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$15/Hour Illinois minimum wage
Illinois is enacting a statewide minimum wage of $15 per hour by 2025. Have any experienced landlords had this happen in their state or city and what have been the effect on rents? Drastic increases or gradual increases with normal inflation of 2% yearly?
@Matt Groth Are those your real numbers? Because according to your numbers, you are paying out almost all your incoming dollars.
@Wesley W. What am I getting for $100 an hour? Do you mean landscapers? Because you made it sound like grass cutting is $100 an hour. If that is true, I am moving to Capital Region, NY to mow lawns.
@Chris Szepessy I understand what you're saying. I just think you're making it a bit simplistic, and I disagree with some of your assumptions. Hopefully people understand most of my point is, minimum wage by law is absolutely needed in this country. And people arguing "well why not $50 an hour" is a straw man argument. Nobody is asking for that. They are asking for a "livable wage". And if you think $7.25 is good, then this country will continue to be separated by vast wealth differences.
I know small business owners probably work 100 hours a week or more and take on all the risk. And I still say if they cannot make their business work while paying a livable wage then they shouldn't be in business, because it isn't good for the country. And no, prices will not double when minimum wage goes up to $15 an hour over the course of the next 5-6 years.
I respect anybody that works for a living, whatever they do. I simply believe $7.25 an hour is a joke. And like I said earlier, the actual wages will be going up from about $10-12 to $15 over the course of 5-6 years. You want to know why there is so many jobs out there today? Because companies are not paying enough. Sound crazy? Try hiring somebody at $8 an hour right now and see how applications you get when Walmart is paying $12. You have to pay somebody enough for an incentive to get off the couch or to change jobs.
Now, this is mostly just my opinion. I'd be open to seeing real stats of those areas that are already increasing minimum wage. Are people getting laid off? Is the price of gasoline now $6 a gallon? Are people drinking water because they cannot afford milk? My opinions have been proven wrong before!
@Anthony Wick Yes, that's exactly what I am saying. $100/hr. just for lawn mowing. This does not include edging. As my current vendor says, "anything extra costs extra." Snow removal is slightly more (and does not include salting sidewalks and walkways, which costs $30 more per property per application).
I attribute this gouging to a historically low unemployment rate in an area that already has very robust social and entitlement programs.
And yes, @Anthony Wick, I implore you to move your business here. I would hire you "in a NY minute", as they say...
Originally posted by @Danny Grey:
Originally posted by @Hai Loc:Lets see if selling Montana to Canada will change the wages
You can't have Montana. We'll gladly take Alberta off your hands though :)
Will trade you Alberta for Florida :)
In Northern CA it has been $15 for sometime for min wage. Gradual.
Some ghettos start $13.75 working at McDonalds.
Originally posted by @Rich Nordstrom:
@Anthony Wick So you said if not for minimum wage businesses would pay employees $2.00 per hour... then go on to say that some businesses are paying $11.00 per hour so what you’re really saying is that it could be a supply and demand thing? And that’s the way it should be I’m against any minimum wage, let the market determine the wage it usually does a pretty good job.
Right on. This is about government intrusion (pseudo-socialism!) vs free market. The government has zero right to force business owners to pay a certain 'minimum' to their employees.
"Livable wage" is a mirage... if your hours are cut, or even worse the business shuts down because of the repercussions... add to that the fact that all every other business does is raise the prices of everything, then it's actually even worse...there's no such thing as this "livable wage" dream people throw around for McDonald's and Walmart workers.
@Anthony Wick with the economy strong, nobody is making $7.25 per hour - minus high school kids or maybe in some extremely depressed parts of the country. Even McDonalds and Walmart hire at $10+ to attract people (supply and demand). They also move towards automation to reduce costs. Both have invested heavily in self checkout.
The net effect of raising minimum wage is increased consumer costs (inflation). It helps new workers in the short term, but it compresses salaries for existing workers. For example, an employee hired for $10 an hour 8 years ago has received multiple raises and is now making $15 per hour. New employees make the same salary as this person who has worked years to get up to $15 per hour. The employer is forced to give a "cost of living" increase to existing workers. BUT they get $2, which is far less than the $5 they "earned" through merit increases. Cost of living increases quickly absorb that $2 increase, so the 8 year employee suffers and is worse off than they were last year.
This is the fallacy of minimum wage increases. It appears to help people, but ultimately drives inflation and hurts the larger work force.
Over time the economy just self balances anyways. We could make minimum wage $100 per hour and the result would be that a $10 Apple Music subscription would now cost $100 per month. In the end, it doesn't matter how much money anyone makes. It only matters relative to the cost of goods and services.
