Why not raise the minimum wage with local ordinances?

[Max_S]

My admissions in posts #10 and #37 notwithstanding, I hate to let all these questions go to waste. While my notion of a minimum wage that follows the employee may be unrealistic, I can still develop the theory.

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It sounds like most of your commerce with opinions on the minimum wage is coming from Main St. and two non-unionized companies. Main St. might be a mixed bag depending on how many stores require hired help as opposed to family for staff, but it’s probably going to lean against a hike. The two companies you say are against.

It’s all going to come down to where the residents work - residents vote and the only way an initiative like this is getting passed is after the next election.

@Dr_Paprika

Housing prices are no longer stable. Is this a temporary effect or long-term? If a change is made now, how should it be re-evaluated?

Temporary or long term instability, I can’t answer that question. Whatever you do, do not make the change without a significant heads-up, at least three months and preferably more if the change is significant. Businesses need time to figure out what they will do, and the last thing you want is to force everyone to take out loans to cover payroll.

I imagine cost of living calculations should be re-evaluated on at least an annual basis if not more often. Your local property tax appraiser will be able to help with most property value estimates. The Census does its ACS survey just about every year. Unless everyone is happy with the minimum wage, local interest groups will do their own re-evaluating to some extent, it doesn’t necessarily have to be a function of government.

@Dr_Paprika

What negotiating power does the town have to enforce bigger wages on the big businesses?

The town does not have to ‘negotiate’ with businesses to enforce its lawful ordinances, assuming such an ordinance is enacted. Civil courts would provide an avenue for pursuing businesses that flout wage laws.

@Dr_Paprika

With Covid reducing profits and businesses closing, how would increasing wages be received by the local business community?

It is inevitable that some businesses would cease operations, at least in your municipality. Increased wages have to be offset by something, be it decreased profits, increased prices, increased sales, decreased expenses, or likely for many of your small and local businesses, short term loans while they try to figure things out. For the most part I predict your business community will not want to raise wages.

But it could go the other way if things are bad enough. If business owners are acutely aware of the struggle to survive - if friends and family suffer persistent hardship due to a low minimum wage, they could come out in favor of a hike for social and not business reasons. They might be willing to raise prices or cut profits if they believe the social benefits outweigh the economic costs.

The unionized businesses, as you noted, will not be as severely affected - they may not be affected at all. The university in particular may come out in favor of a wage hike given the dispensation of its students and alumnus.

@Dr_Paprika

Assume the town increases minimum wages by $2 an hour. Who will enforce it? Will this be re-evaluated? How? How is the number justified? What would be the likely reactions if the various groups?

As mentioned before enforcement would ultimately be through civil court. Potential infractions could be discovered through either employee reporting or discrepancies in filings. For the ordinance to follow an employee who works outside of your town, the state would at the very least have to authorize municipal minimum wage ordinances to apply to employers statewide.

As above I believe the minimum wage should be re-evaluated regularly by the various people dissatisfied with its current rate. It doesn’t necessarily have to follow a formula and the government does not necessarily have to do the re-evaluations.

I can’t say whether any particular company or industry in your town is able to absorb a $2 minimum wage increase, except as above, the unionized industries. There could conceivably be a backlash if too many businesses shutter or if unemployment skyrockets - if the wage hike was a narrow decision that backlash could turn into a reversal, but I think that is not likely.

@Dr_Paprika

Would much of the increased wage go into an increase in local prices, given supply is already less than demand for housing? Would it help business thrive? Would the mayor get re-elected? What movement would there be to the neighbouring county or town? Would business relocate? Will they even stay open?

I do think local prices will rise, but not necessarily in the housing sector because housing doesn’t rely on minimum wage jobs. Some businesses may try to offload the entire increased wage onto their customers, and I think for the most part this will result in customers choosing a competitor - possibly in a different municipality. I think a hike would definitely hurt a lot of businesses in the short term. If lots of commerce is built on sub-living wages it will hurt a lot, and it could possibly wreck the local economy if said businesses do not or can not adapt. I definitely expect some businesses to close or move.

Businesses could cut back on hours or numbers of employees, and these kinds of changes - if widespread - could cause an exodus of residents out of your town.

