California Says To Hell With Economics, Will Hike Minimum Wage To $15/Hour

Tyler Durden's picture

Over the past 12 months, America has had front row seats for a real-life experiment with across-the-board wage hikes.

In January of last year, a grinning Doug McMillon appeared in a video message posted to Wal-Mart’s website to announce that the world’s biggest retailer was set to implement one of the “largest single-day, private-sector pay increases ever.”

Now first of all, McMillon and the rest of the executive suite probably should have reread the statement in quotes above and asked themselves whether that sounded like something that was likely to turn out well. Wal-Mart employs a whole lot of people, and giving everyone a raise is the kind of thing that can end up having unintended consequences - especially when your business runs on the thinnest of margins.

But Wal-Mart pressed ahead anyway and almost immediately, things started to unravel. First, Bentonville moved to squeeze suppliers by forcing them to plow their excess cash into savings rather than in-store advertising. Next came storage fees and eventually, Wal-Mart even tried to compel vendors to pass along any savings they might have recognized from the yuan devaluation.

But squeezing the supply chain proved inadequate to make up the money spent on higher wages and so, Wal-Mart did what anyone with any common sense knew they would end up doing: they fired thousands of people and closed hundreds of stores. Or, visually:

A valuable lesson was learned by all. Or maybe not, because over the weekend, California lawmakers and labor union reps struck a deal to raise the statewide minimum wage to $15/hour.

“The deal was confirmed Saturday afternoon [and the] compromise ends a long debate between Democratic governor Jerry Brown and some of the state's most powerful labor unions,” the LA Times writes, adding that “for Brown, it's political pragmatism; numerous statewide polls have suggested voters would approve a minimum wage proposal — perhaps even a more sweeping version — if given the chance.”

Here’s how it will work: the statewide minimum will rise from $10 an hour to $10.50 on Jan. 1, 2017, with a 50-cent increase in 2018 and then $1-per-year increases through 2022. Here’s more from the Times:

Sources say the Legislature could vote on the wage compromise as soon as the end of next week by amending an existing bill on hold since 2015. Its passage would place California ahead of a minimum wage increase now being considered in New York, and would probably add fodder to the raucous presidential race. Both Sen. Bernie Sanders of Vermont and former Secretary of State Hillary Clinton have endorsed the goals of a nationwide campaign to raise wages to $15 an hour, and advocates say swift action in California could force both Democratic candidates to embrace what would be a more aggressive plan of action.

 

In January, Brown warned of a $4-billion-a-year increase in state budget expenses if public-sector care workers — who are paid the minimum wage — were to receive $15 an hour. The gradual ramping up of wages and benefits in the new agreement is more aligned with Brown's larger budget philosophy.

"Raising the minimum wage to fight income inequality has cropped up on many Democratic candidates' agendas ahead of the November presidential, congressional and state elections," Reuters wrote this morning. "But the idea has drawn fierce opposition from conservatives and some business groups, who have said a higher minimum would harm small businesses and strain the budgets of government agencies forced to pay more to workers."

Yes, this could "harm small businesses." Businesses like the Marmalade Café which has seven locations. "First, you have to raise prices, otherwise you'll be out of business," owner Selwyn Yosslowitz told the Times. So higher prices for diners. That's "first." We imagine you can guess what's "second." "We will try to re-engineer the labor force," Yosslowitz said. "Maybe try to reduce the number of bus boys and ask servers to bus tables." In other words: "Maybe" we'll fire some folks and the people who keep their jobs will have to be more efficient. 

Yosslowitz also worries about the dynamic we've discussed over the course of documenting Wal-Mart's experience with wage hikes: namely that you have to preserve the wage hierarchy. You can't hike wages for the lowest paid workers and then expect those further up the pay ladder to be satisfied with what they made before. "The other big worry [is] that employees already making $15 an hour will demand a raise as well", Yosslowitz said. "It's a chain reaction."

Indeed, the problems with haphazard wage hikes are now readily apparent even to those who stand to benefit the most from the new legislation. Take Miguel Sanchez of Highland Park who works two jobs making tortillas. "It's good for workers, but I imagine this is not going to be good news for employers and small businesses," he says. "Will the cost of things go up?” he asks. “Are employers going to cut back hours because they can't afford it? I worry."

So even tortilla makers get it, but like Wal-Mart, "some folks" will need to actually see the layoffs before they'll concede that you can't cheat economic truisms and that's really a shame for the people who will lose their jobs in the meantime. 

Of course how much you earn and even whether or not you have a job at all only matters to the extent that "shit" costs money, which is why it might be a good idea to just go ahead and vote for "A Future To Believe In"...

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Jethro's picture

LOL! Fucking brilliant. I'm guessing that the state legislature is a regular hugfest, because these assholes vote like they have an extra chromosome.

https://tobeyk.wordpress.com/2012/08/28/meetings-none-of-us-is-as-dumb-a...

TeamDepends's picture

Hey, we didn't get a hug from you. What, are you a capitalist (cringes in disgust)?

nuubee's picture

What is usually completely lost in this equation, is that both workers get screwed. One gets fired, the other one now has to work even harder for that "raise". This is completely different from a inflation-driven raise where your wage is supposed to just be keeping pace with the value you already provide. Thumbs on the scale screw all workers.

