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On July 1, the minimum wage in San Francisco will hit $15 an hour, following incremental raises from $10.74 in 2014. The city also requires employers with at le

On July 1, the minimum wage in San Francisco will hit $15 an hour, following incremental raises from $10.74 in 2014. The city also requires employers with at least 20 workers to pay health care costs beyond the mandates of the Affordable Care Act, in addition to paid sick leave and parental leave. If a local government dictates that your base wage rate for a labor-intensive industry has to increase by 40% within less than a 5-year period and, on top of that, further dictates that you as an employer must provide those same employees with above-average health benefits together with paid leave of varying types above and beyond what market norms have been, well, at the end of that process, you are obviously having to pay a hell of a lot more for those employees than you did just a few years back, perhaps as much as 50% more. Real wage increases tie to rising productivity. I well remember representing highly-talented UNIX engineers during the early 1990s who were earning around $60K per year (adjusting for inflation alone, that number would still not be in the six-figure range today). Today, engineers of that caliber easily command six-figure salaries plus great perks. The best of them easily command $250k+ salaries. For employers trying to find such engineers, they have to open their wallets big time and, yet, they do. Why? Because, if you are a Google or a Facebook or a Twitter or an Apple, or any other preeminent company needing the services of such engineers, you are not trying to eliminate those positions simply because they cost a lot more today than they did in the early 1990s. You are desperately trying to add such people to your payroll because of what they can do for you. The changing tech world has magnified the productivity and value of what such engineers can do and therefore the salaries and perks they can command are far higher. But this is market-based and justified because the profits you can earn as an employer are also much higher owing to their work. The engineers of the early 1990s were just as talented as those today but their value was relatively less to employers than is the value of their counterparts today. Their productivity has vastly increased. Hence, so has their compensation. Compare that to what the city officials in San Francisco are doing with waiters and similar restaurant staff. Essentially, they have decreed (in the name of worker protection) that the cost to the employer of such employees shall increase by 50% or more over a short period when nothing whatever has occurred to increase their productivity. I went years working my way through school doing such work and it is very hard work indeed. The people doing it earn every penny. Yet those who did it 5 years ago at considerably less cost to the employer than those who do it today worked just as hard as their counterparts today. If those doing such work today are doing the same work, and their productivity has not materially increased, yet they are getting paid 50% more, something has to give. This article basically dances around the obvious by tying the discussion to the considerable expense of living in SF and to collateral issues affecting the city's living environment. In doing so, it does not discuss the obvious: when supply and demand dictates what people will do, and you arbitrarily raise the cost of something, it will affect demand by lessening it. That is why SF restaurants are moving to less labor-dependent models of doing business. Not all will do so but the laws of supply and demand have given them an incentive to do so and it should surprise no one that a good number of them are adapting. Perhaps this is all worth it because those who are now working as waitstaff in SF restaurants are doing much better financially and this is worth the trade off. But no one should pretend that this does not come at a price, perhaps a very high one, for those whose jobs have vanished along with the new business models. (By "new" here, I mean not that no one has had self-serve models before, which they obviously have, but "new" in the sense that restaurants that would before have never considered such models are now adopting them).

