owner, you just increase my total salary expense by $865,000. So I go look at automation solutions. Since the technology will depreciate over 5 years, I can spend $4.3 million on it to break even. But what if that technology can be had for less? I can. And so I buy robots and layoff a bunch of employees.
This is terrible news for the most vulnerable people in our society that need a job. My guess is that left-leaners either cannot get to the logic part of their brains overwhelmed by their emotions over those poor workers not making enough money, or their cerebral cortex is well lit up knowing full well that they are killing two political birds with one stone… one – show labor that they are champions of labor, and two – create a larger taker class that will reliably vote Democrat so that government gives them more free stuff.
Once labor gets too expensive I’m sure China will be very accepting to our businesses moving over there.
much of the labor that is transportable has already been outsourced. what remains is a bunch of service industry jobs that are not transportable or mobile. i mean do you really believe don shor is going to pack up and go to china. he may temporarily cut back on his labor but at some point that too will be temporary.
Says you, with much larger labor costs even more businesses will be packing up and going overseas.
if you say so. i suppose you’re against free trade agreements and the like, correct?
DP, maybe you should ask Don what the impact will be instead of tell us what you think will happen… especially since you never have owned a business that pays wages, and are taking care of by a nice public sector retirement package.
i have had a private practice at times with a legal secretary.
So let me spell out DP’s logic. Since we have driven out or killed 80% or 90% of some industries, it’s OK to drive out the last 10% or 20%? Wonderful logic. Exactly the reason why Progressives love to talk about abortion, racism, etc., because their economic policies have no common sense.
Frankly, I also see some business moving out of Los Angeles to neighboring cities, which also have lower taxes, far lower rents, and where it is overall cheaper to do business… and where homes and rents are cheaper and better. They can print their t-shirts or make their sandwiches in Pasadena, Garden Grove, or Apple Valley, and truck it in at 4 AM. Others will continue the job flight to Las Vegas or Mexico.
I know a small businessman who gave up on Oakland, moved to the Central Valley. He builds his product there, drives in once or twice a week to the Bay Area, installs his product, and leaves. His rent and insurance costs are far less.
I think that there are a lot of folks that simply don’t understand the relationship of supply and demand. They have never taken an economics class and they have never been exposed to the difficulties that employers have in paying low skilled employees.
As you and I have pointed out, a drastic increase in the minimum wage hurts the most disadvantaged people in society the most. If this were understood by the “social justice” crowd, they would not be such eager advocates of increasing the minimum wage.
hpierce
I had no intent to “criticize” Don. I was surprised at his response, and remain surprised since he is usually such a thoughtful and evidence based poster. I was very taken aback that he did not actual respond to an honestly intended question, especially since he has often made his position on the minimum wage known and did not seem reticent to do so on many occasions. I was and am surprised that he chose not to address this concept which was new to me.
I would never limit what any poster might chose to say. That is Don’s job as the moderator to keep us on track and adherent to the principles set forth by the Vanguard. I feel that it is only my responsibility to be honest with my replies and to adhere to the principles as well as I can while acknowledging that I tend to be one of the posters who can drift off topic.
There is also the not insignificant issue of low skilled people who are priced out of the market. This includes people with mild disabilities, people with poor work habits, people with poor interpersonal or language skills, and people with criminal records.
What would you propose that these folks do if they can’t find legal work at the mandated legal minimum wage?
that exists today with the current wage rate – what do you propose to do about it today?
What they are most likely doing now: drawing on my tax dollars to stay alive.
There is not much we can do about it today. The California minimum wage is currently $9 per hour and is scheduled to go to $10 per hour in 2016. Those increases are already set.
The major thing I would like to see is some realization from Vanguard staff and posters that drastic increases in the minimum wage are most harmful to the least skilled and most disadvantaged people in society. From a social justice point of view, drastic increases in the minimum wage are certainly not a good thing.
Topcat
“What would you propose that these folks do if they can’t find legal work at the mandated legal minimum wage?”
