$15 Minimum Wage: Why Real Estate Investors Should LOVE This Idea [Opinion]

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?Look, I’m a pretty conservative guy.

And most of my friends will probably hate me after this post… but here’s the truth: I love the idea of raising the minimum wage to $15 per hour. 

Why?

Let me explain.

Do Minimum Wage Workers Deserve $15 an Hour?

Well, let’s get one thing straight first: I don’t think these people deserve it.

In my opinion, people don’t deserve something like that. As you probably know, I’m a red meat-eating, lumberjack-resembling American capitalist. People don’t deserve a specific income. Things are worth what they are worth, not what the government decides.

However…

Just because they might not deserve it doesn’t mean it wouldn’t help me, as a real estate investor. It probably won’t help them, in the long run, but it will help me.

Why The Minimum Wage Needs to Be Increased

Most of my tenants are minimum wage employees, making around $9.00 an hour right now.

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By raising the minimum wage, my tenants will be able to more easily afford their rent. Less trouble getting rent, for now.

Then, rental rates tend to rise based on minimum wage (the lowest common denominator of a society needs to be able to afford to live in an area), so rental rates will start to rise. Inflation kicks in. But my fixed rate mortgages stay the same. My profit rises. The tenant’s living expenses are not 50% higher than before, so they are in the exact same spot after a few years. Sucks for them. But, again, my fixed rate mortgage stays the same.

So, yes, I agree — the major premise behind the “let’s raise the minimum wage” cry is incorrect. It’s not going to help these people over the long term. People’s living expenses always rise to meet their income. Everyone lives above their means. (Be sure to read through “The Simple Action No One Does That Will Make You A Millionaire” for more of my thoughts on that.) Minimum wage tenants will likely be no better off than they are today.

However, I’ll be better off.

Sure, some of my tenants will be able to qualify to buy homes, which means I may lose them, BUT it will lift the real estate market even higher, so I can sell more properties. More tenants who are living with roommates and with their parents will be able to branch out on their own and take the place of those buying houses.

Everyone wins.

Answering the #1 Objection People Have Against Raising the Minimum Wage

So, what happens when McDonalds has to suddenly pay their employees more money?

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The cost of a hamburger goes up slightly. Probably not double. Probably not 50%. But it will go up a little bit.

Boohoo. People in America could handle eating a few less double cheeseburgers if you know what I mean.

Finally, to one more objection: Yes, McDonalds may replace some of these workers with a machine, but that’s happening anyway. No getting around that. But fast food is just one industry of minimum wage workers.

What Do You Think?

What do you think?

Am I crazy?

This post was meant to open up a conversation, so let’s start conversing. Share your thoughts below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

110 Comments

  1. Susan Goldthorp

    No you are not crazy, I think you make a very good point, people keep telling me rents are going up which no doubt they are in many areas. However in low income areas rent will always be dictated by what people can afford to pay, they have less flexibility to pay more than in more affluent areas. A person on $9 an hour 40 hours per week can’t afford more than $500 a month, obviously not sufficient for a family. Another limiting factor are those on SSI disability or retirement. If I want to keep such tenants I can’t think about raising the rent, with their fixed incomes.

    • Edward Briley

      I don’t know about all areas in real estate prices, but I do know in my area, it is possible to buy homes with a PITI for less than $500 a month, and many are better properties than they ever could rent. Look around you will find thousands upon thousands of them. Why aren’t they selling? Rarely is it because of income or not enough down payment. It is because of bad credit!!! People simply are not paying their bills.

      • Mason V.

        Really wish I could say the same here. Instead I am stuck trying to find deals in a town where most SFHs are far too expensive for most people to ever purchase. Its like people are trying to force appreciation of the real estate market without also trying to raise the standard of living as well. Guess that means more foreclosures for me in the coming years.

    • Brandon Turner

      I would agree that both are possibilities though I think, as a landlord, I will be protected and will profit either way. Yes, if less people are hired and the unemployment rate rises, that might be bad, but then government assistance will just step in and pay their rent for them – at the nice higher rates that the forced inflation will cause! That’s my opinion anyway 🙂

  2. Lin Vanderhook

    I have minimum wage, strawberry pickers apply for our SF rentals. The men make $9.50/hr and the woman
    8.50/hr. This couple has Credit scores, mid 700s. Rent is 1750 for 4 bedroom. They plan to bring in 6 more pickers, and all their children. Every child they bear will become a US citizen. They are all illegal, but get free medical, food card courtesy of Calif. Only one speaks English.
    This is what Landlords are dealing with here in California.
    Would a $15/hr help this situation? What do you think.?

  3. Jay Helms

    To answer your title Brandon, no they don’t deserve it – dumbification of ‘Merica BEGIN! And you’re right Brandon, product cost will go up, so will price, meaning less people will buy. The less people buy, the less shifts are offered and then ultimately that business entity will have to decide whether or not to stay in business. Long-term, you’ll spend more time on collections. Short-term, you better ride that wave, raise rents, and store up for winter.