sonnyblarney 8y ago
Minimum wage laws are absolutely necessary otherwise they'd pay $1 an hour and you'd see the '25 cent store' instead of the dollar store and people living in huts. But - as you rightly point out - a 33% jump in a short period is stupid. It would be nice if min wage were tied to some kind of economic indicator. But good comment.
- austenallred 8y ago
  You really think people would work for $1/hr in San Francisco?
  - sonnyblarney 8y ago
    People will ultimately work for their minimum survivable wage and economies will adjust to support ever decreasing wages among a subset of the population. People live in favelas in Rio. They live in tiny, one room flats in Hong Kong without plumbing in deplorable conditions. They live in 'work camps' in Dubai without any rights at all. And they work hard. Of course 'people in SF' would do the same. Don't think you're exempt - you would do the same if your skills were commoditized and you had no recourse. Your salary has nothing to do with how skilled you are, how hard you work, or how much value you can provide. It's entirely a function of 'power' relative to your employer. So even if you are a full-on genius, and can speak 10 languages, code in 10 languages and have a PhD in AI - you will earn next to nothing if those things are common and your skills are a commodity. In any given economy, a good chunk of people have commodity skills, i.e. manual labour or not much more. This bar is getting higher. Way back before minimum wage we (and without knowing you, there's a very high chance this applies to your ancestors as well) survived on next to nothing - and probably worked hard. Land owners, mine owners, factory owners would leverage and leverage and leverage to make sure the workers had 'only enough barely survive' - after all - every additional penny to workers would have been simply charity, in the raw economic sense. So - all modern and civilized economies have 'minimum wage' and/or collective bargaining for some groups. Minimum wage and unions were essential to bringing civilizations out of the dark ages. Some caveats to that would be a very high social security system with gracious benefits - i.e. the government gives you a 'job' which is 'not doing anything' which would set a floor for wages obviously. Or an economy in which there were very few people with commodity skills and 'everyone' was somehow empowered a little bit against everyone else (like 'equality and diversity in skill set' kind of thing), which is not very common. Because of the imbalance of power - we have no choice but to have minimum wage, or something like it - and it's also generally why we don't need such things in areas wherein people are not commoditized. The really interesting paradox is that the 'minimum survivable wage' for any individual is not the profit maximizing wage for employers in the long run! In the 'short run' employers save money / increase profits by cutting wages. But - those people can then 'spend less' and it hurts the economy, which hurts business! Henry Ford realized this pragmatically. He realized that if he wanted to sell a 'model T' to 'everyone' and his own factory workers could literally not afford one, then few people would be able to buy his cars, ergo, his business model was not going to work! So he paid his employees more than the short-run minimum requirement. This requires a fairly enlightened strategy on the part of employers - moreover - it requires kind of a common buy-in by most employers, which is like a strategy game: > If all employers pay subsistence wages - then they all kind of lose because nobody can afford to buy the crap they make in their factories. > If all employers pay some difficult-to-calculate wage higher than subsistence, like a minimum wage ... well, everyone is better off. > But - if most employers pay this 'decent wage' but some employers 'cheat' and pay much less, well, those 'cheating' employers can benefit quite a lot, and get rich of a system by sneaking off surpluses from a system they are not paying into. Kind of like 'not paying taxes'. But of course - every employer is under constant pressure to keep wages down - and they have no formal pressure, like a taxation agency or regulatory body, to keep them from doing otherwise. So of course we're going to have low wages without regulation. The minimum wage is actually economically rational from a practical, surplus sharing perspective (you could say 'socialist' or 'communitarian'), but even if you want to look at it more from a 'free market' perspective, minimum wage could be argued to be the wage at which the economy (including employers and shareholders) maximally benefit in the long run ... but it's just simply impossible to get 'all business' to intelligently collude and set this wage because they are all competing more or less on short-run business cycles, and have great incentive to cheat. Hence regulation. As for SF, especially the increasing ratio of undocumented workers who have no access to social services, yes, they will work for next to nothing - the minimum that will allow them to survive. SF would form favelas just like in Brazil, and there's absolutely no economic reason why it wouldn't - only regulatory policies etc. keep it from that i.e. wages, rights, services, etc. etc... FYI - this partly why having a lot of undocumented folks in the economy is a really bad idea. For a host of other reasons well. If you're going to have people participating in the economy - give them full rights. But that kind of means 'open borders' - which you can't have ... (ie can't have open borders and social welfare at the same time). A much better solution would be to have 'reasonably effective border control', close unprofitable factories/businesses in the US and move them to Mexico so that entire communities of regular people can aspire to a higher standard of living, safety, civility etc.. That's a much better win for everyone.

sonnyblarney 8y ago

Minimum wage laws are absolutely necessary otherwise they'd pay $1 an hour and you'd see the '25 cent store' instead of the dollar store and people living in huts. But - as you rightly point out - a 33% jump in a short period is stupid. It would be nice if min wage were tied to some kind of economic indicator. But good comment.

