$15 per Hour Minimum Wage Effects?

Question

Here in good old New York there is a huge push to raise the minimum wage to $15/hour. I'm not here to start a political debate! Hopefully we can all agree to leave politics out of this discussion, no matter what side of the argument we fall on.

I'm curious about everyone's thoughts as to the impact this would have on real estate. Would it drive home values up due to an availability of funds? Do you think rental prices would go up (because traditionally low-income people still have bad financial habits and won't be able to get financed) or down (because there will be more people who can afford to buy their own home?)

I'm definitely in a lower income area, but if you have thoughts about how this impacts the middle and high-end areas as well, I'm definitely interested.

Joel Owens · Answer

Only certain parts of the country can absorb 15 bucks an hour for minimum wage.

National median income average is 54,000. In areas where median income is 100,000 plus or higher people can pay 18 for a burger. Areas that want 15 an hour minimum wage  and median income is low people will not pay for an increase in product to offset.

Mdconald's already has started initiating order kiosks. Have one cleaner, one cook, one manager on site and automate most of the rest.

That's what happens when burger flippers want 15 an hour. Entry level jobs have entry level pay for a reason.

90% of businesses are small nationwide. If you jack up minimum wage it would take their profit way down and they would consolidate employees to save profit margins.

I think a lot of this is not for the benefit of the people. It is the government trying to document more income that is typically paid for with tips. Pay 15 an hour and people will have to less to tip paying more for a product. So effectively you have a server making the same money more is now showing up as hourly versus tips. It can be tracked 100% for taxes whereas tip money some people tend to report half etc.

All of this energy is put into this yet we have undocumented people using up resources in this country and not paying taxes. This country has it's priorities out of whack. The role of the small business owner is not to bear the brunt of government  mandates and make up for the governments shortfalls and waste.

Jason V. · Answer

@Richard Dunlop 42% of the US workforce currently earns less than $15/hour according to Forbes. Current unemployment is supposedly hanging around 5%. So even if every single person making less than $15/hour were to lose their job (which is just silly to think would happen) because of a Federal minimum wage of $15/hour, I'm not sure I'm buying the 50% unemployment number.

But in the case 50% unemployment does happen: I buy more units, get them approved for Section 8 and laugh all the way to the bank while the doomsdayers sit around and complain.

With the way political winds are blowing, I believe significant Federal minimum wage increases will be coming sooner than later. I'm curious as to what impact this will have on the economy and how to plan for it in a way that doesn't involve stockpiling food and bullets (not that there's anything wrong with being prepared!)

Richard Dunlop · Answer

Government has a Knack for doing exactly the opposite of what it intends to do.

A minimum wage of $15 an hour would gut the middle class!

It won’t hurt the chain restaurants as @Joel Owens

points out they can afford to buy machines to replace workers.

It won’t hurt Walmart because it will put all of their competition out of business.

It won’t hurt Home Depot but the neighborhood hardware store will be no more.

The mom and pop Dry cleaners where 2 family members are each already working 50 hours a week to take home $100,000 will be bought up by the multi owners. It will take ownership of 6 dry cleaning locations (each profiting $25-$35,000) to make a good living. The single store owner will become an employee of the multi owner.

@Jason V. 50% of the $9 hr jobs will be gone Won't hurt the the big players at all in fact as I pointed out it will benefit some of them. It will eliminate the lower rungs on the ladder up. Also some cities it won't hurt Rochester it will.

Curtis Bidwell · Answer

Thomas S. They seldom buy but they do rent.  And rent will always adjust to what someone can afford.

At 1/3 of income a minimum wage earner (full time equivalent) can afford about $550/mo. You put two in an apartment together and you've got $1100 rent.  (Our min wage is currently $9.67 -Wa state).  Adjust that to $15/hr and rent goes up to $866/mo per earner, or $1730/mo for two.  36% increase!!

This could be a huge wind fall ... or ...they could impose a federal rent control as a follow up!

Jason V. · Answer

Thomas S. I had a feeling that might be the case - I'll have to check on that to confirm for myself, because I don't trust you Canucks :-P

Jason V. · Answer

@Curtis Bidwell I've never actually never put the thought into it, even as far as your quick analysis there. That's a really interesting way (and it makes absolutely perfect sense) to determine rents for an area. Thanks!

Jason V. · Answer

@Joel Owens Agreed - Not every state will be as extreme as New York. And us Upstaters will of course be punished for our crime of being in the same state as Manhattan.

@Richard Dunlop Couldn't agree more - governments don't even begin to understand incentives. I'm a big believer in the Milton Friedman school of economics.

Thomas S. · Answer

Historically rental rates have climbed with minimum wage rates.

Extremely unlikely overall real estate will be effected as minimum wage earners don't/rarely buy homes.

Richard Dunlop · Answer

Are you thinking there is any possibility

of Real Estate prices going up with 50% unemployment?

$15 per Hour Minimum Wage Effects?

Most Popular Reply