    • Brandon Turner

      Hey Jay, yeah I agree they don’t deserve it. But I dont think the rise in employee costs from, let’s say, $10 to $15 will affect prices all that much. I think Serge mentions it below, but McDonalds would only pay 1% more. Employees are expensive, but an extra $5 an hour probably wouldn’t bankrupt too many businesses. At least that’s my guess! Thoughts?

  4. Edward Briley

    Well to put your thinking into practice is an idiocy. The truth of the matter is that many more people on minimum can afford their rent more-so than you believe. If someone on minimum wage would just save a fraction of their salary, and pay their bills, that the housing market would boom. To raise minimum wage would not help you, it would only feed the non- essential market, and yes prices would rise. Does someone on minimum wage need a smartphone for instance? The answer is “No” of course. A basic phone, rather cell or landline would suffice. High speed Internet? Dial up is still cheap, along with DSL speed cable in my area. How about cable television? No again, my antenna works fine. Do they need a newer high dollar car for transportation? The sales for them are booming. How about million dollar homes? Many that can afford them, have sense enough not to buy them. So, the answer is easy. By the way, in my area there are over 14,000 homes for sale at any given time. Real Estate companies cannot find good agents. I wonder how many of these “minimum wage workers” would apply themselves to pass the real estate exam so they could make a decent living? I guess it is easier to stand in the streets and riot to get the minimum wage increased than trying to improve themselves. If they would just pay their bills, most of them would succeed. I flip and sell homes that are much better than most rental properties for half the cost of what they are paying for public housing, yet they cannot qualify for one simple reason. BAD CREDIT, because they haven’t paid bills they created. Down payments or Income is not usually the problem. And there is my mortgage broker and myself waving goodby to them is they leave in there 2 year old SUV, texting on their smartphone. Care to ask the reason? Why is it law now, that you have to carry health insurance? The United States has changed, but not to the level that a person cannot find work if they need it. I didn’t say a job, I said “work”. (I used public housing rather than say renting from slumlords or Ghetto properties. Homes I flip look and are basically brand new, from the roof to the HVAC system, and everything in between).

      • Edward Briley

        The only way I can see you, or someone will be better off, is if the Government would raise the Section 8 limits. However, even if they did this, that the number of residents would decrease because the cities could not afford it. The same for raising the minimum wage. The less employed, the less tenants you will have. Hope you have some vacant lots put aside for the homeless. At the same time you will have to raise the cost of property management, not to mention the number of tenants that will not be paying their rent on time, due to the fact, that the cost of the luxuries in life they are able to obtain. These are the same people that put their rent on the bottom of their list of priorities. Really the best way to get increased rent is simple – raise home interest rates. I bet you are hoping for that to happen? When that happens you will get better and higher paying tenants, but does that benefit you?

    • Lin Vanderhook

      you are correct Edward B. the e mail that makes me livid is ”Do you take section 8.?…Sent from my i Phone.” sent to me the landlord on her trac phone. When them come to look at the rental they drive up in a new SUV, and park behind my 15 yr old Taurus.

    • Lee Richter

      I couldn’t have said it better Edward. When I was in 6th grade I mowed yards. Even at that age I did not make minimum wage. I have never made minimum wage except for one summer driving a van in a junk yard at age 13. I did it for a dollar an hour and Minimum wage was over 1 dollar an hour. I did it for the fun of driving that van. Most of my adult life I have worked for myself. I often don’t make any thing trying out new adventures. I follow what seems like it might be fun and challenging. If at any time I see that it will not pay off in the long run I look for other projects to pursue. Edward you talked about cable, cell phones, high priced cars and you are right. Poor people would rather have things like that than savings and the dignity of knowing you are a man or woman of your word and pay your bills. I still don’t have a smart phone maybe that is why I have never made over a 100,000 profit in my life, but I have almost always had money to spend. Letting people make there own choices it the only society I want. Just don’t cry to me on your smart phone while watching cable on your 50″ tv that the car company is repossessing your new car that you did not make payments on. I don’t want you calling me in my new 1999 truck that bought two years ago that had 76 thousand miles on it. The person I bought it from even through in a few dents on the truck for free. What a deal I paid 7300 for it cash. No one will be repossessing my truck. I guess I am too dump to figure out how to buy so much that I can’t afford until I go bankrupt or until I can pay my bills. There is a retarded man probably 30 to 35 that works at my kids school as a janitor. If he make 15 an hour or more I say all the more power to him. I call him a man because he has more character and honor than the lazy person that refuses to do hard work or lots of work. I am going to quit now, but Edward you said it so well. They spend foolishly and stupidly, so they don’t have anything. Even a 6th grader could out earn them.