I think this is a very reasonable question. If it were up to me, I would totally change our system of compensation. I would guarantee to everyone who is able to work full time , a salary commensurate with the ability to provide housing, food, education, medical care ( all the essentials) regardless of what type of work they do.
Not everyone is smart or talented enough to “work their way up”. Some people, often through no fault of their own will only be able to accomplish low level skills. Does that mean that they should be homeless, or not have enough to eat, or be unable to access care anywhere except in an ER. My answer to this question is “of course not”. So I would have a guarantee of a living wage for everyone who works full time. This would take care of those folks, as well as folks who are trying to better themselves through education, or have their opportunities limited by the need to care for a family member or any of the myriad of circumstances that keep someone from meeting some arbitrarily decided skill level that someone else feels is less worthy than someone elses “work”.
Tia–good info. about Australia; I agree this seems like a good idea.
I remember reading somewhere that the average age of a person at minimum wage was 37 years old. There is a far greater number of people who are within 20% of minimum wage; perhaps the pay increase after working at a place for 5-10 years and getting a promotion.
hpierce
It would seem to me that what is actually needed is a needs based assessment. The teen who has been essentially disowned by their family is just as much in need of a living wage as is the “adult” two years older. We like to say that the “social safety net” will take care of these young people, but then we bemoan the lack of initiative and the dependence on the “nanny state”. So would it not be better to actually look at the individual situation before deciding what compensation an individual actually needs to live instead of setting some arbitrary value on the work and let that fluctuate by the amount of “competition” for the job which will tend then to drive down the minimum paid since there will, in our current system, always be someone who is more desperate and therefore willing to work for less ?
OK… you started out asking one question, and when you get responses, you change the question, complicating it, and expect “thoughtful responses”. Not playing that game.
Actually, I will “play” one last time… two individuals, same education/experience… one got his girlfriend pregnant 3 times by the time they were in their mid 20’s. The needs of the latter are much greater than a single guy. so you’d have an employer pay the one with the kids significantly more than the other? Not me.
Oh don’t go there, hpierce. I have been through that, and when I was told a guy who already had kids “needed” the job instead of me, I told them because I waited for a job before I made my children, I should suffer? I guess it was for the better, and then, I used to be proud to work for UCD too. I used to think they valued employees and promoted growth and from within. Right.
Never believe the Press Release.
hpierce
No, and I never have advocated for that. I promote a societal reform that supports all of our population. I would not depend upon the individual employer to take on that role. I believe that our government is capable of providing for our population by a reordering of priorities. You and I have exchanged posts on what I believe about our economic system many times, so you have some kind of idea of my philosophy.
And I did not change any question. I merely pointed out that I was surprised by the non responsive answer that I received.
Yes. employee pay should be based on the value of the work done by the employee, not on some perceived “need” of the employee.
“There will always be someone who is more desperate and therefore willing to work for less” because we haven’t closed our Southern border. When the floodgates of illegal, low-skilled, low-education workers sweeps our nation, tinkering with the minimum wage is laughable. This is utter hypocrisy.
On the flip side, the increased demand for housing and other living expenses are driven up this influx. I’ve read reports of 20 illegal workers living in a one-bedroom apartment in San Francisco. I’ve done volunteer work and seen large numbers living in a small place, but not quiet that large.
If millions less were here, sisterhood’s son would have a different reality. His apartment would cost much less, the apartment would be nicer (landlords have to compete for renters), and his wages and benefits would be higher. It is simple supply and demand.
The minimum wage should be abolished.
We have reached a tipping point where the unions and those receiving benefits from government are nearing a majority and will now so alter the economic forces that the predictable result is an accelerating, decades long, death spiral to California bankruptcy.
Bummer.
Oh Alan, you are such and fatalist. It will be all right. Business will absorb the extra costs and we will all settle in to the “new” normal. Because we all know that CEOs have buckets of cash buried in their bank accounts and under their mattress, and workers deserve a bigger share.
it does raise the issue about the gap between entry-level worker salary and ceo.
This is an old canard of the unions that is no longer valid since the Great Recession. After accounting for inflation, average-worker pay has risen by 4 percent since 2000, while CEO pay has fallen by 30 percent.
if you say so:
So what? Some people make more than others because they have skills and experience doing so.