@Cody Gebhart as far as landlords, we benefit greatly from inflation. This is what I preach all the time - the "time value" of real estate is HUGE and it is because of inflation. Two main benefits:
1. It forces rent increases, but mortgage doesn't increase, so it results in increased cash flow. It also forces increases in new construction costs, which drives up value of existing properties. So your property is worth more and rents are higher.
2. You repay loans with future dollars that are worth less. For example, ten years ago, I could get a bottle of pop for $1 and now it is $2. You are giving the bank back less value money than you borrowed.
Real estate is the best inflation adjusted investment you can make. The only concern for a state like Illinois raising minimum wage is the ability to compete with other states. Businesses will choose to expand (add jobs) in states with lower operational costs. Taxes and wages are the two largest business expenses, so they are leading factors in operational decisions.
Originally posted by @Sam Shueh:
In Northern CA it has been $15 for sometime for min wage. Gradual.
Some ghettos start $13.75 working at McDonalds.
Can you even afford to be homeless for $15 in Northern CA?
This is a very interesting topic. I would assume that rents would increase and that overall cost of living would increase. I live in Los Angeles and prices are going up overall, specially in grocery stores. It's sad because it affects the middle class more than the rich or the poor. When minimum wage increases the middle class just has their costs go up but their wage stays the same.
If they REALLY wanted to help the poor and middle class they should CUT taxes in California. They are extremely high! Seriously, I still do not know why I live here, lol. But they will never cut taxes out here, they will just complain about low wages.
I have never seen data to support a minimum wage hike resulting in higher unemployment and a spike in inflation. If anyone has credible, historical evidence to support this, I'd be interested in reading. Until then, it's all unproven theory....
@Jason DiClemente
There have been multiple people in this thread speak to the degree of jobs being cut and hours cut as well. And not only in their own business, but general jobs as a whole. This isn't theory. It's reality.
If you and Anthony wick still 'feel' this way about your opinions then there's probably not much else that can sway your views. The reality is stats can be bent to fit any argument for or against.
Feel free to Google the repercussions of Seattle's wage increases (those are the only ones I've been following recently)
But one last attempt... Minimum wage went up $1 last year in Portland. My wife got a. 35 cent raise. Our groceries expenses did noticeably increase. Another example: some friends are cooks at a restaurant in portland and want than the person who just got hired at minimum, so they get raises (at smaller increments) now the food prices have gone up $1-2 per item to accommodate the increase in wages... Then pushing the burden on the consumer once again. You guys say that over 5 years there won't be an issue. It already is. Also, To be clear I do wish there was an easy answer for living wages as well....
Originally posted by @Dennis M.:No one is forcing them to work if the employer won’t pay a fair wage . You can pack your skills and ability and go to a different employer, supply and demand ! It is part of a free enterprise system. The other part of the equation i haven’t heard addressed is the folks who make 15-17$ already while their lower skilled coworkers made 8$ ..now the boss must also drastically bump their wages up too to compensate...so it has a damaging snowball effect for everyone . This will kill low skilled jobs plain and simple . Automated Machines have been able to do most of these tasks for years now ,but they were just too expensive . Now that cost is relative to the business owner . Now it’s not such a bad deal to buy a small robot line for 80k that ultimately replaces several 30k a year low skill employees. Robots/Machines don’t call off or ever get sick or show up drunk or steal company profits .
Exactly this, we were forced to bump everyones pay. But Production stays the same. In the end, everyone suffers.
Rather than hire three more workers to increase production drastically, we are forced to try and get 3x the output from one person.
@Travis Watson I'm not really looking for anecdotal evidence. I'm looking for historical data proving the point. When someone says "raising the minimum wage leads to unemployment and inflation" I'd like to see evidence.
Using anecdotal evidence is usually an emotional response, and I dont base decisions and opinions on emotion. Show me facts, and I'd be happy to evolve my opinion.
Originally posted by @Anthony Wick:
@Chris Szepessy I understand what you're saying. I just think you're making it a bit simplistic, and I disagree with some of your assumptions. Hopefully people understand most of my point is, minimum wage by law is absolutely needed in this country. And people arguing "well why not $50 an hour" is a straw man argument. Nobody is asking for that. They are asking for a "livable wage". And if you think $7.25 is good, then this country will continue to be separated by vast wealth differences.