  5. It’s certainly complicated when you look at the big picture… I’ve lived in areas where wages are high and along with that, the cost of living is also high where $15 an hour won’t even get you into the cheapest properties available for lease in the immediate area so it’s all kind of relative. The case for $15 an hour for minimum wage means a lot more then just fast food workers getting a bump in pay and in order to support the increase in labor costs, the cost of goods and services have to go up or people lose their jobs. The majority of people on fixed incomes are already getting squeezed as it is.

    Stats I’ve seen are that median incomes are lower then before the great recession and the % of working age adults is at the lowest % in 30 years. Sure, there’s plenty of big companies out there that can easily afford to hire more people and pay more… and there are plenty of small businesses that can’t afford it.

    It’s certainly complicated but I wouldn’t automatically assume you are going to be able to charge more for rent or sell houses for more.

  6. Michael Woodward

    Hi Brandon! Wow, you opened a can of worms with this one….. I’m not an economist so I can’t speak to all the micro/macro-economic effects this would cause but, in my gut, it sounds like a really bad idea for the government to dictate wages. You made most of my counter-points in your post so this will be short. I feel that government intervention and regulation almost always end up doing more damage (to everyone) than good. It discourages people from finding the grit to get out there and make a better life for themselves. Very few people are physically or mentally incapable of making more than minimum wage but there are many people that make the conscious decision to minimize their efforts…. which minimizes their value…. and therefore minimizes their income.

    With that said, I’m sympathetic toward people that truly need help. I think that everyone should always look for opportunities to help people in need but we have to stop short of letting the government make these kinds of decisions. Also, we need to be steadfast to resist things that are bad for the overall economy/society …… even if they would benefit us personally.

  7. serge s.

    I couldn’t agree with you more Brandon. My big issue is the so called “working poor.” These are people that work full time and still collect government benefits. In essence the American taxpayer is subsidizing the corporations that are able to utilize of this workforce. We as landlords see our profit growth compressed at the expense of the Walmart and McDonalds of the world. Now do these minimum wage earners “deserve” something specifically higher? No, they deserve what the market gives them based on their respective skill set. I do commend them though that they are working and not living only on government assistance like many of our tenants.

    I have a very hard time with the right wing position on this issue. Study after study has shown that raising the minimum wage has a direct and immediate net economic benefit. McDonald’s profit margin would be compressed by less than 1%. But guess what, McDonalds still needs to grow and will still sell just as many hamburgers and could do so and still be just as profitable even if they didn’t raise prices. That worker that is making a few dollars more per hour is going to directly spend that money with his local drug dealer, liquor store or renting Brandon’s Turner’s unit. These people simply don’t save and as such each additional dollar in wages after tax goes back into the economy. On top of that, this person would be self sufficient and not need government assistance. So the issue comes down to protecting that extra 1% margin of the corporations that have the power to lobby to maintain the status quo. Most of my right wing friends bite hook line and sinker even though its not in their own best interest.

    • No offense Serge, You bring up some very good points but not all McDonalds are owned by McDonalds. Plenty of them (as with many other big name fast food operations) are franchises owned by small business owners.

      I know of at least one person not doing too well with seven fast food franchises in California (Not McDonalds but another big company that is doing well collecting all of the franchise fees) he owns and is paying the $20K a month loss with the profits from the franchises he owns in Las Vegas to pay the bills as he tries to get rid of the California ones.

      California ones are not doing too well because of…. high costs to operate which includes higher wages / salaries on top of the higher cost to lease space.

      If he doesn’t sell them soon…. he’s just going to close them down and everybody that works at those locations are going to lose their jobs.

      Regardless…. just want to point out that not every McDonalds or big name Fast food joint is corporate owned.

      • serge s.

        Paul – agreed that there will be losers with any minimum wage hike. I would argue though that your friends problems in CA are much deeper than just labor costs. CA in general is not an easy place to conduct business and I am not an advocate of the taxes in that state. I left CA in 2008 and the business environment was one of many factors.

        That being I am confounded as to why this is still so debatable in the United States. Nearly every liberal and conservative I know are in broad agreement on this issue. Unfortunately our government can’t see past party lines to at least try to solve issues where there is a clear middle ground. Immigration is another one of these issues but I won’t go there.

    • Paul Ewing

      The problem is that they will not get off government benefits. General prices will increase based on the new inflated wages (not just the minimum wage ones, but everyone making more will be increased to keep the ratio of skills to wages lose to the same) which will mean the government will raise the poverty line threshold up to about relative to today’s level and we will all be back to where we were except for those of us with a bit of boost from long term loans based on pre-inflation dollars.