Increasing the minimum wage is a drastic measure. It will hurt your metrics as a mayor by almost every statistic measurable.

@Dr_Paprika

The councilmen are divided on the issue based on their background and what part of town they live in. They complain the limited time they have to devote to town issues is being taken over by this one.

If the council is heavily divided it is not advisable to go ahead with the hike. This sort of change requires broad popular support after careful deliberation. It has to be acknowledged that the status quo is unacceptable. Things will get worse before they get better.

And better does not necessarily mean returning to any former glory. The whole point of increasing the minimum wage is that existing business models are unacceptable because sub-living wages are… not enough to live on. If the former glory days under Trump/Bush II/Clinton were unsustainable, then there is no going back.

@Dr_Paprika

The neighbouring city offers a new incentive for the upset bigger companies to move. This would lower local employment, increase commutes and lower the tax base. How should the mayor react?

Raising the minimum wage is probably incentive enough for bigger companies to move, to lower local employment, increase commutes, and lower the tax base. These need to be known consequences of raising the wage before you put that ordinance into effect. If your people aren’t good with that, don’t pass the law.

~Max

[Max_S]

@DeadTreasSecretaries

If the gap gets big enough and there is doubt that the law would be enforced, some businesses are going to call the town’s bluff. It’s really not out of character for businesses to break rules when they think the benefits outweigh the risk of consequences.

That could be a problem, and there really isn’t any solution because it is de-facto capture of the democratic process at the local level.

~Max

[Max_S]

@TheGunIsMightierThanThePen

[…] every company in the state will try to poach residents from City B (assuming City B has the lowest wages in the state) … but then the number of jobs will dwarf the number of residents of City B, and after the supply of City B residents has been exhausted, companies will move on to the next lowest minimum wage city, and so on and so forth.

Clever people will try to model how all the jobs will fill up each city-sized “bucket”, and try to game the system by moving to a city that is the perfect intersection of having the “highest lowest” minimum wage, yet at the same time having a plentiful supply of jobs.

This is my thinking, exactly.

Keep in mind that as more people move to city B, you will see increased demand for goods and services there.

~Max

[k9bfriender]

So, I can go ahead and toss any applicants from city A in my wastebin.

[Deeg]

What about a MW based on local property values or rents? Market Place on NPR did a segment on a tailored national MW last week. It is of course really complicated; some oppose it because it could exasperate racial wage discrepancies, which is a concern. But wouldn’t it be possible that businesses would move to lower-rent areas to lower costs which would eventually raise property values?

[Dr_Paprika]

My example was hypothetical, of course, but is an amalgam of current situations and real places.

My Canadian province increased minimum wages to $15/h a few years ago. The business community largely did not support this. The main effect AFAIK has been to raise the price of fast food and restaurant meals.

The latter is of concern since many restaurants will not survive Covid. Fast food sales seem to be doing okay. Colleges are charging more for what is largely perceived to be substandard video teaching. Home prices keep rising as the bigger cities become both less desirable and more unaffordable.

I’m good with minimum wages. I do not think local government has the ability in practice to easily impose its will on bigger businesses without consequences. There are other things they can do which might help: laws about dividing tips, or not permitting tips in lieu of wages might help in some industries.

[Max_S]

@k9bfriender

So, I can go ahead and toss any applicants from city A in my wastebin.

I certainly wouldn’t fault you.

~Max

[Max_S]

@Deeg

What about a MW based on local property values or rents?

Well, yeah. I used property value as the sole variable in my cost of living calculations. Then I based my minimum wage on that. (Post #9, details spoiler).

~Max

[Max_S]

Alberta’s wage floor was from $10.20 to $15 over three years ($1.60 increase per year). If you go with increments instead of a big jump you run into ‘stickyness’. Employers will drop all their employees at the first instant if the wage is going from $8 to $15 overnight. If it’s only a few cents at a time there’s a good chance the employees will stay on. At a ~15% wage hike it’s a tough decision - see also the NPR story above about a 25% minimum wage hike on one half of a mall. And consumers won’t abandon ship if prices go up just a little, unless your business is something highly unsticky like a gasoline pump.

