The minimum wage, which sets the bar for the lowest hourly wages, is suddenly in the spotlight. From the president to the governor and the guy temporarily in charge of City Hall, top Democratic politicians are calling for boosting the minimum, in some cases to the max.
President Obama wants to boost the national minimum wage from $7.25 to $10.10 per hour. California’s on track to raise its bar to $9 and then $10. And here in the nation’s eighth-largest city, interim Mayor Todd Gloria has hinted that $14.50 per hour is a nice number.
Critics of boosting the minimum wage say an increase is a ticket to higher costs and more unemployment.
Kevin Faulconer, the GOP’s candidate in the mayoral race, opposes Gloria’s proposal and “sat quietly, with no hint of a smile or even a polite clap,” when Gloria brought it up during last week’s State of the City address. And former Mayor Jerry Sanders is warning of the potential for stunted growth.
Here’s a guide to what all those numbers mean, and what factors will come in to play as the debate continues.
What’s the minimum wage now?
California’s minimum wage is $8 now and will increase to $9 on July 1 and then $10 in 2016. Unlike a small number of other cities, San Diego does not have its own minimum wage. It’s $8 here, just like in most of the rest of the state.
Nationally, the minimum wage is $7.25 per hour — enough, as The Atlantic notes, for a Chipotle burrito (but no guacamole) if no taxes are withheld. Employers nationwide can’t pay less than that.
According to the National Conference of State Legislatures, 21 states (including California) and Washington D.C. require employers to pay a minimum wage that’s higher than the federal minimum.
In Oregon, for example, the minimum wage is $9.10, and it’s $9.32 (the highest of all) in Washington state. When July comes, California’s minimum wage will be the third-highest in the country behind the two other West Coast states.
How come San Diego can get to have its own minimum wage?
Some states, such as New Mexico and California, allow cities to set their own minimum wages. San Francisco’s is the highest in the nation at $10.74 (although a city in Washington state is in a bid to push S.F. out of the top spot — more on that in a moment). As of last year, San Jose set its minimum wage at $10; it’s now at $10.10 thanks to inflation.
In San Jose, the minimum wage doesn’t just affect employers in the city. “Employers that maintain a facility in San Jose or are subject to the city’s business tax are required to comply with the ordinance. Employees who perform at least two hours or more of work per week in San Jose, even if their employers are based outside the city limits, are covered by the minimum wage ordinance,” the Mercury News reports.
At least one other California city may join San Francisco and San Jose. Just up the coast from us, Los Angeles is poised to consider boosting the minimum wage for one group — hotel workers at larger hotels — to a whopping $15.37 an hour.
“The $15.37 exact amount is meant to align with what Los Angeles International Airport workers make (before a recent raise) thanks to a 1999 ‘living wage’ law,” Huffington Post reports. The online publication says the minimum wage has a good chance of passing.
How high is the cost of living here?
The cost of living, many will argue, is too damn high, to borrow a phrase. One recent report named San Diego the ninth most expensive place to live in the country, with costs almost a third over the national average. Our mortgages and rents are especially high.
Gloria argued that’s precisely why San Diegans need more than $8 an hour: “Although California’s minimum wage is scheduled to increase in 2016, that translates into an annual salary of less than $21,000, which is simply not enough in a city with a high a cost of living like ours,” he said in the State of the City address.
What’s this I hear about some town called SeaTac?
If you’ve flown to Seattle, you’ve probably been to SeaTac (short for Seattle-Tacoma), a city of 27,000 that’s home to the region’s airport. By a tiny margin, voters in November approved a minimum wage of $15 an hour, by far the highest in the nation.
But a judge’s ruling may prevent thousands of workers at the airport from being affected. The dispute hinges over whether the airport must follow city laws or is a separate jurisdiction because it’s run by the region’s port.
What happens if a higher minimum wage passes?
On the federal level, an estimated 11 percent of employees would get a boost in pay.
But there’s a complication: It seems that many employers ignore the minimum wage and pay their workers less. The public radio station KQED reports that San Francisco alone — a city whose population is significantly smaller than San Diego’s — could be home to 39,000 workers who are illegally paid less than the $10.74 minimum.
What’s with that unusual state ballot measure?