    • Serge- you state that these people would spend the additional money with their “local drug dealer” and then state that they’d be self sufficient? How long do you expect them to keep the job and the drug dealer???
      Additionally, you state that it wouldn’t hurt the corporation. I’d point your attention to Seattle, Washington where they’ve already raised the minimum wage to $15 an hour. Their unemployment rate has increased and the number of businesses which have shuttered is out of line with the nation.
      Just like us landlords/flippers, when a business’s expenses go up, they don’t simply accept a decrease in profits. They increase prices. It has a ripple effect eventually eating up the short-lived financial boon to the minimum wage earner.
      Brandon – I understand your point. But, as I pointed out above, when the price of wood or nails or paint goes up, my contractors will charge me more for my repair projects which eats into my increased rents. If all the houses you have require no remodeling/repairs and you have all the houses you want then the passed through increased expenses and interest rates won’t effect you and your premise is valid. Otherwise, it will be short lived and you’re profit margin is right back to today’s standards and debating the effects of a raise in the minimum wage again.

  8. Walter W.

    Brandon,

    A business owner will only hire an employee if they can produce greater value than their wages. I would never hire someone for $15 if they only produce $12. So by increasing the minimum wages to $15 dollars, everyone who produces less will not get a job. This is a simplistic example but I think it helps understand a complex economic situation. Based on this, increasing the minimum wage to $15 will reduce employment opportunities.

  9. Brandon,
    PRICE FIXING, whether it is for LABOR, GOODS, SERVICES or even TAXES, is NEVER a good thing.

    Daniel Mitchell of the Cato Institute, a libertarian think tank, suggests that “businesses are not charities and that they only create jobs when they think a worker will generate net revenue. Higher minimum wages … are especially destructive for people with poor work skills and limited work experience. This is why young people and minorities tend to suffer most.”

    Put differently: If an employer needs someone to perform odd jobs, and he values the work at $2 per hour, he will not hire a person if the minimum wage is $7 per hour, thus keeping unemployment in low-wage brackets higher than it would otherwise be.

    Brandon, higher minimum wage, for you, would more likely UNEMPLOY your tenants instead of giving them more money.

    Put another way, let’s say we DOUBLE EVERYTHING, minimum wage, price of bread, milk and gas, clear on up to the CEO’s of Fortune 500 companies! Does any one gain? The rent on your house may have doubled, but so did the Property Taxes, Insurance, HOA fees, the price of a new roof, and everything you BUY for yourself is doubled. In essence, NO ONE GAINS.

    The government tried FIXING the price of gold to get the US out of a depression and all it did was PROLONG the depression. Price fixing NEVER works, especially in the long term of a complicated economy.

  10. Roy N.

    Just to stir the pot a little here.

    Not all government regulation around minimum wages is bad. Such legislation came into existence to prevent the unbridled exploitation of labour and a hurried race to the bottom for wages.

    Everyone (especially in the corporate owned media) is very quick to point out that adoption of a living wage will drive the cost of goods and services astronomically, yet you do not hear the same complaint w/r to increased compensation for executive management which has outpaced growth in wages {which have been close to stagnate here when adjusted for the cost of living} over the past 20 years and its impact on COGS.

    Unfortunately, a raise in the minimum wage, perhaps to a living wage, would impact small business significantly. Despite being the backbone of job growth (in Canada anyway), small business carries a disproportionately high ratio of costs compared to the well healed large (inter)national corporation.

  11. Adrian Tilley

    Brandon,
    Interesting concept. I won’t go into all the arguments for and against, other than to say that many commenters (probably myself included) don’t understand all the implications (pro and con) of having/raising a minimum wage. One of the biggest pros is that minimum wage workers tend to spend every dollar they earn (because they have to in order to pay for rent/food/clothes), so that stimulates the economy, since it’s almost entirely based on consumer spending.

    There’s a fantastic audio debate on this topic here: http://intelligencesquaredus.org/debates/upcoming-debates/item/853-abolish-the-minimum-wage.

    It’s well worth a listen if you’re interested in the topic. Only about an hour.

  12. Mark Lenox

    Wow. I just had to reply to this one. The short answer is: yes you are completely crazy (hey, you asked).

    First of all, with such an increase, more of your tenants would actually lose their jobs because it has been proven time and again that unemployment jumps significantly within 18 months every single time the government has increased the minimum wage. (See http://www.heritage.org/research/testimony/2013/06/what-is-minimum-wage-its-history-and-effects-on-the-economy#_ftn32)

    In addition, on what do you base your assumption that a FIFTY percent increase in a company’s labor cost would result in only a “small increase” in the price of their product? I am very surprised at your lack of understanding of Economics 101. Let’s work through an example:

    Let’s say that you have a multi-tenant property for which you as the owner pay the utilities. Let’s say that paying those utilities represents 50% of your gross revenue on that property. I know for the purpose of this example, that is not realistic, however in the service industry, payroll expenses make up approximately 50 of gross revenue (see http://yourbusiness.azcentral.com/percentage-small-business-expenses-should-payroll-16096.html). Now let’s say those utility costs went up a whopping 50% all at once. (Also, the cost increase from a wage increase from $10 to $15 would be more than 50%, as every employer knows that the employer side of payroll taxes goes up as well). You would have to raise your rents at least 25% just to stay in business. If you raised your rents 25%, what do you think would happen to your vacancy rate? One could argue that the vacancy rate wouldn’t take a hit because the utility costs went up everywhere else too, but it is reasonable to believe that you would either have increased vacancy or a good number of tenants would not be able to pay. So what’s the alternative? Choke your profit down to compensate? Then why stay in business?