I know small business owners probably work 100 hours a week or more and take on all the risk. And I still say if they cannot make their business work while paying a livable wage then they shouldn't be in business, because it isn't good for the country. And no, prices will not double when minimum wage goes up to $15 an hour over the course of the next 5-6 years.
I respect anybody that works for a living, whatever they do. I simply believe $7.25 an hour is a joke. And like I said earlier, the actual wages will be going up from about $10-12 to $15 over the course of 5-6 years. You want to know why there is so many jobs out there today? Because companies are not paying enough. Sound crazy? Try hiring somebody at $8 an hour right now and see how applications you get when Walmart is paying $12. You have to pay somebody enough for an incentive to get off the couch or to change jobs.
Now, this is mostly just my opinion. I'd be open to seeing real stats of those areas that are already increasing minimum wage. Are people getting laid off? Is the price of gasoline now $6 a gallon? Are people drinking water because they cannot afford milk? My opinions have been proven wrong before!
You say "wealth differences" or as it's often referred to as "income inequality''.... A lot of these billionaires came from very little. They worked their way up or took chances in their own investments/businesses. What stops anyone from working hard to do better in life or make more money? Yes, some people are dealt a better hand from birth, but there are many people who came from nothing. Minimum wage jobs aren't meant to raise a family off of. They're jobs for high school/college kids. If you want a business to stay in business AND pay a livable wage that someone can raise a family off of, they absolutely need to charge more for their product/service. Nobody is forcing someone to stay working at any place for $8/hr.
It's funny. I'm in South Carolina which has no state minimum wage and yet wages are growing naturally as businesses are moving into our state. We have a few large Amazon locations, the auto industry in the upstate and new manufacturing coming to our state. Legislature is voting on a 4-10% raise for teachers. True minimum wage jobs like fast food are still paying minimum wage as they probably should, but clerical and semi-skilled labor is paying in the $12-$25 an hour range in a part of the country where cost of living is already reasonable. Rents are also rising after been flat for years.
Beyond small business owners, another casualty of this is the devalued work of those making $15-$18/hr. Someone with experience, training, and education will now make the same as the guy bagging your groceries or pushing around a broom.
@Joel Ownes You mentioned the high real estate taxes in parts of Illinois. Completely true. The theory is the Laffer curve - when you raise taxes too much you actually get less revenue. So with certain commercial property in the South Suburbs of Chicago, there is an exodus of retail tenants.
Back to the thread topic. The current minimum wage in Illinois is $8.25. But in Chicago it is already $12 per hour. In reality there are few jobs in the greater Chicago area that pay the lowest minimum wage.
For landlords, if we use a ratio of 3X earnings to qualify for an apartment, then my average tenant needs to make $18.75. That's easy on the northside of Chicago. But on the Southside, many landlords can't find good qualified tenants, so they turn to section 8.
Some landlords will directly benefit from the increase in minimum wage. There also can be a side effect of more unemployment, which will hurt landlords as well.
I am somewhat conservative, but I am totally supportive of the minimum wage increase in our State.
Some points that have not been addressed in this discussion about minimum wage that are absolutely germane to understanding the issue:
1. Around 1-2% of all workers over the age of 16 make at or below the federal minimum wage. Half of those making at or below the federal minimum wage are under 25. In short any increase in the minimum wage helps an exceeding small and young percentage of the work force. So who does it help? On would think people whose wages are tied to the minimum wage...?
2. Higher minimum wages lead to a reduction in hiring and reduction in hours work, primary driven by employers having an increased focus on relative productivity of their workers. This favors workers who already have skill sets in a given area and dis-advantages those without relevant experience.
3. The NBER found the following when studying Seattle's recent minimum wage increase:
we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016
This study suggests, that the minimum wage doesn't do what its designed to do: put more money in the pocket of hourly workers.
4. Studies suggest that minimum wage leads to increase in grocery prices, looking at data from 2001-2012. I can't find a working link to this paper @Jason D., so I had to settle for an article about it.
5. Of the studies that have found no or positive impact to a minimum wage (Dube et al. and Card & Krueger are the most famous) issues with the reproducibility of experiments and flawed data sets have been found.
@Anthony Wick questions for you:
1. What expenses are acceptable to include in the livable wage determination?
2. What, if the free market has set the price for flipping burgers at $7.25 in Des Moines, do you base your assessment that it is a "joke"? Do you believe it is the purpose of business to provided the aforementioned livable wage at the expense of fulfilling the consumer's needs? If so, how do you rectify that with the well established supply and demand models.