 

Short California restaurants, short them hard.

eforce's picture

7. To complete the ruin of the industry of the goyim we shall bring to the assistance of speculation the luxury which we have developed among the goyim, that greedy demand for luxury which is swallowing up everything. We shall raise the rate of wages which, however, will not bring any advantage to the workers, for, at the same time, we shall produce a rise in prices of the first necessaries of life, alleging that it arises from the decline of agriculture and cattle-breeding: we shall further undermine artfully and deeply sources of production, by accustoming the workers to anarchy and to drunkenness and side by side therewith taking all measure to extirpate from the face of the earth all the educated forces of the "goyim".

-- The Protocols.

maskone909's picture

Hey Janet, sonny has a message for ya... "Now you's cant leave"

erkme73's picture

They may be stupid, but the politicians are smart enough to phase these increases in gradually - knowing the people are too stupid to connect the dots if it's spread out over time.   As it is, they'll get the votes/praises for doing something, but by the time the full impact is felt, they'll be able to blame it on something else.

TahoeBilly2012's picture

I read "across the border..." wage hikes.

Pairadimes's picture

We already have too many of those Californicators streaming into Texas right now, looking for jobs and voting for Democrats.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Pairadimes Mar 28, 2016 10:17 AM

I'd like my menial task robots to be either stainless steel or chrome plated.  Feel free to put McDonald's, Burger King, Walmart, et al, hats on them.  Female shaped robots with boobs (battery storage) are fine too.  Thank you.

Haus-Targaryen's picture

Essentially this.  Next, when the layoffs begin, the same people that demanded wage hikes will be condemning those that lay-off their work force, because they are greedy.  The irony of it all is -- if these people weren't themselves greedy, why demand a higher wage for no additional work? 

Politicians using the population's lack of understanding re; supply & demand to screw their own supporters.  

I am glad I left the country.  I am not saying Germany is that much better ... but I get the feeling the melt-down in the US will be very bloody.  The melt-down in Germany will just be lots people waiting in lines (after the inital blood-letting re; our new "guests.").  

Vampyroteuthis infernalis's picture

California is well on their way to state bankruptcy. Once Silicon Valley melts down it will strike with a vengeance. This is just another nail in the progressive coffin.

Buzz Fuzzel's picture

Why $15 an hour?  If this works and is good why not make it $1,500 an hour and make everyone rich.  

XitSam's picture

And why gradually incrementing the hikes? If they really cared about the workers, the raise would be right now!

Stuck on Zero's picture

And why do you have to raise the minumum wage? Inflation. Who causes inflation?

MagicHandPuppet's picture

Why stop at $15/hour?  Take that bitch to $1000 world wide so we can ALL be RICH!  /sarc

 

EDIT: Dang, Buzz Fuzzel beat me to it, LOL

Surviver22's picture
Surviver22 (not verified) MagicHandPuppet Mar 28, 2016 11:59 AM

Be prepared, economic collapse is coming in 2016!

http://motivationdose.com/global-recession-in-2016

Dirtnapper's picture

Don't worry, the suicide bombers will thin out those lines in a jiffy!

 

 

Stuck on Zero's picture

No unemployment lines. Everyone will receive a Bernie Card.

Meat Hammer's picture

The people who are forcing wage increases are from the same tribe as those who are making the currency with which the previous wages were paid less and less valuable.

You gotta hand it to them.  They're brilliantly evil.

Death to money-changers.

The Saint's picture

Democrat politicians only care about two things, 1) Saying and doing what ever it takes to get votes so, 2) They can hang on to power.

They don't care about America.  They don't care about Americans.  They don't even care about the poor that they are supposidly trying to help.  Honestly, they only care about themselves and keeping their political power and feeding government contracts to their friends and families so they will be able to live the good life and retire well.

In short, Democrats are egotistical, self-centered deceivers who will say and do anything that will further their two objectives above.

pods's picture

Ditto for the other side of the coin.

The Saint's picture
The Saint (not verified) pods Mar 28, 2016 11:03 AM

Sigh :-(

Nobody For President's picture

Right PODS - as i read that screed, I kept thinking "Hell, substitute Republican for Democrat and it reads just as true". Why the hell do people, especially here on zh, still think there is any significant difference between the present two parties?

ZD1's picture

 

 

Almost all Democrats like Bernie Sanders and Hillary Clinton want open borders, pander to La Raza and BlackLivesMatter thugs, and want to import more Muslims into the U.S.

Only Republican candidates like Donald Trump and Rand Paul say they want to stop illegal immigration and vet any Muslims immigrants before they are allowed into the US.

 

fallout11's picture

Politicians treat American voters like livestock, that they "farm" for votes, and throw some feed to occasionally.

Meat Hammer's picture

Only Republican candidates like Donald Trump and Rand Paul say they want to stop illegal immigration and vet any Muslims immigrants before they are allowed into the US.

I can say that I want every home to have a kegerator with unlimited beer.  Doesn't mean it's gonna happen...which is probably why I can say it.