    Finally, this is a very short-sighted idea because ultimately the economy as a whole would take a major hit. That may be good for picking up foreclosure deals, but we all know in the long run it would be horrible for the country.

    Ultimately, government interference in the free market is never good for the free market. Ever. Period.

  13. Zach Davis

    You are correct that we will make more on our rentals and flips, however our costs will go up in direct proportion to our increased earnings, that’s just economics. Minimum wage workers don’t only work at McDonald’s, they also work in construction, manufacturing, distribution, delivery, and sales. All of which affects the cost of our goods and services. For instance, supplies from lumber yards will go up because of the additional costs all the way from harvest and transport to milling, warehousing, more transporting, sales, and delivery. That will transfer into our personal living expenses as well, every thing from consumables to clothes, electronics, vehicles, even our personal homes.
    In addition regular wages will have to adjust up because now people that were making $16 an hour as a department manager at Wal-Mart can now go make nearly as much just standing around at a gas station. There’s also the idea that the additional operation costs might cause businesses to close down or at least let current employees go with would raise unemployment and those unemployed wouldn’t be able to afford our higher rent rates. The reality is that when everyone makes $15 an hour, no one makes $15 an hour…
    For us here the important part is the investing. Regardless of what incomes and costs are the economy will adjust to the new normal and we will likely continue to have an income because our inflated dollars are sill working for us.

  14. Ben Leybovich

    Brandon – my friend. Congratulations!!! You finally, after all these years, wrote something that makes sense. I was just having a conversation about this with Serge S tonight – seriously. Every thinking individual agrees that the working poor need a reason to not be – a minimum wage that affords dignity would do that. And in all likelihood, while this will indeed be reflected in the corporate bottom line, not significantly!

    Good article, Brandon!

  15. Sharon Vornholt

    Brandon –

    I think you are spot on about needing a minimum wage increase, but I’m not sure about the $15 price tag.

    If and when it is raised we will pay a little more for things like a burger at a fast food restaurant. The minimum wage in the country is not a livable wage and that is the issue. Do I think workers need to show up and give 100% no matter what their wage is? Yes!

    You are sure to start some conversation with this one. Nice post

    Sharon

    • Ben Leybovich

      Interestingly, Sharon, I buy grass-fed free pastured cows, and I have them butchered and frozen, and I stick the beef in the chest freezer in my basement. I do not buy the crap fast food chains sell…

      Who does – the low information crowd who currently earn $9/hr and who would get a raise. Meaning – all of that extra money they get will find its’ way into circulation very, very quickly. On the other hand, due to competition the price of that burger will simply not be able to go up as quickly. The net positive to the economy will be huge!!! And, I think, net positive to consumer psychology would be huge as well.

      And all those apartments I’ve got – wow!

  16. Adam Schneider on

    Brandon,
    Your points are excellent. Raising minimum wage does help landlords. Large companies are making decisions based on efficiencies primarily, not based on MW primarily. While a free market would be perfect in an ideal world, ours is not a true free market the way it is set up.

  17. La Nae Duchesneau

    Yes, you are crazy. If minimum wage goes up, so doesn’t the price of goods and services. That increase will go onto us, the consumers to bare. Everything has a cause and a reaction. Will your tenants make more money. Sure they will. But they will have to pay more to live. You will pay more to live. You will not be better off.
    You know, my aunt June, now age 77, says she rather go back to her childhood where movies were 5 cents and make what she was making then, than to live now with what we are making. Money went further in those days. And I am inclined to agree.

    • Kyle Hipp

      Your Aunt June is missing one thing. One’s money might have gone further back then but he person didn’t. I can wash and dry my clothes in an hour and a half today, took a lot longer back then. I can talk to someone across the globe instantly even see them face to face. I can even fly to the other side of the world relatively inexpensively. I can cook my food quickly in a variety of ways in the vast majority of homes in the US. The illnesses and diseases that now have cures or better treatments are countless.
      My point is that our standard of living has gone up dramatically. If you want to live like they did in the 1950s, you defiantly can fairly inexpensively. No tv, radios are dirt cheap compared to then so you should be good. You might have a car, a washer, most likely a bathroom indoors. No cell phone, maybe a party line phone. Your home would be much smaller.
      At the end of the day I would much rather live today. I am here at work, working on a 16 hour shift. I am able to sit on my phone and have a world’s worth of information at my fingertips. It is pretty incredible.

