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About this blog: I am a native of Alameda County, grew up in Pleasanton and currently live in the house I grew up in that is more than 100 years old. I spent 39 years in the daily newspaper business and wrote a column for more than 25 years in add...  (More)

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Feeling good about the show

Uploaded: Oct 8, 2013

The governor made a big show last week when he signed the bill raising the minimum wage to $10.
The show was just that—a feel-good show. It likely will reduce employment at entry level jobs instead of helping poor families as proponents argue. The reality is that most of the people holding minimum-wage jobs are teen-agers who are dipping their toes into the workforce for the first time.
There are some occasions where it is a relatively unskilled adult attempting to support a family—the issue there is not mandating what an employer has to pay—regardless of the job market—it's providing the opportunity for that employee to improve themselves. Adding 20 percent plus the assorted government-mandated costs to an employer's expenses makes it less likely they will hire additional employees.
Government, at all levels, assumes that its actions will benefit people without any real understanding of how people affected by the new laws or regulations will react. And people do react to protect their interests.
Columnist Thomas Sowell, a senior fellow at the Hoover Institution at Stanford University, took on the United States Dept. of Labor in his column published in the Bay Area News Group last Saturday. Sowell observed that the Labor Dept. was planning to extend minimum-wage coverage to domestic workers such as maids and other casual help in households. Of course, it is scheduled to take effect in 2015, after the mid-term elections in November 2014.
Sound familiar. Note when the full effects of ObamaCare—now—are kicking in—a full five years after the Democrats in Congress passed the legislation and the president signed it.
Sowell argues that the law is simply an overreach by a government agency eager to regulate and collect employment taxes on any potential "victim" (my word). The thought of a couple of senior citizens who need help around the house being regarded as employers is laughable.
It will lead, for those informed enough, to them calling in companies to perform duties that once were handled by individuals. Those will be part-time jobs—the only type of position most employers are hiring given the economic impacts of ObamaCare on employers.
Just as raising the minimum wage in California will lead to less opportunity for young people… the potential federal action that Sowell outlined so well will do the same for less-skilled people of all ages who could fill that niche. To say nothing of the effects on elderly folks without significant means who need some casual help.

Comments

Posted by Citizen Paine, a resident of Danville,
on Oct 10, 2013 at 8:13 am

Citizen Paine is a registered user.

Lest any readers be deceived into thinking that the conventional wisdom in your article – things that everybody Knows are true – actually ARE true, here are a few points to ponder.

First, on the facts: the CA minimum wage will rise to $9 next July, and $10 in January, 2016.

Second: "most of the people holding minimum wage jobs are teenagers …" According to the Bureau of Labor Statistics Web Link, 24% of min-wage earners are teenagers. More than ¾ are not "dipping their toes into the workplace for the first time." They are the working poor, and their numbers are large, and growing. Just for completeness: 64% have HS diplomas, and 76% are Caucasian.

Third: " adding 20 plus percent …". Couple points for context, here. The federal minimum wage is $7.25. The buying power of that minimum wage was $10.55 when it peaked in the 1960s (at $1.60/hour – those were the days); it has deteriorated more than "20 plus percent" since then.

Comparing the cost of living in our fair state to the nation, if you take our five largest metro regions (where most of the people are, after all), averaged, with St. Louis, a worker earning $50K there would need to make fully $73K here just to stay even – that's a 46% difference – far more than the delta between state and federal minimums. Web Link

Fourth: "it will reduce employment at entry-level jobs …" Econ 101, right? Except not right, necessarily. Min wage jobs are primarily in the service sector. If burger-flipping and house cleaning could be mechanized, they would be. Further, businesses will pass-on those costs if they can, and the demand curves in those sectors are quite steep – meaning that they indeed can. A 10% min wage bump may correspond to a 3-4% overall cost increase, which in-turn may take my Big Mac up a dime. I do not predict a consumer revolt over that, nor a run to Jack, whose costs will rise correspondingly. We do love our food-like substances.

Fifth: … "Those (new min wage jobs) will be part-time …" They already are: 66% of min wage jobs pay for fewer than 40 hours per week (BLS link). Welcome to WalMart.

Sixth: Thomas Sowell is just not credible. He's an out-of-touch scold, whose last original thought occurred during the Reagan Administration. He's been coasting on the tide of his uniqueness, ever since. It's a very tired act.

A much more timely article would take-on rising income inequality, in which this new minimum wage will make a practically imperceptible dent.


Posted by Daveg, a resident of Birdland,
on Oct 10, 2013 at 9:06 am

Daveg is a registered user.

I believe Citizen Paine's comments are some of the best, well reasoned, responses that I have seen on this forum. Tim's postings are generally well written, accurate and always informative. However, after reading both Tim's and Paine's comments, I would ask, as I'm sure others would also, that Tim pen a reply addressing the points that Paine has articulated. This type of discourse, one filled with facts, rather than emotional rhetoric is much more helpful than the general blather that the forum eventually falls victim to.


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