~Max

[k9bfriender]

The thing is, there are reasons why I may want to locate my business in a place with a higher MW. If nothing else, if it has a higher MW, then the residents have more purchasing power. It may have better infrastructure and services. It may have better amenities for me to go out to lunch.

There is no reason why I would want to hire someone that I have to pay a higher wage solely based on where they live. Now, it may be the case that I pay more than City A’s MW anyway, so it doesn’t matter, but then that MW isn’t really doing any good.

@Max_S

Well, yeah. I used property value as the sole variable in my cost of living calculations. Then I based my minimum wage on that.

People can commute. It’s pretty common that people, especially those on the lower end of the pay spectrum live in a place that has a lower cost of living than where they work. They work where the money is, and they live where it’s cheaper.

[Max_S]

@k9bfriender

The thing is, there are reasons why I may want to locate my business in a place with a higher MW. If nothing else, if it has a higher MW, then the residents have more purchasing power. It may have better infrastructure and services. It may have better amenities for me to go out to lunch.

Or, it may be where you live.

@k9bfriender

There is no reason why I would want to hire someone that I have to pay a higher wage solely based on where they live.

I’m fine with this. All I’m doing by setting the minimum wage at each employee’s living wage (based on where they live) is preventing a situation where employees make less than a living wage. The reality is that a living wage can vary by county or municipality.

@k9bfriender

People can commute.

If the municipality is facing high local unemployment due to lots of commuters taking local jobs, one option is a commuter tax. Otherwise, what’s the problem?

~Max

[k9bfriender]

@Max_S

Or, it may be where you live.

Huwanow?

@Max_S

I’m fine with this. All I’m doing by setting the minimum wage at each employee’s living wage (based on where they live) is preventing a situation where employees make less than a living wage. The reality is that a living wage can vary by county or municipality.

So, do we set MW even higher for the Hamptons?

There are places that you only live after you have made it rich. What a MW is supposed to do is to ensure that you are able to live somewhere that is within commuting distance of a place where you can find gainful employment.

@Max_S

If the municipality is facing high local unemployment due to lots of commuters taking local jobs, one option is a commuter tax.

I think that, as we discussed, most already do impose a commuter tax. There is no problem, it’s that your solution is in search of a problem.

Why would a wealthy community be facing high unemployment because outsiders are taking MW jobs? The whole point is that the people who live in that community have no need or desire for them.

[DMC]

@Max_S

All I’m doing by setting the minimum wage at each employee’s living wage (based on where they live) is preventing a situation where employees make less than a living wage.

Excellent! I think everyone would agree that we need to prevent situations where employees make less than a living wage. Let’s start by raising the floor to a level that will guarantee a living wage in the cheapest of locations and we can start tweaking high cost of living/working areas from there. $15 an hour should do the trick for now, as even the cheapest and poorest places in America require more $13 an hour for a single with no kids to make a living wage, and there aren’t many jobs in those areas anyway. We can tie future floor increases to something such as median hourly wage increases to keep it at a living wage level going forward.

You on board with the new floor?

[Max_S]

@k9bfriender

Huwanow?

You wrote “there are reasons why I may want to locate my business in a place with a higher MW”. I was just saying one reason may be your desire to locate your new business in the same city that you already live in.

@k9bfriender

So, do we set MW even higher for the Hamptons?

Yes.

@k9bfriender

What a MW is supposed to do is to ensure that you are able to live somewhere that is within commuting distance of a place where you can find gainful employment.

If the minimum wage follows the employee based on residence, it serves a slightly different purpose. Instead of ensuring you can live somewhere within commuting distance, it ensures you can live in the municipality that you actually live in.

The problem with local minimum wage ordinances based on the vague notion of ‘somewhere within commuting distance’ is, none of those commuters have any say in the minimum wage where they work.

@k9bfriender

Why would a wealthy community be facing high unemployment because outsiders are taking MW jobs? The whole point is that the people who live in that community have no need or desire for them.

Assuming a local minimum wage that matches the living wage for commuters but not urbanites, and assuming no commuter tax: a business owner knows local residents can’t survive on minimum wage because the cost of living in the city is higher than the city’s minimum wage. So local residents won’t be happy employees in a minimum wage job. Commuters can make a decent living off the minimum wage. Owner hires the commuters instead of local residents. As most low-end jobs across the city are given to commuters, the city faces unemployment and possibly homelessness.

