On Tuesday, the Los Angeles City Council voted 14-1 to raise the minimum wage from $9 to $15 by 2020. Los Angeles is the nation’s second-largest city, with 50 percent of the current workforce reportedly earning less than $15 an hour, reports the New York Times. It is the largest U.S. city to approve a $15 an hour minimum wage proposal.
Read: The Best-Paying Cities for the 20 Hottest Jobs
How a Higher Minimum Wage Can Impact You
The current federal minimum wage is $7.25. President Obama, however, has made it part of his agenda to raise the minimum wage to $10.10 an hour and urged Congress in his 2014 State of the Union address to increase. He supplemented his request with an Executive Order to raise the minimum wage to $10.10 for people working on new federal service contracts.
Los Angeles’ recent minimum wage increase is expected to spark increases across the country. Maria Elena Durazo, former head of the Los Angeles County Federation of Labor, told the Los Angeles Times that the $15 minimum wage is “part of a broader national effort to alleviate poverty.”
Supporters Say Minimum Wage Hikes Will Boost Economy and Help Businesses
Supporters of a higher minimum wage claim that the Los Angeles increase will “set off a wave of increases across Southern California,” reports the New York Times. According to ThinkProgress, proponents also argue that higher minimum wages will improve efficiency, increase demand, lower turnover and increase prices for businesses and the economy.
Joel Benoliel, senior vice president and chief legal officer at Costco, reportedly told CBS News, “If you have the best people in the marketplace working very hard because they’re being paid better, you end up spending less on labor, not more.”
Related: Why Millennials Are the New Wage Slaves
Opponents Argue Minimum Wage Increases Hurt Businesses and Increase Unemployment
Critics of minimum wage hikes suggest, on the other hand, that they will lead to more layoffs of workers in order for businesses to offset higher costs. Specifically in Los Angeles, the Chamber of Commerce released a cost-benefit analysis on the minimum wage proposal, arguing that some industries — like food service and nursing homes — could see drastic labor cost increases, equaling 12 percent and 7 percent of revenues respectively.
The Los Angeles Area Chamber of Commerce’s senior vice president for public policy and political affairs, Ruben Gonzalez, told the Los Angeles Times that labor costs will force businesses to lay off employees. Or, the businesses will have to reduce work hours or leave the city. “It’s simple math,” he said. “There is simply not enough room, enough margin in these businesses to absorb a 50-plus percent increase in labor costs over a short period of time.”
And Forbes reports that other opponents suggest that since approximately 60 percent of people living at or below the poverty line are unemployed, according to 2013 U.S. Census Bureau data, minimum wage hikes won’t benefit a majority of people living below the poverty line.
What Other Cities Are Considering Wage Hikes?
According to CNN Money, SeaTac in Washington was the first municipality to enact a floor of $15 an hour last year. Other cities who have made similar wage increases include Seattle, Chicago, San Francisco and Oakland, Calif. New York City and Washington, D.C. are also considering proposals for minimum wage increases to $15 per hour, reports Entrepreneur.
In New York, Mayor Bill de Blasio has come out in support of increasing the minimum wage. He told CBS, “We all used to think minimum wage meant a wage you could live on, but today in New York City and many other parts of the country, a wage level of under $9 an hour, no one actually thinks you could live on that.”
Many companies have taken initiative, without legal compulsion or government action, to raise wages for their employees. Facebook announced last week that its U.S. contractors and vendors will be required to pay at least $15 an hour and offer paid time off for sick days and vacations, and Walmart and TJX Companies gave raises and promised $10 an hour wages in 2016.
As of Feb. 24, 2015, 29 states and Washington, D.C. had wages greater than the federal minimum wage, 14 states had minimum wages equal to the federal minimum wage, two states had minimum wages below the federal floor and five states had no minimum wage requirements, according to the U.S. Department of Labor. Most notably, Georgia and Wyoming currently have minimum wages of $5.15 an hour. Washington, D.C. has the highest “state-wide” minimum wage at $9.50 an hour.
Keep reading: How Gravity Payments Could Set New Minimum Wage Norm
Photo credit: Dan Holm / Shutterstock.com
This article originally appeared on GOBankingRates.com: How Does Los Angeles’ Minimum Wage Hike to $15 Affect You?
This article by Misha Euceph first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.
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