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Los Angeles Mayor Proposes $13.25 An Hour Minimum Wage

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http://www.bloomberg.com/news/2014-09-01/los-angeles-mayor-proposes-13-25-an-hour-minimum-wage.html

Los Angeles, the second-largest U.S. city by population, would boost its minimum wage to $13.25 an hour by 2017, almost twice the current federal regulation, under a proposal by Mayor Eric Garcetti.

Garcetti, a 43-year-old Democrat, said he will ask the City Council to lift the prevailing $9 minimum to $10.25 next year, then phase-in $1.50 annual raises over the following two years, according to his office.

“Today, we launch the biggest anti-poverty program in L.A. history,” Garcetti said yesterday in a Facebook post. “We are going to raise the minimum wage.”

The mayor’s push is part of a nationwide drive in cities and states to lift wages for low-income earners, after efforts to raise the federal standard of $7.25 an hour stalled in Congress.

The Los Angeles minimum would top out at $13.25 in 2017, when California’s minimum wage is to reach $13 under a law signed last year by Governor Jerry Brown. The city’s minimum would also exceed San Diego’s, where the City Council overrode a mayoral veto to boost the base rate to $11.50 in three years.

Seattle will raise its minimum to $15, the highest among any large U.S. city, over the next three to seven years, depending on the size of the employer. In San Francisco, voters in November will consider setting a $15 minimum by 2018.

Garcetti’s proposal would cost employers an extra $10,000 per employee per year once benefits are factored in, said Gary Toebben, president of the Los Angeles Area Chamber of Commerce.

Will small businesses be able to afford this level of wages? The higher the wages the higher the taxes taken by the local state?

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http://www.bloomberg.com/news/2014-09-01/los-angeles-mayor-proposes-13-25-an-hour-minimum-wage.html

Will small businesses be able to afford this level of wages? The higher the wages the higher the taxes taken by the local state?

Below, some comments left on an April 2014 entry at DoctorHousingBubble - housing-economy website/blog, mostly about Calif/SoCal house prices.

I'm not sure if there is anything in the 'U-haul Test' but I found it quite an amusing and creative thing to look at, as a possible indicator. Although perhaps they are misinterpreting the price differences for simpler reasons, such as there is more activity for their trucks locally within LA and shorter journies.

http://www.doctorhousingbubble.com/cash-buyers-california-investor-buying-underwater-homeowners/

JobPolicy

April 28, 2014 at 1:03 pm

All those saying the jobs are leaving CALI are mistaken. California can change it’s policies TOMORROW if things start going south too quickly. Legalizing marijuana use alone will bring in tons of new businesses. (As long as everyone just doesn’t put grow houses in their backyards).

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Bubble Pop

April 28, 2014 at 1:46 pm

Oh really…looks Like Toyota is moving its HQ from Torrance to Texas. Honda is slowing moving to Ohio. Nissan left a long time ago.

http://www.usatoday.com/story/money/cars/2014/04/28/toyota-move-texas/8358361/

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Tired of the BS

April 28, 2014 at 7:08 pm

I wonder if U-Haul and Budget Truck Rental would agree.

Rick Perry claimed that it was cheaper to rent a truck to go from Austin to SF vs the other way around, therefore implying that supply and demand realities were proving Austin’s appeal. I took that as a challenge to verify it, and indeed he was right. So I looked at various city pairings on U-Haul’s site and found that on average, a 23% discount is given to bring a truck back to Los Angeles from another major US city.

Check out Budget’s main page, go ahead, you’ll find three very peculiar promotions. They are incentivizing potential customers to bring their trucks back to the Northeast and California. In other words, more people are renting their trucks to move out of those places than are moving in.

https://www.budgettruck.com/50offcal.aspx?iadid=hp_cal2014

“Rent one-way and keep more money in your pocket.

Save up to 50%, when you rent one-way from Arizona, Texas and Rocky Mountain States.”

“’The Best Available Rate’ for one-way consumer rentals

From Origins in TX, AZ, NM, OK, CO, UT, WY, WA, OR, ID, MT (there are some areas within these states that are excluded).

To California.”

By the way, this isn’t the first I’ve seen of this “please help us bring our equipment back to California” for both Budget and U-Haul. In fact, U-Haul has had “Phoenix to LA” specials – $99 on 24″ trucks.

