Leaving for Las Vegas: California's minimum wage law leaves businesses no choice
latimes.com
latimes.com
EDIT: Jesus. I apologize for making an economic sounding argument for this. I've taken it out. How's this...the wealthy elites need to pay people more for the sake of the stability of the social fabric. Find some economic rational for that if you like. (That's what economists really do anyway...Provide the theoretical underpinnings for the operation of their class.) They need to understand that having slightly smaller profit margins will be good for them as well, in the long run, due to a more stable republic. I understand that, as libertarians, you guys don't think that government can play a part in that. I do. We have a fundamental disagreement about that.
Propitiation follows: I know that all of you guys are very economically literate libertarians. I should never have fronted like I was anywhere in your league. I could tell you were not only attractive but powerful and noble as soon as you came in the room. Your ability to recite the economics that you picked up at Uni is not only impressive but frightening. Surely, your might and prowess will be known through the ages.
The business that will pick up the slack in this example is one overseas. These employees would lose their job and would be unemployed, not increasing demand with higher wages.
Unless you are hoping trump enacts some seriously strict trade tariffs, it's pretty stupid to believe that every business hit with this raise will survive with the same number of employees due to increased demand.
My point is that this business is a bad business if it can only exist because the state subsidizes its employees with social programs. Eventually demand will pickup because of the wealth transferred to the lower economic class.
Don't discuss downvoting in a response to someone. It doesn't make for good discussions. Especially since you're likely not replying to the person who downvoted.
>My point is that this business is a bad business if it can only exist because the state subsidizes its employees with social programs.
Then why couldn't you articulate that in the first comment? It was just a tirade against the wealthy elite mixed in with unsubstantiated claims of increased demand that fail to take into account that the wage increase isn't global.
I don't believe this is the case. However, you can't downvote a response to your own comment.
Edit to add: To confirm, I still have a downvote arrow available to me on your comment.
I think that the idea that paying people more, who spend more of their income proportionally, increases demand isn't really unsubstantiated. Maybe I didn't substantiate it, but only because I thought it was well known. Apologies for that.
The mistake you are making here is in thinking that the majority of people are employed by wealthy people. Tirades like yours make people believe this is just forcing billionaires to open up their wallets, but 99% of businesses are small businesses and they account for something like 49% of employment.
https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
So minimum wage increases tend to be more of an attack directly on the middle/lower class small business owners who are operating on thin margins.
>Maybe I didn't substantiate it, but only because I thought it was well known.
Don't pretend like you misunderstood the problem and use a faulty assumption to appeal to incredulity (still without providing evidence nonetheless!). The faulty assumption you built this demand argument on was that all of these businesses will easily absorb the wage increase and there will be no jobs lost. There will be no increase in demand and there may be a loss in demand if a huge chunk of small businesses layoff parts of their workforce or relocate.
I wonder if the majority of small businesses are able to employ all those people because they force tax payers to subsidize their low wage payments. I guess the question then is whether it is best to have the lower classes struggling to survive on little wages while accruing more and more wealth to the top. Does this arrangement produce enough of a benefit to all involved to obviate the need to redistribute that accumulated wealth.
I think that the accumulated wealth of the 1% needs to be redistributed. I think it's not only better for society, but its also more moral...and I get that I'm using slippery language unlike the "hard science" of economics. (I detest economics because it poses as a science while mainly serving to provide intellectual cover to the purveyors of the status quo.)
So, yeah, I was being a dick. You caught me.
Add to it we're running out of busywork to have people doing, costs of automation are plummeting, jobs that were initially thought by the majority of people to be safe from the robots are turning out to be not-so-safe, and the elite continue to live under the delusion that they can continue stockpiling wealth while the rest of us scrape by.
There are a lot more poor people than rich people, and your money isn't going to help much when they're breaking down your door with torches and pitchforks.
And no, other businesses won't replace them in CA, because their production costs are higher the moment they start the production. It's basic economics.
And then there are robots.
Businesses like this can only operate because taxes are used to subsidize their employee's lack of a living wage.
If you aren't proposing that businesses give away free money, are you instead saying that the government should reduce what it gives away in social welfare for low-wage workers? That could make low wage jobs unworkable if workers can't afford to actually commute to work or live nearby. That would in turn force wages up.