One thing that is always lacking in the union bit is the control for years of experience at the job.
See here for some education to complement your inventory of political talking points: http://www.payscale.com/research/US/Job=Chief_Executive_Officer_%28CEO%29/Salary
What is really effing laughable is that that average CEO pay in this country is $181, 045.
Now go read up on what we are paying city employees.
If you want some respect for your opinions as an independent thinker, please read a bit more, do the math and stop just mouthing the DNC talking points.
Perhaps. I’m no fan of big business — as such — either; often the larger a corporation is the more it emulates big government.
But surely many struggling small businesses don’t have buckets of cash. A mistake so many make is believing anyone who is an employer is automatically . . . #ahem# . . . “rich”.
Mr. Miller may be spot on. Every decision seems to seek some liberal Utopia, and I’ve heard people claim we continue to see an out-migration in California and New York while there is a population increase in Texas and Florida.
In my extended family four different couples have left the state for cheaper, nicer digs, and they take with them their investments and some retirement incomes. None of these individuals rely on public social services.
Business owners I know have moved to other states, one to South Dakota, who said he hired twice as many people, live in a twice as big house, and hires more people because he pays less “fees” and taxes then Californiup yours.
That or retired..
A friend had an office here, and in Florida. He went to Florida full time to help take care of his Mom, but he quickly remarked how gas, meat, supplies, labor, and office space is much, much cheaper.
The downside is he has found labor transient / problematic; part of that is he offers few employee perks, and it may also be his hiring practices. He’ll give many people a shot, and doesn’t do his homework checking out their background.
TBD
“Every decision seems to seek some liberal Utopia”
Or from the other perspective “every decision seems to seek some “free market Utopia”. I am always a little bemused when someone posts that the best economic driver is the “free market”. How would we know ? In my lifetime, and as far as I can tell there never has been a “free market” in this country. There has always been some kind of manipulation of markets by politicians, bankers, industrialists, unions, developers, financiers or any of a host of interests that I probably would never dream of including. We do not, repeat, do not have a free market. Frankly, please tell me we have a free market when we have groups that block research into certain areas of research that they do not like such as gun safety, or when we subsidize farmers not to grow food, or when we manipulate foreign markets to suit “our interests”, or when we pass laws favoring large companies moving their plants to take advantage of cheap labor. Liberals have no monopoly on “Utopian thinking”. It is widely utilized by both ends of the political spectrum.
You are correct, Tia, we don’t have a completely Free Market, or complete Socialism, we have a mixture. Social Security wasn’t born from the Free Market. But we know what works.
But we can have more free or less free.
Ronald Reagan had a 92-month economic expansion which increased the size of our economy by an astounding one-third, essentially like adding an economy the size of West Germany to our own. We added 20 million new jobs, and we were a smaller nation. Our standard of living went up 20%, and with deregulation energy prices dropped by 50%.
http://www.forbes.com/sites/peterferrara/2011/05/05/reaganomics-vs-obamanomics-facts-and-figures/
I agree that we should stop bringing in H1B Visa workers and laying off American taxpayers. Disney had record profits, but just laid off hundreds, which seems like clear age discrimination to me; and millions of low-skilled workers sneak across the border on the other end. Hence, the lower, middle, and upper-middle class are struggling.
Business, meet your new worker: http://www.rethinkrobotics.com/baxter/
Thanks politicians for helping to make them more cost-justified.
did automation harm or help the economy in your estimation?
Automation did not “harm” the economy, but automation is the primary reason other than over-taxation and over-regulation for why the US is not creating enough jobs to meet the needs of the country. And increasing the minimum wage to $15 per hour just pushed us to more automation.
This it good for me because I expect more of my small business borrowers to start needing equipment loans.
so you raise important issues here. everything is a trade off. automation meant increased efficiency, safer working conditions, and a higher standard of living for those who worked in the factories and other low end jobs. on the other hand, the trade off was fewer workers. to me the answer to that is more industry not less automation, wages, or work place protection.
Bingo.
