From the Editor: A $23 per hour minimum wage ~ Short-term pros, long term cons

*There is a correction below concerning how the item made it to the agenda.
SOUTH LAKE TAHOE, Calif. - The South Lake Tahoe City Council has an item on its agenda Tuesday, requested to be there by Councilmember Scott Robbins and Mayor Pro Tem John Friedrich to look at a possible minimum wage for the city. Many have stated their reasons for being against such an increase, including both chambers of commerce, the lodging association, and community leaders.

In 1938, Congress established the first minimum wage at $0.25 per hour. The Fair Labor Standards Act (FLSA) created several regulations to improve detrimental health, efficiency, and well-being of workers and the minimum wage was part of that Act.

Things have changed over the last 86 years, and there have been 22 minimum wage increases in the United States since then.

Robbins has suggested a rise to $23 per hour for South Lake Tahoe, though that is not the amount on the Council agenda, and not the amount Friedrich wanted discussed. A rise to $23 per hour would make South Lake Tahoe the city with the highest minimum wage, including $7 more than New York City, almost $6 more than Los Angeles after their increase to $17.28 goes into effect in July, and $4.33 per hour more than San Francisco before their increase also changes this summer. The Dallas, Texas minimum wage is $7.25, and Phoenix, Arizona's is $14.25. Over the border in Nevada, the minimum wage goes up to $12 in July.

So why does South Lake Tahoe need to drastically rise to $23?

Proponents say it is because people need a higher hourly wage increase to earn a living wage. That is fair, but why would South Lake Tahoe's living wage need to be so much higher than areas with higher rent and, in some cases, higher food costs?

Proponents also say thousands of school kids and residents have left over the last 23 years because of low wages and the high cost of living. While they have left, as I outlined in an Op/Ed in March (see here), residents left when the value of their South Lake Tahoe home took a large leap in the mid-1990s and an even more leap in 2005. They cashed out and went to communities where homes were cheaper, or took other opportunities for jobs, family, weather, and other reasons.

South Lake Tahoe school enrollment has dropped while the census shows the population has not changed much. Could it be the people who have moved to Tahoe are not having children?

There are plenty of entry-level jobs in the area, along with those that normally pay a bit lower - tourism and hospitality. Wouldn't it be a better use of time to attract businesses that pay higher?

I can still remember when a former city manager said the town can prosper when its residents don't earn their money in town, as it is the same cash changing hands. If residents have jobs outside of the area, such as with remote workers, new cash circulates.

That scenario happened both prior and during the pandemic. The result was the number of housing units that were plenty to supply homes to those working on the South Shore was all of a sudden not enough.

"Supporters argue that increasing minimum wage can stimulate consumer spending and boost the overall economy by putting more money in the hands of low-wage workers," said finance writer J.B. Maverick in Investopedia. "Critics, on the other hand, warn that higher labor costs might lead to job cuts, automation, and increased prices for goods and services."

The disadvantages of raising the minimum wage, according to Maverick, are businesses needing to raise prices to cover their increasing costs, thus fueling inflation.

Any increase in prices means an increase in the cost of living - essentially negating any advantage gained by workers having more dollars in their pockets.

A study by the Public Policy Institute of California showed increasing the minimum wage would do little to boost the income of California’s poorest families — and it may even add to their cost of living. The study showed that the more wages a business has to pay workers results in higher costs to the consumer, thus negating the rise in wages. That study also showed that families weren't suffering from a low minimum wage as much as they were from being underemployed and not receiving full-time job opportunities.

"Increased labor costs and slim profit margins may force business owners to cut their staff," said Dan Marticio in an article on Lending Tree. "A Congressional Budget Office (CBO) nonpartisan analysis of a prior version of the Raise the Wage Act projected that raising the minimum wage might raise the income and earnings of many low-wage workers but could cause other low-wage workers to lose their jobs."

So, while it would be nice to make more money, the minimum wage needs to stay where the state sets it, and not higher. Giving minimum wage workers more opportunities is key.