Rising Minimum Wages
Should salary levels be regulated or mainly left to individual contractual negotiations between the employee and his/her employer? The former, according to the Los Angeles City Council and governance entities in several other cities and states.
On Tuesday, Los Angeles decided to increase the minimum salary to $15 an hour by 2020. Other cities such as San Francisco, Chicago, New York, and Seattle have passed similar measures. Liberal strongholds, you say? Think again. Republican-leading states like Alaska and South Dakota have also raised their state-level minimum wages by ballot initiative. Some companies such as Walmart and Facebook have raised their wages voluntarily.
But the effect is likely to be particularly strong here in Los Angeles, where around 50% of the work force earn less than $15 an hour. That’s right: in an urban area with super-rich movie studios, high-tech companies, hotels, restaurants, health companies and much more, half of “regular” employees barely earn a living salary. In New York state, around one third of workers make less than $15 an hour. Take into consideration that the cost of living in some cities such as Los Angeles and maybe even more so San Francisco and New York is very high. In fact, studies show that every single part of Los Angeles is unaffordable on only $15 an hour if a person spends only the recommended one third on housing.
“Assuming a person earning $15 an hour is also working 40 a week, which is rare for a minimum wage employee, and that they’re not taking any days off, they’d be earning $31,200 a year. An Economic Policy Institute study released in March found that a single, childless person living in Los Angeles has to make $34,324 a year just to live in decent conditions (and that was using data from 2013).”
Opponents, however, say that initiatives such as the above will make some cities into “wage islands” with businesses moving to places where they can pay employees less. Others call the initiative a “social experiment that they would never do on their own employees” (they just did…) But “even economists who support increasing the minimum wage say there is not enough historical data to predict the effect of a $15 minimum wage, an unprecedented increase. A wage increase to $12 an hour over the next few years would achieve about the same purchasing power as the minimum wage in the late 1960s, the most recent peak.”
Time will tell if the sky falls from the above initiative or if the system in a rich urban area such as Los Angeles can cope. Said Gil Cedillo, a councilman who represents some of the poorest sections of the city and worries that some small businesses will shut down, “I would prefer that the cost of this was really burdened by those at the highest income levels. Instead, it’s going to be coming from people who are just a rung or two up the ladder here.”
This is, of course, not only an issue of the value of low-wage work and fending for yourself to not end up at the bottom of the salary chain. It is a matter of alleviating urban poverty and improving the nation’s overall economy for a sufficient amount of people to better get the economy back on track for more than the few.