  18. Maybe it’s because I work with generally, low-income families…however, I find so many of these callous comments, ignorant and repugnant, and representative of an America that does not recognize the hard work and situations that nearly anyone of you could find yourself in, at any time. Please be cautious as to how harshly you criticize folks and saying “they don’t deserve $15.00/hr”. Could you seriously live on this still rather paltry sum? Our food prices are artificially low, because we generally have slave labor in this industry. I am happy to pay more for my food and other products and/or services if these folks actually received a sort of living wage.

    The people I assist at my W-2 job are generally working at least one job, often two, to barely make ends meet…no, they are not driving Mercedes, generally public transportation. They are not the Regan/Bush stereotypes of welfare queens/kings.

    I am a capitalist as well, to an extent, but certainly not as a religion. We are fast becoming a dangerously bifurcated nation, one in which the haves have most, and most have not much. Our economy is largely dependent upon the ability of individuals to purchase goods/services. Obviously, what does this take, cash…when will they have this? When their income, earned or dictated by the government keeps up and/or surpasses inflation.

    Thank you

    • Jonathan Fischer

      Amy, I could not agree more with your comment. I just came across this article and I was sorely disappointed in both Brandon’s articulation of the article and all of the abrasive callous comments. It’s unbelievable to me that some people actually believe that those on government aid are actually just really lazy people stealing the American tax dollars. What is sorely lacking in this country is a sense of camaraderie and empathy with other human beings. Raising the minimum wage is a great thing, and I support it 100% whether or not that benefits me in my real estate ventures or not.

  19. vicki gleitz

    I agree that the minimum wage needs to be raised significantly. I totally am at odds with the reasons given here. The growth and actual encouragement of hard- working, low-wage employees being demonized is beyond disturbing. I am so saddened by many of these posts that I have “lost my words” [ an Autistic thing] and am therefore unable to provide the much needed response at this current time.

  20. Tom Lane

    A 15$ minimum wage would stimulate the economy to some degree, but I know some very skilled tradesmen who charge that in the off season, just to keep the lights on. If the government wants to influence wages and the economy, why not pass a law that EVERYONE gets a 10% raise on the first of every year? I don’t want the guy framing my house to have to ask…”would you like fries with that?”

  21. Kyle Hipp

    I was just touching on this subject the other day in conversation. Government actions to help the poor doesn’t do much for them but lock them into poverty, at the very least make it difficult to break out. It does make poverty tolerable, some might say comfortable. The middle class, largely gets squeezed by these programs. Subsidized Healthcare costs and regulations on care increase costs for those that do pay. Subsidized housing programs like section 8 increase the number of households, which increases rents and housing costs. The list goes on. So if minimum wage is raised, it will benefit many wealthy folks as they will have the ability to adapt and have the liquidity to benefit from the change. The middle class will largely be squeezed with the initial negative ramifications and be worse off for it.

  22. Melanie Smith

    Ok I’m sucked back in. Forgive me if someone has already said this. You should never give anyone more money without giving them more financial education and knowledge. Otherwise you’re only contributing to many of the issues discussed here.

    And I don’t lack compassion for low income people – I grew up that way and lived that way myself at times. And my husband and I give generously because we have been blessed to not be in that situation anymore. But giving many people more money often does the opposite of what is intended because they just don’t know how to handle it.

    Is it wrong to profit in times like this? Each of us can only decide for ourselves what role we play. I for one think you can still be ethical and compassionate…and a capitalist.

  23. I think everyone is asking the wrong question. The real question is not whether minimum wage should be increased – it is whether minimum wage should exist. I know nothing about economic theory and had no opinion until I spoke with someone who has a doctorate in economics and now I agree with him. It is very wrong to have a minimum wage unless you raise it regularly along with the increases in cost of living. It should be done regularly, probably yearly. It is akin to having a social security system with no annual increase in payments. It will eventually cause very unfair wages/benefits if inflation occurs, but there are no increases.

    I believe that there should be no minimum wage, because then employers can pay someone what they are worth, therefore allowing entry into the labor market and the opportunity to gain skills to work up the ladder. I hire some of my tenants to work on rentals doing unskilled labor such as clean-out. I cannot hire others because they are too slow to be worth the $10 per hour that I pay. Those people often resort to crime because they cannot keep any job they get. (Employers hire them and then let them go when they see their work level.) Minimum wage prevents employers from hiring them for what they are worth, which is about $5 per hour. They might be able to learn some skills and develop a work ethic if given the opportunity, but the government dictated minimum wage does not allow that option.

    Statistics show that the vast majority of people who begin in minimum wage jobs do not stay there. People need to be allowed to enter the labor market and work their way up.

    That being said, I hope they raise minimum wage from a personal standpoint. I have a boatload of low interest loans and could accelerate my payments when the inevitable inflation of everything occurs, but my payments stay the same.