If you’ve been in California for a while, you may remember Ron Unz, the wealthy libertarian businessman who made a high profile but failed bid for governor in 1994. Now, he’s pushing a state ballot measure to boost the minimum wage to $12 an hour because that “would solve many of our economic problems at a single stroke.”
In a New York Times commentary, Unz says that a minimum wage will save taxpayers billions of dollars by boosting incomes so many Americans will no longer need services like food stamps.
“Businesses should pay their own employees rather than quietly shifting the burden to government programs and the American taxpayer,” he writes.
Unz’s critics suspect his motives are not pure. “He believes a bill that raises wages will help drive out immigrant workers,” writes columnist Amy B. Dean for Al Jazeera America. “Here’s how that works: Unz takes as gospel the traditional conservative belief that raising the minimum wage will destroy jobs.”
What do supporters of a higher minimum wage say?
Increasing the minimum wage “will be good for our economy. It will be good for our families,” President Obama declared last year. The idea is that increasing the minimum pay will put more money in the pockets of poor people.
Supporters are dreaming big. “Wages in the $22- to $25-an hour range will be needed to create good, family-supporting jobs — comparable to what manufacturing jobs paid back in the day — in many of America’s largest cities,” writes columnist Richard Florida in The Atlantic.
What do opponents say?
Critics say higher wages will lead to fewer jobs. “No one argues that increasing the minimum wage increases the number of unemployed workers who find jobs. In the end, the trade-off is clear. People who keep their jobs get more money; those who lose their jobs, or fail to get new ones, suffer,” write a pair of researchers in an L.A. Times commentary
They point to a report that suggests only 11 percent of the poor would benefit from a minimum wage hike since many poor people don’t work or are young and may live with their parents.
So what’s the truth about the potential impact?
The Atlantic puts it this way: “Researchers have been fighting over this question for a century — one of the first major government studies on it, involving Oregon’s early minimum-wage law, was conducted in 1915 — and the answer, I hate to tell you, is still murky.”
Economists, the story says, are divided, as a recent survey made clear.
There’s another complication: What happens if higher wages translate to higher prices? Things cost more — including that Chipotle burrito (no guac) — and everybody ends up with much less purchasing power, especially when it comes to industries that rely on low-paid workers like fast food and gas stations.
And, as Forbes columnist Susan Adams wonders, if the employers forced to raise prices “are McDonald’s or Walmart, that could again burden disadvantaged families, since they are the ones who eat and shop there.”
So will prices skyrocket? Probably not, The Atlantic says. According to one researcher’s estimates, a minimum wage hike of 10 percent would have a tiny effect on prices overall, although fast food costs would jump by 4 percent.
How does the ‘Living Wage’ fit into all this?
Under its “Living Wage” ordinance, the city of San Diego requires contractors who work for the city at a cost of more than $25,000 to provide certain minimum levels of pay and benefits to their employees. Currently, employers must pay at least $11.65 plus $2.34 worth of health benefits per hour or $13.99 per hour without benefits.
A divided City Council passed the law in 2005 after a mammoth debate. How’d things go? “Businesses not dying in spite of living wage,” says a headline in the U-T from 2010. The story said “it seems clear that the worst fears of the critics haven’t come true.”
What about alternative ways to help the poor?
Conservatives and even a few liberals are intrigued by the idea of increasing the Earned Income Tax Credit, which lowers taxes for poor people. “The credit goes only to poor families, and not to relatively affluent college students, spouses or retirees,” Forbes’s Adams notes.
So a young single mother making minimum wage would get a boost but not a college student whose parents are paying her way and takes a fast-food job for spending money.
Still, as Adams notes, the credit isn’t a perfect solution: “I suspect that many minimum-wage workers, even though they’re entitled to spread out the income tax credit during the year, have a tough time figuring out how to set that up and can’t afford to pay an accountant to do it for them.”
So what’s next?
Gloria is pushing for a measure on the November ballot. “No one who works full time in this country should live in poverty,” he writes in a U-T commentary, using almost identical words as President Obama in his State of the Union speech last year.
Obama’s not likely to get anywhere because of opposition in Congress. But states and cities are picking up at least some of the slack.