I've been asked what I would do if I had to pay three part-timers $15/hr. Folks think I'd raise prices or lay off one employee. Nope. I would lay off all three, and then unfortunately three super-flexible jobs gone. And bringing this around to rental property, three young people just might have a little more trouble paying their rent.
Why would I lay off all three? The value to me of the work they do (and the flexibility we give in doing that work) is simply not worth $15. My wife and I frankly have the availability to pick up most of that effort; it wasn't worth our time before, but it most definitely becomes worth our time if we have to pay $15. This would also light a fire in me to streamline a few things. And then if we need someone again, considering the nature of the work we do, we can go to one of these freelancer websites and hire someone from India for literally $3/hr.
So, forget the Walmart and McDonalds examples. With a steep jump to $15, small businesses all over this country will be faced with the exact same decision, i.e. is it still worth "consuming" more labor? It may not be, considering many of us have families to feed, too.
@Jim David so what you are saying is that you're time is worth more than $8 and hour, but less than $15 an hour.
I think that's a decision that every business owner has to make with regard to employees. It doesnt matter if you're paying them $5 an hour or $100 and hour, what matters is what your time is worth.
I am a small business. I have one employee currently by choice. The amount paid per hour is very low. That is BY DESIGN.
Now the employee has a chance to make much more than the average position in their field by hitting certain metrics.
I like to pay very little but give a person a big goal to reach for then they can do very well. I want to weed out the lazy people who want to do the basics, sit on their butt, and collect a check. When most of the money is paid out on the performance the lazy people run away as they know they will not survive. I believe if people work hard and smart and help the performance of the business they should be rewarded. I also believe if they do the minimum and are not helping the business to grow and prosper much then the pay should be very low for the effort put in.
As Marcus Lemonis says (people,process,product). You need all three to create the magic.
CA they might pay 15 an hour but cost of living there is sky high. 100k income where I live in GA can go 5 to 10 times farther then what 100k can do in CA because of cost of living ratios. This goes back to states wehre income averages are 40k they can't pay 15 an hour the metrics are just not there. The machine never calls out for work, never complains of scheduling, no health insurance to pay, social security, workmans comp, no bad attitude to customers, no worries of computer stealing, production value doesn't go down because of not feeling well, can give proper change back,etc.
Originally posted by @Jason D.:
@Jim David so what you are saying is that you're time is worth more than $8 and hour, but less than $15 an hour.
I think that's a decision that every business owner has to make with regard to employees. It doesnt matter if you're paying them $5 an hour or $100 and hour, what matters is what your time is worth.
Exactly, but it's only part of what I'm saying. It also takes us time to manage / communicate with those employees, so we save that too.
I'm also saying, too often, labor is looked at as an absolute need rather than a choice (and therefore you can raise min wage with no repercussions because everyone needs it). This isn't the case for a lot of folks - they don't always need to hire someone, they choose to because the price is right for them. When you raise the price of something, people consume less of it and labor is no different.
@Bill F.
Thanks for your efforts in linking the research articles.
The problem with the minimum wage debate is that both sides keep making the same arguments no matter what the minimum wage is. The right seems to think it should be $0.00 and the left seems to think it should be $1,000,000,000,000.00. So let’s try to reason through what the min should be set to.
Obviously too high causes inflation and distorts market forces as many have pointed out. With regards to these metrics, the lower the better. If you’re opposed to any and all forms of welfare and wealth redistribution, we can stop here. Just don’t expect society to hold together and hope you never develop a sense of morality given the wealth of our country.
But if we don’t think any and all government welfare should be set to $0.00, what should the min be? Enough given the local cost of living to not deserve any welfare or charity. If you work a full time job, the minimum wage should be the minimum to afford the most basic rent, food, utilities, transportation, and other basics to survive. A penny less than this and taxpayers are effectively subsidizing badly run businesses that should either change, become more efficient through automation, etc. or should fail. Remember, part of both Capitalism and free markets is bad businesses fail, just as unproductive people become poor.
Given this line of reasoning, what does this look like in the real world? Well clearly the minimum wage should be tied to a local CPI measure of sorts. Sadly our government would never do something so rational. I live in a pretty dead average cost of living area of the US. Based off my experience, I think something in the neighborhood of $20000 to $24000 should be reasonable. Assuming a 40 hour work week and zero taxes, that gives a minimum wage of $9.62 to $11.54 per hour. The actual income taxes for such a person would be around $3000 to $4000 per year for the income range above. The minimum wage here was $11 and changed to $12 and it doesn’t look like lowering it would help the economy much. That sounds pretty reasonable to me. Other locations undoubtedly need higher and lower minimums.