I think that I, and people like me, should pay more --proportionally -- to lower levels of inequality before it rips the republic apart. The wealthy actually have the best of all worlds currently. Lower taxes and high government expenditures mean that the government actually has to borrow the money from them to subsidize those low wages. Instead of just taxing them, the government now owes interest.
I think that the wealthy have begun to believe their own bullshit and it's dangerous. Democracy should be used to fix the situation before it becomes worse.
What does "out performing" mean in this regard? Tax revenue, GDP, and employment could all be very high in a state where the majority of people are living worse off than people in other states because of a massive cost of living.
Maybe you could just provide some references to these examples?
What would work would be a nice infusion of inflation. You can spend $X today on Y of labor or Z of capex, or hoard it until next year when the same $X will only buy (0.95)Y of labor or (0.95)Y of capex "stuff", your choice how much "stuff" you want to get for your $X
Inflation is another debate. Traditionally wages rise later rather than sooner in that environment.
And yet as of today in the United States an employer of 50 or more has to either separate business operations into two distinct units or buy employer-linked insurance.
I am not sure how it was a different question. The government mandates they become involved.
There are considerable expenses on top of just salaries when you employ people; most countries have some sort of an "employee tax" levied on employers plus other requirements.
You can say well Europe but the minimum wage (and all other wages) in Europe is lower than California and on average than the US.
That applies to the workers too. If California is growing too rich around them, they might be under-skilled for the local job market and have to move to Nevada for work. Again, Nevada benefits from more labor.
The downside is that people whose skills lock them into insecure industries like this also sometimes put down roots where they live and suffer more when they have to move. But at least they can see it coming. Raising the minimum wage is bound to cost some people their jobs. If it didn't, that would mean employers can actually afford to pay even more and it should be raised further.
I would take the oppressive heat over the oppressive fog and piss smell of SF if it had the same job opportunities. I know the reason me and the majority of my friends pack into this peninsula like sardines to pay massive taxes, rents, and general COL expenses is purely because of the industry.
Definitely a chicken and egg problem but maybe if the state continues with anti-business and high tax policies, they may accidentally go over board and cause an exodus.
I would have gone to Chicago if the job offers there meant 200k+ at big companies and 100-150 at startups (+options).
Climate matters a ton for me. I live by Chicago but am considering taking an effective pay cut to get the bay weather. Running is my hobby, and running in blizzards is getting old.
People stay in the Bay Area because of climate since you realise you can be outside nearly year-round. And in terms of well-being, if you spend more time outside, there's a good chance of being healthier and happier.
As someone who works for a Chicago based startup I think if you adjust those salaries for the cost of living they are very reasonable.
[1] http://www.bestplaces.net/cost-of-living/chicago-il/san-fran...
Strange how all kinds of business have been able to prosper in places with the same or much higher minimum wage laws...
Not trolling, would like to know your opinion.
It has been called "the dismal science" for this characteristic.
Yeah, just like this Rapture thing sucked, as this Harold Camping guy predicted (to speak of another prediction of equal validity).
Plus, strange how businesses have not massively moved out of other places where the same or much stricter minimal wage laws were enforced (or minimal wages raised). I wonder what the supply side economists of those places think about it.
If somebody seriously believes that, given these laws, "virtually every single restaurant and grocery store [will shut] it's doors in California", I don't know what to say.
Let's check back in 5 years to see how this "prophecy" fared related to the Rapture...
Certainly we live in an era of wide spread fake news, leading to all kinds of weirdness where President Hillary today watched the UK sink into the sea, Atlantis-style, as the promised inevitable result of the brexit win, etc.
Taking an extreme grain of salt, the linked article implies at least one company owner thought it would be worth the free publicity to announce in public that he talked to the mayor of another town.
Despite shrieking insistence from the fake news that the end of the world is at hand, the odds of California falling into the ocean any time soon are quite low.
Note that this is basic supply and demand, some businesses sitting right at their maximum labor price point will be shut down.
Food deserts in poor neighborhoods in the US are an example - http://hub.jhu.edu/magazine/2014/spring/racial-food-deserts/ - the margins simply don't make sense, even if the rent is cheap.
