Wednesday, April 13, 2016

New York & California Just Killed Entrepreneurship

In just 16 years, the minimum wage in the State of California will see a rise of 222% from $6.75 in 2006 to $15 in 2022.  That is an average annual increase of nearly 14%.  In New York, the increase to $15 from, again, $6.75 in 2006 is more complicated as follows:
  • For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage would rise to $11 at the end of 2016, then another $2 each year, reaching $15 on 12/31/2018.
  • For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50 each year, reaching $15 on 12/31/2019.
  • For workers in Nassau, Suffolk and Westchester Counties, the minimum wage would increase to $10 at the end of 2016, then $1 each year, reaching $15 on 12/31/2021.
  • For workers in the rest of the state, the minimum wage would increase to $9.70 at the end of 2016, then another .70 each year, until reaching $12.50 on 12/31/2020 – then  continue to increase to $15 on an indexed schedule to be set by the Director of the Division of Budget in consultation with the Department of Labor.
The reality is that no other class of workers has seen that kind of increase.  In fact, assuming a 2% raise a year, it would take the middle class worker an average of 111 years to have a 222% rise in their salaries.

The point is that many people will find themselves less able to afford products and services that are heavily dependent on low wage workers; such as fast food businesses, retail, hospitality, and leisure.  The same goes for this nation's 55 million seniors, who, at best have seen increases of just 1% a year in their Social Security checks.  Additionally, millions more, such as waiters and waitresses, won't be eligible for minimum wage because they earn tips.  And, so too, for the three quarters of 47 million Americans in poverty who aren't even working.

More importantly, the $15 wage will accelerate the death of entrepreneurship and its ability to create jobs.  It will be much more expensive to start new businesses that generally depend heavily on entry level employees.  Entrepreneurship has already been in decline for decades, but now it will become a much higher risk proposition.  Even before instituting this excessive wage, 1-in-4 startup businesses failed in the first year.  50% will be kicked to the curb in just 4 years, and operational costs are one of the 4 main reasons for failure.

I hope I'm wrong, but I think the $15 minimum wage will be a real job creation killer.  And, in fact, a job killer for businesses who must raise prices, and in turn, lose customers who can't afford those price hikes. Also, the $15 minimum wage will bring in automation to replace the humans making that wage.  Already, you can rent a robo-security guard that can hear, smell, and has 360 degree night vision for just $6.25 an hour.  So, if you can already automate a security guard, it only seems logical that other lesser tasks, such as flipping burgers, will follow suit.


Governor Cuomo Signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Policy into Law:

California, New York enact $15 minimum wages:

California Minimum Wage 2006:

New York Minimum Wage 2006:

Minimum Wage - United States Department of Labor: Questions and Answers About the Minimum Wage:

The Mysterious Death of Entrepreneurship in America:

The Slow Death of American Entrepreneurship:

Startup Business Failure Rate By Industry:

The Four Major Reasons for New Business Failure:

Rent A Robot Security Guard for $6.25 an Hour:

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