So how to you grown more industry to offset the increase is productivity per worker? Certainly not by increasing the cost per employee… first Obamacare and then $15 per hour.
Having worked for most of my early career helping by business partner executives justify and implement technology, software and robotics are increasingly able to do the job of low-wage workers.
This push to raise the minimum wage is exactly the wrong thing to do.
Reform tax and regulation to cause more capital investment in business starts and growth, and reform our education system to produce more skilled workers to do those jobs.
Create more and better career paths for workers to earn raises for more challenging and meaningful work, instead of artificially raising the cost of low-skilled labor thereby locking a fewer number of “lucky” employees into a static brain-dead job that barely allows them to survive.
Re Frankly’s 10:06 post… you rail against “obamacare” yet the private sector had a ready response… cut hours so as not to trigger the requirement. The “business is everything” model, and the “workers are everything” model, are both seriously flawed. Just my opinion.
Oh… if the private sector had compensated their employees for med insurance, I think there would be less of a drive on the minimum wage. But Kaiser, Blue Cross/Shield, etc. drive up those costs, instead of being a “do more with less” industry.
hpierce, you need to understand that organized labor and the Democrats they control are more driven by envy of power and control than they are doing long-term good.
I had started a VG article that I have not yet finished entitled “Can the Rise of ESOPs kill the Democrat Party?”
ESOPs are “Employee Stock Ownership Plans”. They are basically a structure for employee-owned companies. The suggestion I would make is that employee ownership in the company would tend to change the us-against-them wedge that unions use to inflame labor to the collective, and then pool money and resources to buy Democrat politicians to do their bidding.
My suggestion is for tax benefits to be extended to ESOPs to encourage their use. Republicans should get behind this.
But what is telling from my perspective is that employees that collect into a union could otherwise form to buy the company and reform into an ESOP. There have been a couple of airlines that have done this.
Why doesn’t this happen more often? For example, why didn’t the employees of Hostess Corporation rise up to buy the company?
The answer is really quite simple and telling. Basically, the job of starting, running and growing a company is much more difficult and risky than it is just being a workin’ stiff complaining that he isn’t valued enough. The lack of employee take overs of companies is proof that labor should be more appreciative of the job and wages they do get, and more willing to help business succeed.
Wow, Frankly (re: your 10:26 post)
Many City employees have “stock” (houses, schools, etc.) in the communities they serve.
Re: ESOP’s even Suze Orman and Motley Fool, and many other sources warn against having a big part of your life savings invested in your employer. If the employer fails, you are doubly screwed. No pension, your 401k in a defunct enterprise, no job (my error… triply screwed).
but hpierce, don’t you see the disconnect here? The screaming about income disparity, but labor not wanting to accept the risk that goes along with keeping a company successful?
You do understand the mechanics of risk and return, right?
Labor jumps up and down and stomps their feet to claim they deserve more from the company, and yet they would never consider actually taking over and running the company because of personal risk?
It is all contained in the mother hen parable.
If employees want a bigger piece of the pie of the company, then put skin in the game for the success of the company. Otherwise be appreciative of what the company provides.
BTW Frankly, am opposed to unions, in general, and am not a “Democrat”. I vote people and issues, not ideology. I vote on my values and ethics. You seem to imply I am pro-union and a Democrat. Not true on either score.
Frankly, re: your 11:06. … “yes, massa”. I have never stomped my foot. I have pointed out to my employer my value to the organization I worked for. I deserved my compensation. You are barking up the wrong tree criticizing my world view.
But “tit for tat” (and I have a pocketful of tats). Would you cut all your employees’ total compensation by 15% if the company owners wanted 15% more profits? If so, you are part of what is wrong with corporate America. Or would you have the cahones to defend your employees? Would/are you like the GE former executive who believes you should regularly dismiss 15% of the lower performing folk (even if they are meeting standards) as a mantra?
Frankly mentions an interesting contradiction. Hostess workers also didn’t take over the business because they didn’t have the required management and business skills, and maybe they also recognized a dying business. Maybe they were smarter than we all think, they knew the risk, and the endless, idiotic union rules which also crippled them. Hostess is going the way of Kaspers Hot Dogs and others. Kaspers has an older largely white clientele who are dying off, and I can buy Kaspers hot dogs at Costco.
