If your household had four members and together you were grossing $84,700 a year, how “rich” would you feel?
Not very if you lived in San Jose.
Would being in the same situation but making $105,350 annually make you more financially comfortable?
Not if you resided in San Francisco.
The figures of $84,700 and $105,350 in terms of annual income for a household of four is what the federal Department of Housing has determined is the upper limit of being low income in San Jose and San Francisco respectively.
The figure for Stanislaus County is $47,900.
California’s minimum wage will go up nearly 50 percent over the next four and half years. It goes from the current $10.50 to $11 in less than six months on Jan. 1, 2018. Then for each of the next four years it goes up $1 until it reaches $15 an hour.
If you look at it from the household side, those in the Northern San Joaquin Valley that rely on minimum wage jobs would appear to be headed for a period where they will do much better than their lower economic rung counterparts on the Bay Area.
While minimum wage jobs on both sides of the Altamont will go up equally, the impacts will be drastically different.
Assuming someone can find a 40-hour minimum wage job that they can work for 52 weeks a year at the current $10.50 they are making $21,840 annually. In 2022 when the minimum wage hits $15 an hour that same person would make $31,200 an hour.
Giving the lower cost of living is driven primarily by housing, inland minimum workers would seem to fare much better as the $15 an hour minimum wage moves closer to full implementation. But here’s the problem: The Bay Area clearly has a substantially large pool of consumers who can absorb small business pricing hikes. Smaller firms primarily are where minimum wage jobs are mostly concentrated. Silicon Valley as a whole has a median income household income of $101,980, based on U.S. Census data. Compare that to Stanislaus County’s median household income of $57,500.
This means there will be fewer households on this side of the Altamont that will be able to comfortably absorb wage increases in the prices that merchants charge for goods and services.
University of Pacific economist Thomas Pogue drew a stark picture of the dilemma the Northern San Joaquin Valley region as the minimum wage goes up the escalator steadily to $15 an hour when he was speaking at the State of the City program in January at the Manteca Transit Center.
Pogue noted California’s minimum wage benchmark of $15 an hour will ultimately force pay hikes for less than 10 percent of workers in the Bay Area. But on this side of the Altamont the escalating wage floor will impact more than half of all jobs. That represents significant challenges for businesses, especially how labor is the major cost in many private sector concerns.
The one positive for the 209 economy when it comes to minimum wage is not one city in the Northern San Joaquin Valley has its own minimum wage policy.
You may say that’s not a big deal since many cities in the Bay Area do have them targeted to hit $15 an hour although earlier than the state which will reach it in 2022. Mountain View hits the $15 minimum in 2018. San Jose gets there in 2019 as does Cupertino, Palo Alto, Los Altos and Milpitas. Santa Clara and other cities are moving to follow suit.
So why does this matter? All of the cities mentioned have their minimum wage laws indexed to regional inflation once they reach $15.
This represents an opportunity for Valley cities now cashing in on the distribution needs of the Bay Area. Firms are picking locations here because it is a lot less expensive land wise and they are still within delivery range not just of the Silicon Valley, the East Bay, and San Francisco but Sacramento as well.
The opportunity the Bay Area minimum wage laws will involve are lower paying white-collar jobs that support Bay Area endeavors and are more effective when they are close by.
Most big sources of relatively lower paying “back office” jobs in the Bay Area over the years have resisted moving to inland California and instead have left the state. A bank processing credit card accounts for consumers in the Bay Area can do that just as effective from South Dakota or Alabama.
The creeping minimum wage beyond $15 an hour that many Bay Area cities have in place — or are moving to do so — could be a game changer. It could prompt service-orientated firms not tied to daily retail but need a presence in the region they serve to relocate to the outer edge of the Bay Area which is what the Norther San Joaquin Valley is.
They likely would have a number of jobs above $20 or so an hour, but they also will have a lot of jobs that the escalation clauses of various cities’ minimum wage laws will start cutting into the bottom line non-stop.
The 209 needs to work to use the minimum wage laws of Bay Area cities to build on the growing exodus of distribution from the heart of the Bay Area.