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I say, this is baloney. What will happen is that fast food will cost a little more, and that’s it. The minimum wage hits all businesses equally.
Economics is not my strong suit, but I don’t see how this will hit all businesses equally. Seems to me it will only hurt the little businesses that have minimum wage employees and small profit margins, and that includes a lot more than just fast food outlets. In fact, national chains can spread their cost across the entire nation. It’s the little independent one-outlet California businesses that will be hurt the most. If not, what am I missing?
This is how I reason it. It is true that competitive businesses in any particular industry, say fast food or Walmart-type operations, rely on labor as an essential component of their production. However, they cannot stay in business without those workers, so when the required wage hikes are effected, the only short-term solution is to raise the product price. All such businesses will be affected equally and simultaneously.
Of course, this does somewhat increase the motivation to automate and reduce the labor force, but that pressure is present anyway, and has been for a long time. Walmart has installed self-checkout stations that are slowly taking hold, but most people clearly prefer people-checkout. When someone invents a robot sandwich-stacker thats personable, cute and young-looking, then the minimum wage will be more problematic. I’m sure they’re working on it.
Um, now that I re-read your objection, I see that I missed your point. You are talking about “little businesses” apart from the large chains. You do have a point, to the extent that such things exist. Do they still? I suspect they are a tiny and shrinking fraction of the low-wage industry. The large chains have won the war. Waiters and waitresses are not affected so much because they rely largely on tips. So what other kinds of minimum wage jobs are there? I’m having trouble thinking of them.
There are many minimum-wage jobs in agriculture. However, as in food service and retail sales, the minimum wage has been kept so low for so long while costs of living have increased that I am in complete sympathy with increases in the minimum.
I believe the California law phases increases into the wage picture, and when important changes are made that way any suffering for those negatively affected is minimized.
Agriculture. Good point. And I’m reminded of another. Raising the minimum wage has a multiplier effect on consumer activity. It is to the benefit of businesses of all sizes that the population can afford to buy their products. At $7.50 an hour, they can’t buy much.
Isn’t there a “joke” about Walmart that they maintain their own customer base by paying their employees so little they can only afford to shop at Walmart?
If not, you started a good one.
Yes, it’s to be phased in. I think that’s the only workable, fair way to do it. But can the small businesses increase their sales fast enough to offset the higher wages each year?
As a food service cook since November of 1991(that is when I got out of the US Navy) I have been struggling to get even $10.00-$15.00 dollars an hour just to start,and I have OVER 18 years in the kitchen from apprentice to lead cook in the kitchen.The food service industry just does not want to pay to hire or keep good cooks. This new effort to start a cook at $15.00 an hour will have a rippling effect on the seasoned veterans already making this minimum wage. Who would have thunk it?
Well I certainly hope it helps boost your pay. With your background you should be getting well over minimum wage.
I join with PT, John, in hoping the minimum wage boost your pay soon. It occurs to me that your profession is pretty typical of those that are undervalued in society. You are responsible for many subtleties in the quality of both ingredients and processing of the product and yet these are not rewarded by the system in the short term. Mediocre cooks can get by pretty easily, I’m thinking. I’m wondering if the wage increase just might make management look more carefully at the talent they’re paying for?
I was thinking of all the independent restaurants and bakeries we have here. Little moving companies. Microbreweries. Jewelry stores. Lansdscapers and nurseries. Gyms. Beauty shops. Pet shops. Housekeepers. Nurseries and daycares. Cleaners. Plumbers and electrians. The HVAC guys. Even pot shops! Any strip mall is occupied by a lot of little mom-and-pop start-ups. When mom and pop want to expand, they’ll need to hire help and pay as little as possible for it. The giant national chains didn’t start as giants. They all started small.
Good points, I hadn’t thought of many of those, I guess because they are in the minority compared to the big chains. I think the same principle applies however. And I agree, phase-in is certainly necessary.
In the minority how? “The number of small independent businesses outnumber the larger national chain locations by a factor of ten or more in nearly every economically viable community.”
I’m feeling pretty stupid, Jim. I still don’t see how raising minimum wage is not going to hurt the little guys more than the big chains.
There are lots and lots of small businesses who have been repeatedly hammered by recent regulations. We are a nation growing small businesses…if they let us. The 30-40 year olds are seriously working part time and always trying to do start ups.
Big companies contract hire as much a possible to avoid paying benefits – or hire part timers who shuffle schedules to meet school busses/caring for parents.
Hourly workers are everywhere now: Life guards at your local pools, car washes, parking attendants, landscape / yard crews, geeks running computer assistance, hospital staff, hotel workers, tutors, piano teachers, gymnastic/swim instructors …it’s everywhere. Trying to make ends meet. Trying to make a little extra cash. Realizing social security pays little and insurance/drugs are more expensive than ever.
Even the CA gov said as he signed the bill – “This really doesn’t make financial sense.”
It is being phased in – so the layoffs won’t show up in one lump. Makes it look better.
There will be benefits? Robotics and automation will progress. And it may prove healthier if fast food is expensive and people start eating out less….shedding pounds?
I like the governor’s quote, but it makes me wonder why he didn’t just veto the bill. I guess the legislature would have overridden the veto?
The result seems inevitable to me — fewer start-ups, layoffs or fewer hours for current employees, fewer minimum wage jobs available for those who want them. That’s just in California, of course. For now.
I wondered the same thing – maybe he thought it unwise politically or was getting pressure from someplace? Some will have earn more money and have more to spend, but there will be fewer jobs offered.
Walmart backed the bill, then closed a bunch of stores. Actions speak louder than words
Walmart backed the bill? That’s so transparent …
Yep, they were recruited by supporters along with other big companies (one of which has now moved jobs out of the country) and their support was publicized and touted to help win public opinion. Meanwhile, back to the Governor’s comment. Backwards world
Once again it seems the 1% are calling the shots. Disgusting.
I do have a background in economics. I ask has anyone ever heard of the multiplier effect? Compassion aside, most economist know that the multiplier effect is more efffective when the poor receive the money.
I’ve never subscribed to the theory of trickle down economics because I believe it’s the small, growing businesses that create new jobs. A higher minimum wage is going to make it more difficult for those small businesses to hire more people. You can put money in at the bottom either by hiring more people at lower wages or fewer people at higher wages. It sounds like California opted for the latter. Personally, if I needed money, I’d prefer a low wage job to no job at all.