We are having a dramatic demographic shifts that are most visibly apparent when you see old Taco Bells or such turned into a single-proprietor taquerias.
This question is indicative of gaps in your understanding about company management and company labor.
I employ 19 people in my business. I need everyone of them. I need their skills and productivity. I need them motivated to provide top-level customer service. The best employees will not work for me if I am a tyrant and/or I pay them less than they are worth in the job market.
Without paid labor there is generally not a company. Without a company there is absolutely not paid labor.
If I can move to reduce pay by 15% and I can still get what the company needs to succeed, then why would I pay more? How would you justify paying more from a business perspective? Why would you ever pay more than you need to? When you go buy a new TV, do you look for the store with the highest price so you can pay more?
We all want to pay to meet our needs in context of value assessment. I would pay more for a car that I know to be higher quality and higher value. I would pay more for an employee that I know to be higher quality and higher value.
If you are frustrated with the ability of private business to pay less than you think is reasonable, then advocate for policy changes that increase competition for labor in the labor market. Real wages increase when there is a strong demand for labor. Demand for labor increases with economic growth.
State liberals and Democrats and unions are pushing for policies that constrain growth and job supply creation while demanding we over-pay labor from a market perspective. This is breaking the market forces and will result in consequences that ultimately hurt the very people that liberals, Democrats and unions trumpet they most care about.
This whole $15 minimum wage is fascinating.
If you run a warehouse and do shipping and have 40 minimum wage workers doing picking and you add $7 per hour to what they cost this adds $14,000 per year per worker x40. Added cost is about $560,000 per year. Add to this the considerable added costs of health care and the hassles associated with hiring, retaining and dealing with employees…
If you were after even a 10% rate of return, you could now afford to spend $5.6M on a fully automated picking system to replace these minimum wage, entry-level employees.
Add to this the fact that so many minimum wage workers need heavy automation and AI to support their work running VERY SIMPLE cash registers etc. that stores are now experimenting with “turning the registers around” and eliminating the cashier position. At $14,000 per worker per year- it pretty much cements the deal that any sane business owner is going to replace everyone they can ASAP.
I have often said that the greatest contract victory a union ever wins is its last…
Ditto here- this may represent the real start of widesperad AI and automation in the workforce at levels never seen before. LA may have created the breakthrough that advocates of automation have dreamed of for years!
Thank you Mike. I am working on the advertising right now to offer small business loans to these LA business that magically now can cost-justify automation.
I don’t know if Schilling Robotics is into this type of automation but maybe the higher minimum wages will be a boom for their business.
Strongly suspect Schilling’s lowest paid workers (except perhaps janitors) are already paid above $15/hr. That is reflective of their success.
I’m not talking about what Schilling pays, I’m talking about what they make.
K… didn’t see the pun…
Not just experimenting… many big grocery stores have self check-out, as does Home Depot, etc.
And now in LA, there will be more of this.
Safeway and HomeDepot have one person supervise 4 self-check automated cashiers. At first, I hesitated using them, but now I used them 50% of the time.
A friend who is a high end management consultant told me 12 years ago that the fast food joints had to make the automated systems very simple to use because of the high turnover rate in the fast food industry. This seems to be a further push in that direction.
What is the monthly cost to enroll a self-checkout machine in ObamaCare? Zero.
TBD… and if you keep the employee below ~ 30 hours a week, you don’t even have to provide medical for the one employee who monitors those 4 machines. Many private sector employers are reducing hours to ~ 29 hours a week.
Oh, and TBD…do you have medical, and who pays for that? If you are in the private sector, and if your employer pays for medical, they should stop doing so, and lower the cost of their services. [or increase their profits/dividends to help me]
Yes, and SaveMart here in Davis and Walmart in Dixon as well as the Walmart grocery store in the County Fair Mall all have the self check out machines. Increasing the minimum wage will tip the cost/benefit towards more retailers using self checkout. The next wave of automation I expect to see will be touch screen (maybe iPhone and Android) ordering systems in restaurants, including fast food restaurants. This will eliminate some of the waitperson and counter jobs at these establishments.
