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Economic Idiocy: California Hikes Minimum Wage To $10/hour By 2016

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http://globaleconomicanalysis.blogspot.co.uk/2013/09/economic-idiocy-california-hikes.html

In a two-step move, in the wrong direction, California signs law raising minimum wage to $10/hour by 2016

California has become the first state in the nation to commit to raising the minimum wage to $10 per hour, although the increase will take place gradually until 2016 under a bill signed into law by Democratic Governor Jerry Brown on Wednesday.

The law raises minimum pay in the most populous state from its current rate of $8 per hour to $9 by July 2014 and $10 by January 2016. The state with the highest minimum wage currently is Washington, where employers must pay at least $9.19 per hour.

State Assemblyman Luis Alejo, who authored the wage hike bill, said the increase would help working people pay for necessities in a state where rising costs have long outpaced wage increases for the poor and working class.

..

We do not need people to spend more. Realistically, we need people to save more. Higher prices (which are going to be the end result of this move) are all but guaranteed to eat up most of the presumed benefit.

Labour need to make this type of pledge before the next general election to increase the minimum wage to £10 to help stop fuel and food poverty. It's this type of thinking that will rescue the economy. Bold and decisive.

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I can see a race to the bottom on min wage coming soon.

And frankly, having a min wage in Spain etc. is a disgrace right now.

We can't be far off seeing some strong leaders emerge from all of this and some radical economic policies start causing some disruption.

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Labour need to make this type of pledge before the next general election to increase the minimum wage to £10 to help stop fuel and food poverty. It's this type of thinking that will rescue the economy. Bold and decisive.

A $10/hour minimum wage would be about the same as ours. Except that US GDP per capita is quite a lot higher. They can afford it.

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A $10/hour minimum wage would be about the same as ours. Except that US GDP per capita is quite a lot higher. They can afford it.

But they don't have to 'afford it'. They can hire illegal Mexicans, or borrow at low interest rates to automate the jobs.

Most people in California already make $10 or more, so all this will do is push the poorest out of work.

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A $10/hour minimum wage would be about the same as ours. Except that US GDP per capita is quite a lot higher. They can afford it.

How much US GDP is locked into the defense and healthcare industries, unable to get out for more productive uses because of taxes and mandatory insurance?

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Most people in California already make $10 or more, so all this will do is push the poorest out of work.

And encourage businesses that employ significant numbers of low-skilled, low-earning workers to leave the state.

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And encourage businesses that employ significant numbers of low-skilled, low-earning workers to leave the state.

Yes, people will just be popping across the border to Nevada for their Big Mac and Fries.

Viniculture will shift to Death Valley.

Everyone will quickly drive to Seattle for their weekly shop.

There will probably be earthquakes, volcanic eruptions, flood, pestilence, plagues of frogs, and obamacare too, as giving poor people slightly more money is known to anger the very spirits of the Earth.

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Everyone will quickly drive to Seattle for their weekly shop.

Maybe not, but they'll buy an increasing proportion of it on Amazon.

Point taken: non-portable, service sector and tourism jobs won't leave, but others will and are.

A couple of miles from me there is a big advertising billboard on the 10 freeway encouraging businesses to relocate to Texas, with the somewhat un-catchy slogan "Low tax! Low regulation! Low litigation!". The relocation of high-tech and other businesses that are reasonably portable (i.e. all they really need is office space and an Internet connection) to Oregon, Nevada and Texas is becoming an increasing talking point here.

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Yes, people will just be popping across the border to Nevada for their Big Mac and Fries.

No, they'll be pressing buttons on a screen and waiting for their burger to turn up with no human intervention. Though probably not at $10 per hour since I believe you'll find most McDonalds' workers in California are already close to that level or above it.

Viniculture will shift to Death Valley.

Vineyards that don't employ Mexican illegals will sack any remaining Americans and do so. Though I was reading recently about a new machine for picking strawberries automatically, so perhaps vineyards won't need humans soon either.

Everyone will quickly drive to Seattle for their weekly shop.

There'll be less workers in the supermarkets, expected to do the work of the laid-off workers as well as their own.

If fluffy lefties actually understood anything about business, they wouldn't be so surprised by the entirely predictable consequences of their silly ideas.

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No, they'll be pressing buttons on a screen and waiting for their burger to turn up with no human intervention. Though probably not at $10 per hour since I believe you'll find most McDonalds' workers in California are already close to that level or above it.

.. because $10/hour is so low a wage.

I'm not anti-automation.

Vineyards that don't employ Mexican illegals will sack any remaining Americans and do so. Though I was reading recently about a new machine for picking strawberries automatically, so perhaps vineyards won't need humans soon either. There'll be less workers in the supermarkets, expected to do the work of the laid-off workers as well as their own..

In both of those cases, the assumption seems to be that businesses are happily employing people they don't have to. But a slight rise in costs will mean that they won't. Does not scan.

There may be a slight rise in the cost of goods. On the other hand there will be an increase in purchasing power from increased wages.

If fluffy lefties actually understood anything about business, they wouldn't be so surprised by the entirely predictable consequences of their silly ideas.

We've had several decades of right wing economic orthodoxy imposed on us, in case you hadn't noticed. The results - spiraling inequality, multiple asset bubbles, low and sporadic economic growth, economic insecurity for all but the most well off, lower rates of innovation and business formation - are entirely predictable. But still, just as with the communists of yesteryear, it's never their fault when things blow up..

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.. because $10/hour is so low a wage.

It's a high wage for people who aren't worth $10 an hour.

I'm not anti-automation.

Indeed not. You're clearly pro-automation, because you want to make unskilled and low-skilled workers less affordable than robots.

In both of those cases, the assumption seems to be that businesses are happily employing people they don't have to. But a slight rise in costs will mean that they won't. Does not scan.

Companies pay people what they're worth to the company. If they are forced to pay more, they look for alternatives. Only a lefty thinks that companies can arbitrarily increase salaries.

There may be a slight rise in the cost of goods. On the other hand there will be an increase in purchasing power from increased wages.

If companies could 'slightly increase the cost of goods,', why haven't they done so already? You think companies prefer to charge less than their customers are willing to pay?

Instead, they do this: http://globaleconomicanalysis.blogspot.ca/2013/10/high-tech-robotic-wine-future-of.html

Seems I was behind the times. Californian vineyards are already automating, because it's now cheaper than hiring humans. You should be celebrating, because you're getting what you wished for; pretty soon there'll be no workers in Californian vineyards making less than $10 an hour. Because there'll be no workers in Californian vineyards.

We've had several decades of right wing economic orthodoxy imposed on us, in case you hadn't noticed. The results - spiraling inequality, multiple asset bubbles, low and sporadic economic growth, economic insecurity for all but the most well off, lower rates of innovation and business formation - are entirely predictable,

Yes, it's a funny old world where government-run central banks holding interest rates on government-issued paper money artificially low is 'right wing'.

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Yes, people will just be popping across the border to Nevada for their Big Mac and Fries.

Viniculture will shift to Death Valley.

Everyone will quickly drive to Seattle for their weekly shop.

There will probably be earthquakes, volcanic eruptions, flood, pestilence, plagues of frogs, and obamacare too, as giving poor people slightly more money is known to anger the very spirits of the Earth.

Minimum wage effects on employment is one of the most studied areas of economics. And there's a tonne of data, from US states over decades.

The effect has been (surprisingly) small to non-existent.

http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

But Mish has one graph so that's proved it.

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