  24. Joel Owens

    Brandon I didn’t read it all but it’s clear by your response that food will go up just a little if workers get paid 15 an hour that you have no clue about owning businesses and how they operate. Before real estate I was in the food business for decades in all facets.

    It’s a low margin and high volume business to generate revenue. Any minor blip at all can tip the scales to losing money. At Mcdonald’s they are already using computer kiosks in other countries and replacing employees. PEOPLE need to understand they will not be paid 15 an hour to mindlessly flip burgers at a fast food place. It’s not just 15 an hour. You as an employer have to match FUTA, FICA, and some are paying out health insurance premium offsets for workers. You start adding in all of this and the cost per worker is through the roof. Beef is in short supply due to droughts in many states. I have seen beef climb to 6 a pound now and going up. This is why I haven’t bought any food businesses lately. For many workers it’s not about how much they make but life choices and IMPULSE control. There are people who can make 100 into 100,000 and then people who get 50,000 and are broke in a few months. It’s all about choices and what they are getting paid. Want to get paid more?? They should get an education and improve their skillset and EARN the right to get paid more for what they do. I am not being harsh just realistic about the real world. These people are looking for handouts without working for it. They will say I am working 2,3 jobs etc. The body wears out from manual labor as you get older so they can’t burn both ends of the flame forever. The question they NEED to ask is what can I do or learn to get me to a better place as this isn’t working. I can go on and on about why raising the wage will have catastrophic results. Raising the wage does nothing each time the government does it. All that happens is costs of goods rises with it and you are at the same place as you were before. People think businesses can absorb these costs and who cares right?? WRONG A fact is America is employed by about 80% of small businesses owners making it week to week. They do not have the tax advantages of the big corps. Sadly when bills like this for hikes happen it’s the small business owners burdened with things that put them out of business. A business owner might make 100,000 a year. They SHOULD. They opened the business and took all the risk to make it happen. Workers are just clocking in and out and taking a check. They should be paid for working but to make the owner go from 100,000 a year to 50,000 because people should get 15 hr just doesn’t make sense.

  25. Alan Mackenthun

    I’m really disappointed Brandon. You’re trying to be too cute. You opened your post stating that minimum wage workers don’t deserve $15/hour and recognizing that people will get paid what they’re worth, but then you just seem to assume that business people will just grin and pay it. Bull! You won’t be quite as cute when you’re tenants get fired and they can’t make their rent. No one pumps gas anymore. Jobs do simply go away. You run a business. If you have to pay someone $15/hr and they only produce $10/hour of value, you’re not going to hire them. Your argument is built on really poor logic and has no merit whatsoever. at all. even a smidgen.

  26. David Krulac

    I had a job where I made the minimum wage, at the time $1., and nobody who works for me makes minimum wage.

    However, I do know people who have businesses where employee wages are more than 50% of their revenues. One is a service company, that provides a service and not a product. Doubling employee costs would have a drastic effect on employers who have high employee costs in relation to revenue. it would have a much more effect than raising hamburgers by a few cents.

    And also consider all of the ancillary relationships of costs and dollar thresholds. When the minimum wage was $1, the threshold for providing a 1099 to an independent contractor was $600 and that represented 600 man hour of labor. If the minimum wage is $15, and the requirement for 1099s is still $600, that represents only 40 hours, big difference.

  27. KYLE Z.

    Brandon, Where I live 15 dollars a hour is a high paying job. If they were to raise the minimum wage to that, What happens to the people getting 15 dollars a hour now? Do they get a five dollar raise? Did they turn the poor into the middle class? or Did they turn the middle class into the poor? My thought has always been minimum wage jobs are designed to be entry level jobs not skilled workers. Most people here do not get raises so as the price of things go up people just get poorer. If the feds raise the minimum wage the middle class just lose as they wont get the benefit of the feds helping them.

  28. Keith Bloemendaal

    I haven’t read all the comments yet, but I think this is more of a “State” issue, not federal. If it costs $500k to buy a 900′ house in LA but only $100k in NC, then the minimum wage shouldn’t be the same.

    Also, I continue to see “living wage” brought up, but who determines how much is a “living wage”?

    Finally, I just think raising it to double what it is now in many states would be horrible, not just on small town economies, but for real estate investors too. I am quite sure there are people on many of my subcontractor crews that make less than $15, so it would directly affect my business.

  29. Troy Fisher

    Brandon Turner … Use your own state as a case study. I’m not quite willing to do the research, but it’s there. Washington State as you know has an annually increasing Minimum Wage requirement. Every year the minimum wage increases vs the CPI, have your rents and government assistance gone up every year according to the CPI?

    Narrow down the search and dig deep down into the what is happening in Sea-Tac. They increased the minimum wage there to $15/hr. Have rents increased? Have cost of living increased? Has that submarket labor gone up or down? Since 1999 Minimum Wage has increased by $3.70, what effect has that had on Aberdeen?