TopCat, not only do check-out screens not require health care, their theft rate is zero (O).
I spoke with a very successful immigrant businessman who owns multiple restaurants and small businesses, and he said that his profit margin at his gas station was small but predictable. “What can a cashier steal from me, worse case is a candy bar or soda. But if a wait person doesn’t ring up a check, but is paid by the customer, our business can be taken for $50 or $100. That can be every day, or twice a day, very easily.”
It’s ironic that the $15 minimum wage supporters often cite fast food workers as the beneficiaries of such increases and yet, these very same workers will be the ones eliminated with the move to automated ordering systems. There will still be some employees putting together the burgers and burritos, but fewer than we see today.
As I have said previously, if we are concerned about social justice, we need to make sure that employment opportunities exist for even the lowest skilled and most disadvantaged people in society.
They clearly are not interested in “social justice” for the American worker, but for the Open borders crowd / needy of the whole world.
If they really, truly wanted to help the American low-skilled worker – black, brown, white – they’d immediately close the border. They do the opposite. If you stop or reduce the Supply (of low-skilled labor), you would raise wages, and eventually, benefits. You would also reduce some of the drug flow into our country, but many Progressives could care less about that.
Our lower classes will continue to struggle and social welfare costs will continue to rise as the Progressives and GOP together work to keep the border open for cheap, compliant labor. When both sides agree, you know we’re in trouble.
Thanks for the reminder.
See the political side that pushes for minimum wage hikes.
These are the same that want open borders that drive the supply of low-skilled labor through the roof and depress wages.
The same that want higher taxes that causes less capital investment in business starts and growth that would produce jobs.
The same that demand more business punishing regulations that causes less capital investment in business starts and growth that would produce jobs.
The same that defend the crappy public school system that makes the unskilled labor pool even bigger, and causes companies to have to import from, or outsource labor to, places where the students actual know math and science.
It is so laughable to see the sheep following this left-leaning herder as they head toward the eventual meat grinder.
Even famed farm labor activist Cesar Chavez wanted the border closed, he knew that thousands of illegal immigrants undercut and harmed his community.
Frankly
“If I can move to reduce pay by 15% and I can still get what the company needs to succeed, then why would I pay more? How would you justify paying more from a business perspective? “
Maybe because you are a human being and they are a human being ? Maybe because not everyone sees everything exclusively from the “business perspective” exclusively ? Maybe because you have more than you need and are aware that they do not ? Just a few potential answers to the question that you posed.
Tia – you are talking about a charity, not a business.
What many businesses do is bonus their employees based some degree on the annual profit. This helps the employees share in the success of the company while also motivating them to help contribute to profitability. But a public company might have a hard time with that if it also paid dividends to stockholders. Retirees tend to like those blue chip stocks that pay regular dividends. If you given the profits to the employees you short the retiree stockholders. What would your bleeding heart do?
It actually is not a caring thing to do to pay employees more than market rates. If your business fails (as it probably would paying so much for labor) the employee would not be able to find a job paying as much and would likley have financial difficulty having pursued a lifestyle above what could be supported.
The better thing to do is to support career paths and provide robust training and development to help move the capable employee to higher skills and higher wages that match the general labor market. But since you are just for paying them a higher wage, employers will cut their training budgets because they have to.
Again… who is the caring one here?
I agree that the raise to $15 per hour is too big of a jump. I’d support $11/hr in Jan. 2016; then peg to inflation rate.
Here’s my logic: the megachain big businesses can better weather a $15/hr minimum wage than can small mom & pop businesses, particularly retail businesses. As smaller businesses begin to go broke or otherwise close down, there will likely then, a few years down the road, be a proposal to drastically reduce or repeal the minimum wage altogether (with the reason being the loss of small non-chain businesses). By the time such legislation gets passed, it will be too late; most of the mom & pop’s will be gone. And the mega-chains will step in to further consolidate market share, with the added benefit of minimum wages likely being even lower (in real dollar terms) than today, if not repealed altogether.