~Max

[Max_S]

@DMC

even the cheapest and poorest places in America require more $13 an hour for a single with no kids to make a living wage

I would think the number is significantly less. Just off the top of my head,

$4.00/hr goes to rent. ($693.20/mo or ~$22.79/day)
$3.75/hr goes to food. (~$650/mo or ~$21.36/day)
$0.87/mo goes to utilities. (~$150/mo)
$0.06/hr goes to health insurance. (~$10/mo)

gets me $8.68 to cover the big expenses. $10 is certainly a living wage where I live, coincidentally it will be the minimum wage later this year.

~Max

[k9bfriender]

@Max_S

You wrote “there are reasons why I may want to locate my business in a place with a higher MW”. I was just saying one reason may be your desire to locate your new business in the same city that you already live in.

Nah, I live in a fairly cheap area, and work in a pretty wealthy one. Most of the cars that people drive around here are worth more than my house.

@Max_S

Yes.

Does that include if they move during employment? I can force my employer to give me a raise by moving somewhere with a higher cost of living.

@Max_S

If the minimum wage follows the employee based on residence, it serves a slightly different purpose. Instead of ensuring you can live somewhere within commuting distance, it ensures you can live in the municipality that you actually live in.

I don’t know that that is something that needs to be addressed. I’d much rather live somewhere cheap, and work somewhere with a higher MW, than have to live somewhere expensive to get that higher MW.

@Max_S

The problem with local minimum wage ordinances based on the vague notion of ‘somewhere within commuting distance’ is, none of those commuters have any say in the minimum wage where they work.

Except of course, having a say in where they work.

@Max_S

Assuming a local minimum wage that matches the living wage for commuters but not urbanites, and assuming no commuter tax:

I don’t see why you would make either of those assumptions. One would only exist if your idea somehow got made into reality, and I don’t see why there wouldn’t be a tax on where you work, as there is. Is that something else that you would change? That you no longer pay income tax if you work where you live?

@Max_S

So local residents won’t be happy employees in a minimum wage job. Commuters can make a decent living off the minimum wage. Owner hires the commuters instead of local residents. As most low-end jobs across the city are given to commuters, the city faces unemployment and possibly homelessness.

Well, yeah, that’s another reason why tying MW to where you live rather than where you work is a terrible idea.

We’ve gone over quite a few cons to this idea, did you actually have any pros, and argument that gives this idea merit?

It’s an interesting idea, and is worth thinking about, but after you think about it and you see all the flaws, it’s time to move on, I think.

[DMC]

Then you disagree with the vast majority of research as to what constitutes a living wage or why the minimum is way too low. Using the typical rent as 30% of income calculation, your rent number gets me to a minimum wage of $13.53. The most telling statistic in this entire brouhaha is that 28% of those who make over 100K think minimum wage is enough to live on. 11% of those making less believe the same. It should also be noted that 83% of those surveyed think it is too low.

My method of solving the problem requires a couple of senators who aren’t scrooges. Your method requires 89,000 municipalities to come up with their own complex systems. Since your entire goal was simplification, why make it so damned hard, unless there is actually a different goal?

Let’s be honest here, I’m not getting a “raise the minimum wage” vibe from you at all. What would the end result look like in your world, monetarily and simplified?

[k9bfriender]

@Max_S

$4.00/hr goes to rent. ($693.20/mo or ~$22.79/day)

Maybe, if you have a roommate. But even then, that’s stretching it a bit. Cheapest 2 bed around here is a bit over 1200 a month, and it’s in a sketchy part of town.

@Max_S

$3.75/hr goes to food. (~$650/mo or ~$21.36/day)

I can make that work, but I don’t eat out. If I lived in a cheap apartment, not near a store, and I see that you didn’t budget for a car or transportation, then cooking is problematic.

@Max_S

$0.87/mo goes to utilities. (~$150/mo)

Maybe covers electricity. Probably not internet, probably not phone, even a cheap one.

@Max_S

$0.06/hr goes to health insurance. (~$10/mo)

Ha. Haha. HAHAHAHAHAHA!

