President elect Joe Biden may give California an unintended boost assuming folks in Sacramento can resist the temptation to one up Washington, D.C.
Biden’s massive stimulus bill includes raising the federal minimum wage to $15 an hour.
The federal minimum wage is currently $7.25 an hour. It hasn’t been raised since 2009.
You may ask yourself why this makes any difference to California. The minimum wage is at $13 now, will go to $14 in 2022 and then $15 in 2023.
If it does pass Congress it could accelerate California reaching $15 sooner than later unless a federal minimum is phased in like it has been in the Golden State.
But that isn’t the boost. It will be the fact states under federal law must require the private sector to pay the minimum federal wage — they can go higher — for a wide variety of jobs.
This may not sound like a big deal until you realize Texas, Georgia, Nevada, and North Carolina — four states that have poached banking and tech jobs from California — have always had their minimum wage no higher than the federally mandated minimum.
While they are some jobs in tech and banking that pay minimum wage, that isn’t the big impact. Higher wages for those in the service, retail and even manufacturing sectors will eventually eat into the buying power of tech checks driving up the cost of living.
Contrary to what some may thing, if a clerk at the Piggy Wiggly supermarkets on the South and Midwest have to be paid more than twice what they are making now it will drive up the price of goods.
It also applies upward pressure to pay for other jobs.
It happens every year when the minimum wage goes up a dollar in California. Hourly employees for government agencies such as school districts and cities that are above minimum wage go up as well to keep the same dollar distance. The same is often true in the private sector in a bid to keep employees.
You might also want to check out the pay scale for public employees ranging from school teachers and police officers to park workers in places like Texas, Georgia and North Carolina. The minimum wage hike will put upward pressure on their salaries meaning higher taxes.
There are economists who will argue that minimum wage increases never have a long-lasting impact as they are always eventually wiped out by price increases. They contend real economic growth through people being more productive and developing higher skills sets that make them more valuable is the way to go.
The Congressional Budget Office notes that Biden’s $15 an hour minimum wage proposal — a 107 percent increase — will raise 1.3 million Americans above the poverty line. However at the same time the CBO projects a $15 federal minimum wage will eliminate 1.3 million jobs.
There are some economists that will pooh-pooh such projections. But you might want to check around with large and small employers alike in California to see how many jobs they've shed and how the shift to automation has stepped up since the state started its climb toward $15 an hour minimum wage by Jan. 1, 2023 up from $10 in 2017.
A lot of press is given to those leaving California and the fact we may loss a seat or two in the House of Representatives. But the real bottom line is the state is still growing in population but not as much as it was in the past. Meanwhile states such as Nevada, Texas, North Carolina, and Georgia where more heeled workers flock to for a lower cost of living are also the same states that haven’t jacked up minimum wages since 2009. And then it was because they were forced to by Congress raising the federal minimum wage.
If you browse the Wall Street Journal and regional papers in the above-mentioned states you will find all is not as it seems. The cost of living is lower for expatriates from places like California, Oregon, Washington, and New York but there are more and more home-grown folks in those states feeling the financial squeeze from growth.
People flusher with dollars are reshaping neighborhoods and commercial districts and driving up housing prices. Sound familiar?
They are in the early stages of “California-cation”. More than doubling the minimum wage via an edict from Washington, D.C., will accelerate the process.
Of course, there are other things that make California “difficult” to live in.
People who smugly believe they will not end up like California in terms of the business climate haven’t noticed the steady trend. What starts in California ends up spreading elsewhere from air quality standards impact vehicles to green energy and labor rules. They are joined first by other states such as New York and New Jersey that also happen to have minimum wages well in excess of the federal standard.
There is also the assumption that California — the land of big property losses from endless wildfires, floods, and the occasional earthquake — is way out there as well when it comes to natural disasters. But you will also notice damage from everything from hurricanes, floods and tornadoes are up in places like Texas, North Carolina, Georgia, and Florida. That’s because the more people you have, the more damage natural disasters cause.
As for Nevada, we may have a wonderful complex, compromised, and nutty water situation running the gamut from subsidence and over-drafting underground water tables to minimum fish flow fights but the Silver State has a much more serious issue. Outside of drawing what they can from the Colorado River watershed that is split legally between seven states including California, Nevada can rely — for the most part — only on underground desert aquifers.
This is not a bid to “dis” other states.
But after years of hearing other states slam California non-stop, they all appear to be heading down the same path as the Golden State.
A lot of Biden’s agenda and that of the new majority in Congress will start shrinking the gap between those states and California with a $15 federal minimum wage being the first step.
As bizarre as it may sound, the fact California has been “out there” — a term detractors use in other states to describe our rules, regulations, and high housing costs — may actually make us more resilient when what appears to be a new federal wave washes across the country.
California will start looking less “kooky” and high cost to do business in.
You might argue the proposed legislative agenda might hurt the country, but its impact on California will be relatively small because of where we are on a wide variety of things ranging from Biden’s $15 an hour minimum wage to many aspects of proposed green policies.