austenallred 8y ago
You really think people would work for $1/hr in San Francisco?
- sonnyblarney 8y ago
  People will ultimately work for their minimum survivable wage and economies will adjust to support ever decreasing wages among a subset of the population. People live in favelas in Rio. They live in tiny, one room flats in Hong Kong without plumbing in deplorable conditions. They live in 'work camps' in Dubai without any rights at all. And they work hard. Of course 'people in SF' would do the same. Don't think you're exempt - you would do the same if your skills were commoditized and you had no recourse. Your salary has nothing to do with how skilled you are, how hard you work, or how much value you can provide. It's entirely a function of 'power' relative to your employer. So even if you are a full-on genius, and can speak 10 languages, code in 10 languages and have a PhD in AI - you will earn next to nothing if those things are common and your skills are a commodity. In any given economy, a good chunk of people have commodity skills, i.e. manual labour or not much more. This bar is getting higher. Way back before minimum wage we (and without knowing you, there's a very high chance this applies to your ancestors as well) survived on next to nothing - and probably worked hard. Land owners, mine owners, factory owners would leverage and leverage and leverage to make sure the workers had 'only enough barely survive' - after all - every additional penny to workers would have been simply charity, in the raw economic sense. So - all modern and civilized economies have 'minimum wage' and/or collective bargaining for some groups. Minimum wage and unions were essential to bringing civilizations out of the dark ages. Some caveats to that would be a very high social security system with gracious benefits - i.e. the government gives you a 'job' which is 'not doing anything' which would set a floor for wages obviously. Or an economy in which there were very few people with commodity skills and 'everyone' was somehow empowered a little bit against everyone else (like 'equality and diversity in skill set' kind of thing), which is not very common. Because of the imbalance of power - we have no choice but to have minimum wage, or something like it - and it's also generally why we don't need such things in areas wherein people are not commoditized. The really interesting paradox is that the 'minimum survivable wage' for any individual is not the profit maximizing wage for employers in the long run! In the 'short run' employers save money / increase profits by cutting wages. But - those people can then 'spend less' and it hurts the economy, which hurts business! Henry Ford realized this pragmatically. He realized that if he wanted to sell a 'model T' to 'everyone' and his own factory workers could literally not afford one, then few people would be able to buy his cars, ergo, his business model was not going to work! So he paid his employees more than the short-run minimum requirement. This requires a fairly enlightened strategy on the part of employers - moreover - it requires kind of a common buy-in by most employers, which is like a strategy game: > If all employers pay subsistence wages - then they all kind of lose because nobody can afford to buy the crap they make in their factories. > If all employers pay some difficult-to-calculate wage higher than subsistence, like a minimum wage ... well, everyone is better off. > But - if most employers pay this 'decent wage' but some employers 'cheat' and pay much less, well, those 'cheating' employers can benefit quite a lot, and get rich of a system by sneaking off surpluses from a system they are not paying into. Kind of like 'not paying taxes'. But of course - every employer is under constant pressure to keep wages down - and they have no formal pressure, like a taxation agency or regulatory body, to keep them from doing otherwise. So of course we're going to have low wages without regulation. The minimum wage is actually economically rational from a practical, surplus sharing perspective (you could say 'socialist' or 'communitarian'), but even if you want to look at it more from a 'free market' perspective, minimum wage could be argued to be the wage at which the economy (including employers and shareholders) maximally benefit in the long run ... but it's just simply impossible to get 'all business' to intelligently collude and set this wage because they are all competing more or less on short-run business cycles, and have great incentive to cheat. Hence regulation. As for SF, especially the increasing ratio of undocumented workers who have no access to social services, yes, they will work for next to nothing - the minimum that will allow them to survive. SF would form favelas just like in Brazil, and there's absolutely no economic reason why it wouldn't - only regulatory policies etc. keep it from that i.e. wages, rights, services, etc. etc... FYI - this partly why having a lot of undocumented folks in the economy is a really bad idea. For a host of other reasons well. If you're going to have people participating in the economy - give them full rights. But that kind of means 'open borders' - which you can't have ... (ie can't have open borders and social welfare at the same time). A much better solution would be to have 'reasonably effective border control', close unprofitable factories/businesses in the US and move them to Mexico so that entire communities of regular people can aspire to a higher standard of living, safety, civility etc.. That's a much better win for everyone.