These businesses have the data and the experience to model these promotions. Last time I checked, they are profit motivated.

The writing is on the wall. It’s quite obvious that California has rested on its laurels and burned out its candle. Look, I don’t live in Texas and never have. Don’t want to either. But that doesn’t mean it makes sense to stick my head in the sand. Good grief.

As for the Toyota decision, Nissan was the bellwether back in 2006 – before SHTF – and Carlos Ghosn himself sited that “Tennessee has significantly lower real estate costs…”, so… Honda, you’re next.

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roscoe

April 28, 2014 at 7:47 pm

Schwab moving a bunch of employees out of San Francisco. 1,000 this year with 2,200 later.

http://lonetreevoice.net/stories/Schwab-starts-work-on-third-office-building,152399?

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Dave

April 29, 2014 at 8:23 pm

I used to do this “u haul test” during the last bubble and believe you are correct. The Budget site quotes me $230 to go from Austin to Santa Monica but over $1000 to go one way from Santa Monica to Austin. It is clear they need the trucks in LA quite badly.

However, I’ve also noticed that TRAFFIC is now as bad as it was during the boom times even though incomes are lower and gas prices are quite a bit higher. From what I see I don’t think it’s just the top 1% driving around. Perhaps people driving between their three minimum wage jobs?

Any other evidence of a net outflow from CA cities to the desert southwest? Perhaps the good Doctor could research that a bit for a future piece….

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The Observer

April 28, 2014 at 8:44 pm

Yeah, but there are great fortunes to be made flipping houses so we never really needed those jobs in California.

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Let me see, a business has 5 employees and these employees each earn $10 and hour. The business sells the products the 5 employees make for $55 dollars an hour. Great, the business is solvent and makes a small profit. The employees are happy to work for $10 an hour. If they could get more than $10 somewhere else, they would would move.

Anyway, now the lovely mayor forces the business to pay 13.25 per hour. Wages now cost $66.25 an hour, but the business can only make $55 an hour. One of two things happen now:

1. Business closes. 5 people loose their jobs.

2. Charge higher prices for products which in turn increases inflation making the new $13.25 feel more like $10 and hour.

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Let me see, a business has 5 employees and these employees each earn $10 and hour. The business sells the products the 5 employees make for $55 dollars an hour. Great, the business is solvent and makes a small profit. The employees are happy to work for $10 an hour. If they could get more than $10 somewhere else, they would would move.

Anyway, now the lovely mayor forces the business to pay 13.25 per hour. Wages now cost $66.25 an hour, but the business can only make $55 an hour. One of two things happen now:

1. Business closes. 5 people loose their jobs.

2. Charge higher prices for products which in turn increases inflation making the new $13.25 feel more like $10 and hour.

The converse with no minumum wage: Wages lowered and workers go hungry, or the public sector steps in and subsidises business by way of benefits for workers.

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The size of the black and grey economies in SoCal is very significant. I suspect that for every legal worker making the minimum wage, there are several illegals working for a lot less. There is no shortage of the latter: 35% of the population of Mexico want to move to the US (according to a recent poll), and enforcement of immigration law is next to non-existent (unless you're caught committing a serious crime).

We recently needed a large eucalyptus tree cutting down and removing from our back yard before its roots started to damage the house. We'd got as far as one quote from a licensed contractor ($1,200) before a guy rang the doorbell and told us (in Spanglish) that he'd noticed the tree, that we needed it getting rid of and that "hees guys" would be happy to oblige for "three feeefty". My wife agreed on the spot, and three hours later, the only evidence that a tree had ever been there was some sawdust lying around.

Legitimate contractor - taxed and regulated, workers' comp insurance, etc. etc. = overheads, hence $1,200 to get rid of a tree.

Jose who got out of his battered old 1980s pickup and knocked on our door - if him and "hees guys" have green cards, then I'm Kim Kardashian. They operate totally outside the legitimate economy, have very little overheads, probably pay themselves around $5 an hour and therefore can do the job for a quarter of the price of the legit company.

However well intentioned, the end result of Garcetti's proposal will be more Joses, a bigger black economy and fewer legitimate jobs.

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This is what happens when you allow 'city states' to evolve with mayors, local parliaments and tax raising abilities.

Detroit and a bunch of other rust belt cities managed to drive away business and residents with leftist schemes, Chicago is in the process of doing so, California looks to be going the same way.

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