Low wages only leads to a race to the bottom, greater inequality, and finally lower growth because the people most likely to spend money don't have any. And based on how most OECD economies have been doing since 2008 it looks like the low growth of the last decade will probably hang around for longer. Unless the inequality shifts this will be low growth like it was during several hundred years of the feudal system.
He is just saying that this will be a common occurrence.
Discussions like this should always goes back to first principles - you can't force people to pay a certain wage, no matter how good your intentions.
Your business is not adding anything positive to the economy so you should actually close the doors and go work for that minimum wage you think it's so great.
The only exception here is if you are just starting and you have very few employees (less than 5). In that case it is acceptable that you can only afford low wages, but that can be remedied with tax cuts for the first few years of a company with no need to still keep the minimum wage so low.
Soon those 8$ ph employees in Nevada will get squeezed by automation or cheaper employees in some other state/country. And they'll be given the ultimatum, "work more for less or get the boot".
This is a common downwards pointing death spiral in many of the western countries. There's going to be a huge economical squeeze starting with the blue collar workers in the next +10 years. Will be hard to compete with a robot...
.. so pass the price rise on to customers? After all, sewing industry is normally one of the first things that gets offshored. But here they're already willing to pay better prices for "ethically" manufactured goods.
http://www.forbes.com/sites/eriksherman/2016/01/08/seattle-f...
How could an increase in $5 per hour for minimum wage translate into $40,000 per employee? Worst case scenario:
260 days * 8 hours * $5 increase = $10,400
Some garment tasks inherently taking a lot of space to lay out cloth for cutting or sewing imply garment companies are paying maybe twice as much for a garment worker's space than for a software dev's space, an extremely large multiple of employee income is paid in rent, and moving away from CA would result in enormous savings in rent.
Clearly moving production anywhere other than CA would save an enormous about of money in rent. In rural nowhere you can get industrial zoned buildings for about $4/sq/yr or about 500 times less than CA office space, at which point you have to start looking in more detail at costs of utilities and other expenses that were noise at higher rents but are now significant relative to the cheaper rent.
>Costco is paying those same workers $0.
Why would Costco pay its competitors employees? (Beyond what is does already via taxes)
If his response to rising operating costs is to not respond at all and continue charging the same prices for the same goods and not move at all in terms of addressing the problem, then he shouldn't be in business in the first place, he clearly has no idea how to run one.
Now, that's a good question. Are companies lying when they fight against every law enacted to protect their employees? Are they mistaken? I think most likely: they don't care if what they're saying is true or not. Is that the same as lying? Well, I'll leave that to you to decide.
> Or would you rather the business fold entirely and all of them become unemployed including the owner?
Well, if the company you work for paid you 33% less, would you rather they folded immediately, so you could look for work elsewhere? Or would you rather that they went on paying you less so they could stay in business—succeeding as a company merely because they're unwilling to pay people what they should?
Another way to think of this would be that if this business can only afford to operate while the state subsidizes its employees dietary, medical, and transportation costs then maybe it is a bad business. Walmart apparently has the same problem.
Notice that he didn't talk about his profit margins either. He'll be losing 200K out of what exactly?
We would have to know how this business is structured to know if that figure means anything. 200k loss after the owners 500k salary could be the case here.
[0]http://www.forbes.com/sites/clareoconnor/2014/04/15/report-w...
The problem with word choices like that is the implication the human beings working for him are not living, and further, that's OK.
The reality is that "we" are paying the living wage to his employees via higher taxes in very expensive government services so he can pocket more profit than if he responsibly took care of his own employees.
If all the welfare queen small business owners left, tax rates could drop quite a bit. Life would, frankly, improve for everyone except the parasites future hosts in LV and other areas.
Inflammatory comments like these are anti-intellectual and don't belong here. It's the same thing as referring to people on unemployment as welfare queens.
They are barely living hand-to-mouth or need to have 2 jobs to make even that.
Obviously, we want to remove as much corporate welfare as possible, to allow the market to operate smoothly while still allowing for subsidies in well thought out places like clean energy or investing in new business sectors.
While I understand why the author is complaining, he should much rather complain to all his potential customers that make a purchase decision based on price instead of ethically supporting american workers.
I'm really waiting to see all those voters spend significantly more on "Made in Great America" apparel to make sure to keep all those jobs...