BarkingCat's picture

The other side does not base their existence on free shit for the poor.

Also people who vote for the other side are less forgiving.

The politicians are mostly scum.

Meat Hammer's picture

You say "the other side" as if there are two sides, which there are not.

J Pancreas's picture

Totally agree and would prefer more robotics. Sad to say the only efficient markets are black markets. Who is John Galt?

giggler321's picture

>>(battery storage) are fine too

I guess you want D cell's then? eh?  those AA run flat in no time

S.N.A.F.U.'s picture

Why are you all trying to put batteries in the milkshake dispensers?

FreeMoney's picture

The blame for job losses will be to "Greedy Capitalists".  Long robots.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) FreeMoney Mar 28, 2016 12:02 PM

The reason for the push of minimum wages is more tax revenue 

Max Cynical's picture

"We already have too many of those Californicators streaming into Texas right now, looking for jobs and voting for Democrats."

This is a TIRED argument...it's NOT liberal democrats leaving their utopia in Cali for more freedom, lower taxes, higher job growth, etc. to be around independant thinking conservatives in other states. They're perfectly happy living in what they have created in Cali.

Look in the mirror...Texas has been overrun by illegal invaders...placing blame for your problems is much closer to home.

Dave Thomas's picture

It's kinda true, look at Bexar, Harris, Tarrant, and Travis counties, all blue. Then the Rio Grand valley, all blue. The only red counties are out in the sticks. Si su puede!

BarkingCat's picture

southern Texas has had Mexican populations for a very long time. Now that is true for a much higher portion of the state.

The blame however belongs with the federal and not state government. States are not allowed to secure the border.

 

The issue of Kalifornia locust infesting Texas (and many other states) is a separate and valid issue as well.

daveO's picture

One of the unintended consequences may be that low payed minorities will be forced to leave. This will hurt their Democrat voting base. They'll lose population.

The Saint's picture
The Saint (not verified) daveO Mar 28, 2016 10:41 AM

On the contrary, this will force business to hire more illegals and pay them a lower wage under the table.  A higher minimum wage will actually increase illegal hiring probably calling them outside contractors..

Herd Redirection Committee's picture

Yep, pay 3 illegals the 'minimum wage' and the 4th works 'for free'.

You know there will be workarounds, one way or another.

zeropain's picture

yah, the headline should read "minimum will rise from $10 an hour to $10.50 on Jan. 1, 2017"

cus that is all that will happen the rest will be adjusted back down when california budget gets whacked by the credit cycle crash.

pods's picture

You nailed it.

"10 years from now the budget will be balanced."

There is nothing binding that this house passes that the next house has to go along with.

Sounds like the smarmly DC cuntwonks who talk about the same fantasy numbers.

pods

 

 

malek's picture

Budget? Muaaaahaahahaha!
We don't need no stinkin' budgets!!

No, the headline should read "Minimum wage in California will rise 5% in 2017 and 2018, 9% in 2019, 8% in 2020 and 2021, and 7% in 2022"
Because that gives you a lower boundary of the real inflation to be expected in those years.

 

KnuckleDragger-X's picture

Time to invest in fast food automation.......

Miffed Microbiologist's picture

I read an article awhile back that made a cost analysis of robotics in fast food and the viability was around $12/hr. However I am a bit skeptical if this is entirely true. Working we robots in the lab is certainly not foolproof. They have many moving parts and go down often. Because of their complexity, technical services must fix them.

I would like to see a robot making hamburgers for a significant time and evaluate the throughput and quality of the product. Plus the maintenance as well as the possibility of bacterial contamination at various points. Something tells me this won't be seamless.

Miffed

BarkingCat's picture

"quality of the food"..... that is not exactly a high threshold for the robots given their human competition.

I don't buy fast food anymore so I couldn't care less about it, but sometime ago I went into a Jack in the Box and they had a self serve order taking terminal. 

I looked at it as I walked to the human that was also taking orders.

Frankly, I do not want to waste my time figuring out another lame interface.

 

Firepower's picture

Obongo Inc.'s next brick in The Wall is to transform Mediocre McJobbers into full-fledged BLM'ers.

Lord Christ-0-Bama, hail Him

AND His Resurrection!

Mr. Bones's picture

Boiling frogs will result (had already resulted) in a crab mentality.

Glad to see that the "chain reaction" is finally getting attention.  Having been a skilled but "uneducated" laborer I was acutely aware of the premium provided by my skill set being eroded.  It got to the point where after taxes I was below the poverty line which meant nothing because it was my "business" being taxed in to oblivion while the human subsisted on ramen.

Boris Alatovkrap's picture

When fiat minimum wage is increase by government dictate, REAL minimum wage is decrease to $0 for citizenry who is now without job. 

zeropain's picture

dont need a job if you got robots working and ebt and disablity to sit on your fat ass.  crazy how the system works.  so you get an intellectual elite and a mass of zombies.  how do you think that will turn out?

Boris Alatovkrap's picture

How is it work out? Even in Russia, proclivity of lazy nephew is deprive hard working citizen of access to couch.