Why do we lurch from one extreme to the other? A minimum wage increase to $11 dollars per hour is a substantial increase (22%) from todays minimum wage, and is a modest enough increase to not have a large deleterious effect on small businesses.
The minimum wage in California is going to $10 per hour in 2016. I expect that there will be further increases in 2017 and beyond.
I stand with Nancy Pelosi, and I believe Elizabeth Warren, in opposing TPP and the disastrous TISA (Trade in Services Agreement) treaties.
These will make the $15 Minimum Wage debate irrelevant, as multinational corporations can import foreign workers, and pay them the wage scale from their home countries!!
There will be no effective minimum wage when you can pay people from Bangladesh or Mexico dirt wages!! This is lose-lose for the common man or woman.
This fast-track legislation would also apparently allowed unfettered immigration. The 5-minute clip below explains why both political sides have worked together to craft this disaster.
http://www.dickmorris.com/how-fast-track-allows-massive-immigration-dick-morris-tv-lunch-alert/?utm_source=dmreports&utm_medium=dmreports&utm_campaign=dmreports
TBD, I respect your opinion on this, but I think rejecting these trade agreements will do more long-term economic harm to the US and the people of the US than good. China will fill the void if we back out.
I understand the counter argument that the trade agreements are bad for US labor rates. I see that as an unfortunate necessity as the alternative of economic isolationism is going to result in much more long-term economic pain for US workers… basically our children.
Globalism is causing a leveling of wage rates across the globe. The US previously had the highest wage rates thanks to our rapid industrial expansion that created a sustained strong demand for labor, and unions that leveraged that strong demand to gain higher and higher wages. Business had to pay the wages because the US was really the only big game in town.
But the US is no longer the only game in town and that is not going to change back.
Killing these trade agreements now is like closing the barn door after all the cats have escaped.
Instead we should be demanding a complete tax system overhaul (like Rand Paul’s 14.5% flat tax idea!), and regulatory reform that attracts more business to locate in the US, and education overhaul that produces the most capable workforce, and immigration overhaul that stops the massive expansion of poor and uneducated low-skilled workers are competing for a shrinking supply of low-skill jobs.
Frankly, you’re a sharp guy, so I have some serious questions for you.
If these treaties are so wonderful, why the secrecy?
Do you agree that these agreements will mean that we give up some of our internal rights and freedoms, which will be decided by external forces (like Brussels and the EU).?
If we already have tens of millions of low-skilled people struggling, and millions more on the way, does it make any sense to triple down on that process and take wages through the floor for large multinational corporations?
Are you aware that a large chunk of the main treaty (TPP) is already covered by NAFTA?
Do you support the massive worker influx these treaties fuel? (One provision says if a country doesn’t make a decision on a work visa within 30 days, they automatically are granted status.)
I’m for free, fair trade, but this sounds like a disaster. And I wonder how many congressmen will get kickbacks when they leave office?
P.S. Landscaping jobs or such can’t be exported to Bangladesh or China; such service or trade jobs can’t be shipped away. But when we bring in sub-minimum wage workers from Bangladesh, Albania, China or Mexico, the landscaper may go from making $10-15 an hour, to dirt wages.
Do we really want workers here making $5 an hour? Do we really want unsanitary, sardine-like housing?
TBD – I think, unless I am mistaken, that this treaty does not significantly increase immigration if at all. The fear is that it gives the President more power to do this. And I think that is largely a myth (other than the immigration malice this President already wields.)
This is a pretty good response to all the fears around the agreement: http://thefederalist.com/2015/06/09/top-nine-myths-about-trade-promotion-authority-and-the-trans-pacific-partnership/
Listen, I am weary of anything that gets us another step toward a world court. About a decade ago after NAFTA I was sued by a Canadian company for copyrights of a digital image that I put in a website that had been in a public domain area, and not labeled with any copyright information. It turned out that this was a large Canadian law firm that had paid to create a software web crawler that would go and look for opportunities and then contact the content owner to tell them if they agree to be party to the law suit, they would get free money from the settlement. This Canadian law firm was basically trolling on its own because of the law changes. The US and Canada and other parties changed the NAFTA laws to shut it down and prevent it from occurring again. But there is always the chance that something like that would not be shut down soon enough and people in the US would be damaged. But in general, there is the ability for the laws to be changed and the US politicians would be raked over the coals not fixing the problems.