$10 a month for health insurance. Surely you kid.

@Max_S

gets me $8.68 to cover the big expenses.

The big expenses? Not including car or transportation, any maintenance on it or on your home, not including things like doctor or dental visits. And putting health insurance at $10 a month.

This also assumes that you work 173 hours a month. Which would be 40 hours a week in some months, but not in others. Not all employers work you 40 exactly.

[Max_S]

@k9bfriender

Does that include if they move during employment? I can force my employer to give me a raise by moving somewhere with a higher cost of living.

I hadn’t thought about that. Moving would force your employer to either change your pay or let you go.

@k9bfriender

I’d much rather live somewhere cheap, and work somewhere with a higher MW, than have to live somewhere expensive to get that higher MW.

The minimum wage isn’t designed to maximize personal income, it’s designed to make sure employees make enough to live on. You as a worker shouldn’t be complaining if you can’t shop around for the largest gap between the minimum wage and the living wage, in an effort to game the system. You should be worried about employability wherever you are thinking about moving to. The minimum wage would ideally guarantee that if you are working, you will be okay.

@k9bfriender

Except of course, having a say in where they work.

Of course.

@k9bfriender

@Max_S

Assuming a local minimum wage that matches the living wage for commuters but not urbanites, and assuming no commuter tax:

I don’t see why you would make either of those assumptions.

The former assumption was based on your suggestion, “What a MW is supposed to do is to ensure that you are able to live somewhere that is within commuting distance of a place where you can find gainful employment.” The latter assumption was necessary for my example.

Not all municipalities impose local income taxes. Only seventeen states have them.

Furthermore I happen to live in one of the seven states without state income tax. The only income tax in Florida is at the federal level.

@k9bfriender

Well, yeah, that’s another reason why tying MW to where you live rather than where you work is a terrible idea.

To clarify, this thread of replies leading back to posts #45 and #48 do not involve a minimum wage based on residency. The example you quoted from me incorporates a local minimum wage ordinance by the city that applies to all wages paid by businesses operating in that city, and that city only.

~Max

[Max_S]

@DMC

Then you disagree with the vast majority of research as to what constitutes a living wage or why the minimum is way too low.

The MIT paper pegs broadband at $60/mo which translates to about $0.35/hr in the living wage. MIT also includes a smartphone prorated over three years with unlimited talk and text and between 10-15 GB of data, I think it comes out to about $48/mo for a cell phone (+$0.27/hr in the living wage). I wouldn’t include broadband or cellular data plans because I think these are not essential (unlike a prepaid voice/SMS plan). We can start a different topic if you want to debate that point. Assuming I can shave eight or nine dollars off the monthly phone bill, drop the broadband, there’s about $0.40 of the difference.

MIT’s living wage health insurance component (based on employee contributions to employer-sponsored plans, from this table) comes out to $128.58/mo in my region (+$0.75/hr in living wage). I had used $10/mo ($0.06/hr) based on individual coverage in the marketplace, as advertised in recent healthcare.gov commercials. So there is another $0.50 difference.

They also include about $426/mo in transportation costs for my region (+$2.45/hr in living wage). That is also based on BLS Consumer Expenditure reports of transportation costs by household size, adjusted for regional variances. I don’t think this is necessary. Owning a car may be necessary in many places or for various jobs but it isn’t necessary here for most minimum wage jobs I can think of. People making minimum wage can (and around here often do) use either public transportation, or a bike, or walk, or some combination. A bike can easily be prorated to under $0.20/mo, and here unlimited bus fare comes at $30/mo. So in transportation I find a difference of about $2.27/hr.

$2.27+$0.5+$0.4=$3.17, which is more than the $3 difference between $13 and $10.

@DMC

My method of solving the problem requires a couple of senators who aren’t scrooges. Your method requires 89,000 municipalities to come up with their own complex systems. Since your entire goal was simplification, why make it so damned hard, unless there is actually a different goal?

The goal is not simplification. It would be immensly more simple to have a single national minimum wage at $13.10 or $15. As stated in the OP, the benefit of local minimum wage ordinances is that it would be easier to pass local ordinances than national legislation.

~Max