My home state, California, has edged out New York to be the first state adopting a $15 minimum wage. Our Governor, Jerry Brown, gave the policy a full-throated endorsement. He stated “I'm hoping that what happens in California will not stay in California, but spread all across the country. It's a matter of economic justice. It makes sense.” If you know anything about California, you too would be in support of this righteous increase that more than doubles the national minimum wage.
How does anyone expect one to live on a measly $7.25 an hour? After all, this is not Des Moines. Have you seen the prices for things out here? Half the people cannot afford to live and the other half are driving BMWs.
First, let’s start with the cost of gasoline. When people come to visit us and we drive them somewhere, they are shocked by the signs at our ubiquitous gas stations. They want to know why our gas costs anywhere from $.80 to $1.25 more per gallon than theirs does at home. We tell them “My God, this is California; what do you expect? We have our own gasoline blends for every season. It is to protect our environment.” Even when the country was awash in gas and prices were plummeting below $2 per gallon, we had a shortage that spiked our prices. But it is all good because we get to live in California. How is a person making what people make in Baton Rouge supposed to pay for our gas?
Then there is the cost of electric power which is 50% higher in California than the national average. But it will not be for long. Because our wise elected leaders including Governor Brown put into law a requirement that 50% of our energy comes from “renewables” by 2030. Forget that the price of natural gas and oil has plummeted and new supplies have been found that will last for generations; we have to think about global warming. We can bear the cost of doubling our electricity rates. And the good part is we will have those nifty-looking windmills everywhere. How does a person afford this excellent electricity making what people make in El Paso?
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Of course, there is the cost of housing. The 12th Annual Demographia Housing International Affordability Survey for 2016 ranked four California cities (San Jose, San Francisco, Los Angeles and San Diego) in the top ten least affordable cities in the world for middle class housing. Four in the top ten for housing costs in THE World. That is fairly astounding. This obviously has nothing to do with government controls, rent control, government fees or restrictive development policies by urban planning imps or any of Governor Brown’s policies.
A friend of mine’s son rents a small studio apartment in San Francisco for $3,200. The soaring housing costs have caused the Black population to plummet in San Francisco from 14% to 6%. That is the smallest percentage of Blacks in the 14 largest U.S. cities except one: San Jose has only 3% black population. The government policies, of course had nothing to do with this development. With these housing costs how would you expect anyone to live on the same wages as Savannah, Georgia?
Other states may have a higher poverty rate, but that is before there is an adjustment for the cost of living. When the adjustment is made for the cost of living, California has the highest average poverty rate from 2010-2014. The 23.8% living below the poverty line in California exceeds every state except the District of Columbia (included in the study) at 22.7%. Mississippi has the highest poverty rate, but once you adjust for the cost of living it plummets to 16.1%. When that many people are living in poverty, either you must hand them out government money or have their employers’ increase their wages.
What we see is that all Californians will now be able to support themselves without government handouts. Between the increased tax revenues and decreased welfare costs, taxes on everyone will significantly decrease. Thus, we are sure Governor Brown will be able to call for a cut in the state tax rates. Since California has the second highest combined tax burden after New York, that will help to attract a lot of new people to the state.
The important thing is businesses can absorb these increased payroll costs. You may want to remember that all payroll will be going up. For instance, now with the new pay rate people making up to about $62,400 per year will be subject to California overtime rules which are eight hours per day and 40 hours per week. Everyone will share in the new benefits.
When business owners let their customers know that the 20-25% increase in their meal at a restaurant will be going for such a good cause (lowering the poverty rate), the selfless residents of California will heartily pony up the additional money. When people care about each other like we Californians do, this will work out.
It will be so delightful when you go to a McDonald’s and will not have to face those annoying, cheerful, young faces greeting you and asking for your order. Instead you can choose your own food from a tablet at the counter, swipe your debit card and then have Robot Rob deliver it to you. Who wants all that human interaction ordering a McMuffin?
Now that you have some perspective, you must agree that a $15 minimum wage is responsible. No one can live on these current wage levels. After all, have you seen the price of a Martini on Sunset Boulevard? It is at least $15 and that is for a well or generic label. Can you imagine how much it is with Absolut? How is a person supposed to support themselves on these wages with these prices?
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