Minimum Wage Tag

Los Angeles now joins two other bastions of progressive political activism in setting the new minimum wage level to $15/hour.

Los Angeles became the largest US city to raise its minimum wage to $15 an hour on Tuesday, as a wage increase bill passed the city council by a vote of 14-1. It is now up to city attorney Mike Feuer to draft an ordinance to implement the new minimum wage requirements. The ordinance will then return to the council for a final vote before becoming law. Under the proposed legislation, the city’s minimum wage would increase to $10.50 in July 2016, and would increase incrementally every year until it reaches $15 in July 2020. For small businesses with 25 or fewer employees, the wage hike would come on a modified schedule with the incremental increases starting in July 2017 and the minimum wage reaching $15 by July 2021. The current minimum wage in California is $9 an hour and is set to increase to $10 in January 2016. In the past year, two other US cities have approved similar wage increase measures. In June 2014, Seattle moved to increase its minimum wage to $15 by 2017. Last November, San Francisco voted to increase its minimum wage to $15 by 2018.

It will be interesting to see the economic fallout from this decision. As many aspiring actors and actresses work fast food jobs and hold entry-level service positions to survive while catching their big break, I would anticipate that Hollywood will be feeling the pinch in a much more limited pool of talent. And that is likely to be only one of many unintended consequences of this vote.

A higher minimum wage means more money for low level workers... in theory. The trouble is that raising the minimum wage directly affects the ability of job creators to offer more workers more money. It looks great on paper but doesn't work well in reality. For example, we recently reported on a San Francisco book store that's shutting its doors over a higher minimum wage. Now, some are citing restaurant closings in Seattle as collateral damage resulting from the city's new minimum wage hike going into effect next month. Shift WA reported, hat tip to the great Jazz Shaw of Hot Air:

More Seattle restaurants close doors as $15 minimum wage approaches Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.” Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” Seattle Magazine, “Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”

Cashiers aren't the only workers who might be forced to look for other employment thanks to robots. To help alleviate the current labor shortage, one Singaporean restaurant plans to employ a fleet of robots to deliver food to customers. Meet the flying robot waiter: According to Channel News Asia:

Restaurant-goers in Singapore can expect to be served by autonomous flying robots – the world’s first commercial attempt – by the end of next year. Infinium-Serve, the autonomous flying robotic waiters, will be first launched at one of Timbre Group’s five outlets in Singapore. Infinium Robotics CEO Woon Junyang estimated the project to cost a “low seven-figure sum” for the five outlets, subject to final negotiations and certain variables of the actual deployment of the robots. Infinium Robotics signed a Memorandum of Understanding with Timbre Group on Oct 31. Both companies are seeking productivity-related government grants to help offset deployment costs. Mr Woon said he is confident that such robotic solutions will help alleviate the Singapore’s labour crunch. Introducing this technology into restaurants would take away mundane tasks of serving food and drinks, and allow human waiters to focus on higher-value tasks such as getting feedback from customers, he said. “This will result in an enhanced dining experience which will eventually lead to increased sales and revenue for the restaurants,” he added. A prototype of Infinium-Serve was showcased to Prime Minister Lee Hsien Loong at the inaugural launch of the National Productivity Month in early October.

Professor Jacobson just noted that voter intensity is likely to be a critical factor in the 2014 elections this November. However, I assert that a petition drive being held in San Diego, focused on revoking the City Council's minimum wage mandate, shows that voters are quite intense right now.   Given the complete collapse of effective national policy on either foreign or domestic matters, I believe the drama that is occurring shows that citizens are desperate for some control over the increasing chaos in their lives. Following the questionable lead of progressive cities like Los Angeles, earlier this summer the City Council voted to increase the minimum wage to $9.75 in January, $10.50 in January 2016 and $11.50 in January 2017.  Our newly elected mayor, Kevin Faulconer, vetoed it; however, this veto was over-ridden on August 18. At that point, fresh from the success of the petition drives organized to remove our previous mayor, Bob Filner (facing numerous sexual harassment charges), members of the San Diego community organized.

Fast food workers are planning to take their protests to a new level Thursday as they take to the streets for the largest mass strike to date. According to the New York Times, these protests will be different from previous protests in two ways. First, organizers are expanding their demonstrations' locations, and participants. This time, protesters from both the fast food and health service industries will go on strike in 100 cities, and hold sit ins in over a dozen. Second, organizers plan to engage in and encourage civil disobedience as a way of getting the message out:

At a convention that was held outside Chicago in July, 1,300 fast-food workers unanimously approved a resolution calling for civil disobedience as a way to step up pressure on the fast-food chains. “They’re going to use nonviolent civil disobedience as a way to call attention to what they’re facing,” said Mary Kay Henry, president of the Service Employees International Union, which has spent millions of dollars helping to underwrite the campaign. “They’re invoking civil rights history to make the case that these jobs ought to be paid $15 and the companies ought to recognize a union.”

