CalWatch: California will start the new year with a record-setting wage floor.“On Jan. 1 California will have the highest minimum wage in the country,” as Capital Public Radio noted. “California workers earning minimum wage will get an extra dollar an hour at the beginning of the year. The state raised the rate from $8 to $9 in July 2014. Soon it will be $10 an hour.” Legislation hiking the wage was sponsored by Assemblyman Luis Alejo, D-Salinas. According to Alejo, the increase would result in about $2,000 more net dollars over a year’s time working 40 hours a week at the new minimum wage.
Will it or won't it?
I find the sequence interesting, this is happening at the end of a long and weak expansion. And place. It is happening in the largest jurisdiction in North America. And the history. It is happening in the 7th most insolvent state, with the highest per capita expansion in medicaid. It is happening just after pension returns have been down graded, and the market has yielded a flat gain in price. And the frackers have run out of steam.
If GDP Now is showing a 1.5% growth, then that is California's growth, it is the heavy weight in the mean. Cities and counties are tight, they arem not hiring, and now they have another wage hike. There are three contributors to the wage costs, pension rising with a flat market, health expenses inflationary due to Obamacare, and now minimum wage hikes. Retail taxes likely down by 10% YoY. , Silicon Valley geeks won't be paying large capital gains. The public sector is no longer hiring, and may start lay offs.
Is this a perfect storm?
Yes, but no random event. Economic agents, mostly i government, calculate their run time, and they optimally leave the bills to the next fool in the sequence. The cycle is so predictable that its cost enters the accounting system, it become the transaction cost of government money.
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