I also opine for a return to more domestic and regional business because I see us giving up so many of our gains while counties like China simply steal and copy our hard-earned intellectual property.
But we are too far down the path of Globalism to turn back without seriously impacting our economic future. Instead of blocking TPP, we need to make sure we compel our politicians to manage it for US best interests long-term, while we also work to make it easier and more profitable for business to do business in the US.
Think about this. One of the key inflation items is the cost of housing. The tax and regulatory code pushes so much investment to housing and the cost rise way beyond inflation to bubble. If that capital was instead going to business starts and expansions, we would have more jobs and the demand would cause wages to rise and there would be less speculation of real estate driving up the prices, and hence lower inflation.
The main problem the American worker faces today is not outsourcing of jobs, it is a too small supply of good job opportunities. We should be exporting much more. TPP should help with that.
My understanding is that the TISA does cover immigration. Did you watch the Dick Morris video? I believe it is covered in the companion piece, the TISA. Wikileaks may have covered this.
Why the secrecy, why? Are we not a democracy?
There are plenty of hard-working blue collar folks in my family, but many of those jobs have been taken by illegal immigration. Take a carpenter. Union carpenters in the Bay Area are charged out at $95 an hour, I can hire one of these guys direct for $45 an hour, or a modestly experienced illegal immigrant will charge $15-20 per hour. An American with wife and children can’t survive on those wages. (I’ve also seen shoddy, dangerous work I don’t recall seeing 20 years ago, and I wonder if things like the balcony collapse in Berkeley was installed by an American or a legal immigrant.)
If we give away “the trades”, give away hi-tech jobs to young H1B Visa workers at 1/3 the wage (age discrimination), and now give away low-skilled jobs, what jobs will Americans do? Government jobs?
I’m surprised Tia hasn’t weighed in, maybe her Open Borders stance overrides her $15 an hour views?
TBD… no, we are a republic, not a democracy… be VERY, VERY glad of that. “True” democracies, and “mob rule” are not as far apart than I’d want.
hpierce – I stand corrected.
Frankly, here you go:
Secret Immigration Provisions of Trade Deal Revealed by Wikileaks
On June 3, WikiLeaks released parts of the TISA (Trade in Services Agreement), which is related to the TPP (Trans-Pacific Partnership) agreement. However, it is still a separate agreement and would be ratified separately. One of the TISA annexes/sub-sections they posted covers “Movement of Natural Persons”, linked here: https://wikileaks.org/tisa/
The focus of the Movement of Natural Persons annex appears to be business visitors and intra-company transfers. Most of the proposed agreement deals with standards for visa applications (30-day deadlines for processing, fee schedules, etc.).
There are red flags throughout the document including:
* A prohibition on “Economic Needs” testing, aka, labor market certification on B-1/L-1 visitors;
* Creating a presumption that all spouses of L-1/B-1 visitors who stay for 12 months should also get visas;
* The proposal appears to forbid mandatory face to face visa interviews as burdensome;
* The language about “independent professionals” is very non-specific and it could be an attempt to allow self-petitioning;
* Finally, the total impact is uncertain because even after the agreement is signed every signatory needs to publish a schedule of industry sectors that they will allow business visitors, contractual service professionals and independent professionals to enter.
http://immigrationreform.com/2015/06/04/secret-immigration-provisions-of-trade-deal-revealed-by-wikileaks/
Thanks for this. I need to read up.
I think the US needs to first work on policy that helps American workers and then move on trade policy.
Do you pay attention to Mike Rowe? He says there are a lot of jobs in this country that are not being filled. I’m a bit surprised at his claims and need to spend some time checking them out. But what he says is compelling.
But you and I are in agreement about the problem of immigration depressing wages.