The SEIU is encouraging members of its health service union members to join protests in 6 of the 100 cities, hoping that diversifying participation will draw greater attention to the strikes. These strikes are the result of a two year effort to force fast food chains to raise their minimum wage to $15 per hour, and to allow their employees to unionize. Earlier this summer the NLRB ruled to break through McDonald's corporate-franchisee relationship in an attempt to conduct mass unionizations of entire chains all at once, as opposed to working through a company franchise by franchise. If that ruling is upheld by the courts, McDonald's could be held liable for labor law violations at its thousands of locations. CNN Money reports data suggesting that fast-food CEOs currently make 1,000 times more than the average worker in the industry, and that around 33% of fast food workers have spent at least some time in college. Additionally, 70% of fast food workers are over the age of 20, making it easy for organizers to quickly debunk arguments that "fast food jobs are for teenagers." Whether or not that data holds true in the long run, union representatives are ready to emphasize the disparity between individual employee salaries and overall corporate profits as a way to whip up support.

Earlier this month, we wrote about McDonald's and what appears to be a technological experiment that would replace cashiers:

McDonald’s employees who picketed for a better living wage (whatever that means) may come to regret that decision. According to a Redditor, a McDonald’s in Illinois replaced their cashiers with machines.  The machines appear to be the cousins of the ones found in grocery stores, big box stores, and CVS that allow customers to complete transactions. How cost effective is replacing an organic employee with a mechanized one? According to an economic blog, and unsurprisingly, the machines likely come out on top in terms of pricing.

When labor costs increase, employers are required to offset those increases elsewhere in order to remain profitable while still providing a product the market will want. So when workers demand to be paid $15 an hour to push buttons on a cash register, they can and should be expected to be replaced with cheaper, more efficient labor. When an employer can only afford three employees for what they once paid for five, that's two jobs that have been eliminated. Undeterred by facts and economics, Eric Garcetti, the mayor of Los Angeles reportedly plans to raise the minimum wage to $13.25 an hour, what would be one of the highest minimum wages in the country.

McDonald's employees who picketed for a better living wage (whatever that means) may come to regret that decision. According to a Redditor, a McDonald's in Illinois replaced their cashiers with machines.  The machines appear to be the cousins of the ones found in grocery stores, big box stores, and CVS that allow customers to complete transactions. How cost effective is replacing an organic employee with a mechanized one? According to an economic blog, and unsurprisingly, the machines likely come out on top in terms of pricing:

• For a location open 24 hours: The cost of human cashiers, not counting benefits, $15/hour * 24 hours * 365 days/year = $131,400

• For a location open 6AM to Midnight:  $15/hour * 18 hours * 365 = $98,550.

• For the machine to be cost effective, all it needs to do is cost less than $100,000 a year to buy and maintain.

Who could've possibly seen this coming? Forbes. They predicted this exact scenario last July.

A recent article at the Huffington Post makes the claim that if McDonald's MCD +0.26% doubled its employees salaries it would only cause the price of a Big Mac to go up by 68 cents. The implication here is that 68 cents isn’t much money, so they should do it. There’s a few things missing from this. One is that the article itself alleges that doubling wages would lead to a 17% increase in costs. And I guess this is obviously supposed to seem like a small amount? It doesn’t look that way to me. What do people expect will happen when prices go up 17%? If McDonald’s could raise its prices by that much without lowering demand they would. No, what would happen is people would shop at those stores less, there would be less profit and less McDonald’s stores to hire workers. Doubling of labor costs will simply increase a fast food restaurant’s incentives to adopt technology like this. And if fast food wages doubled everywhere it would spur the development of these technologies even faster.

Appearing on CNN's Crossfire, Congresswoman Barbara Lee advocated for raising the national minimum wage to $10.10/hour, arguing it would increase worker productivity and decrease turnover. After discussing the national minimum wage, Newt Gingrich asked the Congresswoman whether she'd support an even higher hike than that. Via The Daily Caller,

“Let me ask you this question, you’re a good advocate for this,” Gingrich asked Lee. “The mayor of Seattle is proposing that the minimum wage ought to go up to $15 an hour.” “Good for him,” Lee responded. “In California — more than likely, from what I remembered — a living wage where people could live and take care of their families and move toward achieving the American dream was about $25, $26 an hour.” “So would you support that as a minimum wage for California?” Gingrich asked. “Absolutely I would support it for California. I think the regional factors –” “And you don’t think that’d have an effect on unemployment?” Gingrich interrupted.