    Sea-Tac makes a better comparison to the economy at large versus our own here in San Jose, where we went to $15/hr this year. But people couldn’t afford the housing here before, and even at 15/hr they still can’t at the assumed 1/3rd living expense ratios. I think while it is an interesting thought exercise to work through the problem, making it into a case study would be much more beneficial to the conversation.

    Also as an aside as someone who has spent 15 years in the QSR (fast food) industry. a 2/3rds increase in the labor cost is astronomical. When you are employing 30 people and supplying thousands of hours of work in a week a restaurant cannot absorb those kinds of costs.

    The 1% is based on McDonalds Corporate Revenue. From the McDonald’s Franchie website: McDonald’s continues to be recognized as a premier franchising company around the world. More than 80% of our restaurants worldwide are owned and operated by our Franchisees.

    80% of locations are independently owned and operated. That means the McDonalds in your town is not a corporate store, but owned probably by someone who lives in Aberdeen. In general, their net margin on every gross dollar sold is $.08 or less. Imagine what you would do if your margins were the same, and someone came along and told you your biggest monthly cost (probably your mortgage) was about to increase every month by 2/3rds?

  30. Joel Owens

    Well Turner I think you stepped into a big pile of POO, POO not knowing what you were starting with this topic ! LOL

    Sometimes ideas that seem like they have merit are really a pile of crap.

    Large companies that have to answer to shareholders who buy stock would have a max exodus. Can you imagine saying your dividends and the stock price went way down because would had to pay burger flippers 15 an hour and took a huge hit against our companies numbers??

    A lot of people would be out of a job. The burgers would go up more than a few cents. To retain the same profit margins you would see it go up by dollars. The same workers at Mcdonald’s complaining about pay and happy to get 15 an hour would then jump up and down in fury about paying 3 dollars more for that burger.

    Minimum wage jobs are minimum for a reason. If people want to tip workers for better service then that is fine above their base rate.

    When someone goes into a restaurant they just see it hopping and think ” Oh this place makes tons of money they are rich!!”

    They do not see the times open when it’s not as busy when you are losing money. They do not think about the rent, utilities, workmans comp., uniforms, having to re-image the store every so many years, litigation insurance, accounting, franchise fees, etc.

    Food and labor costs alone generally run if you are a stud 50% total to 48% total. 15 an hour would bankrupt the food industry. I will get off the soap box but man it’s a horrible idea to raise the minimum wage like that. A place with an ultra high median income over 100k might be able to absorb the average price hike better but not “average town America”.

  31. David Krulac

    Brandon, One thing that has affected some of my tenants is the Federal re-definition of working full time. It used to be that 40 hours was full time, now recent legislation has re-defined 29 hours per week as full time. several of my tenants had their hours cut from 40 to 28 or 36 to 28, thereby reducing their income by up to 30%. This reduction in people’s pay check is totally unwarranted and hurts people, like my tenants who can afford it the least. Instead of raising the minimum wage to $15, lets give back to these people the 30% wage cut.

  32. This is my first post to one of these column posts/articles. Let me say that that you aren’t crazy. However, you and many of those who replied are very, very ignorant. In your defense, you aren’t trying to explain why increasing minimum wage is bad for the United States.

    “Do Minimum Wage Workers Deserve $15 an Hour?”
    – That isn’t for you or me to decide. However, it should be at least $10.75. Had wages kept up with inflation, all workers would be receiving, at a bare minimum, $10.75. This is one of the objective ways to measure where minimum wage should be set.

    “Either prices will rise in general, or less people will be hired, defeating the purpose.”
    – Typical, generalized, conservative talking point. Okay, let’s freeze minimum wage until the end of time. Will prices – in general – stop rising? OF COURSE NOT! Prices/Cost-of-living will continue to increase regardless of whether minimum wage decreases, stagnates, or increases.

    “And you’re right Brandon, product cost will go up, so will price, meaning less people will buy. The less people buy, the less shifts are offered and then ultimately that business entity will have to decide whether or not to stay in business.”
    – Again, prices will increase regardless of what you do with minimum wage. There is one point I need to make in regards to the effects of raising minimum wage: It’s obviously not a 1:1 ratio. The replies to this thread are all generalized: “you raise minimum wage, you raise product prices on the consumer.” The data shows that the costs are minimal:

    #1. A 10 percent increase in the minimum wage resulted in a 0.4–0.7 percent increase in restaurant prices. Much of the increase occurred within the first month of the wage hike. In the fast food sector, prices rise 1.5 percent in response to a 10 percent increase. (http://goo.gl/JHoMTO)

    #2. A new report released today (Wednesday, Oct. 24), national Food Day 2012, says that a proposal pending in Congress to raise the minimum wage would increase retail food prices for American consumers by at most 10 cents a day, while helping nearly 8 million food workers and 21 million workers in other industries. (http://goo.gl/m7w8iZ)

    #3. Raising the minimum wage to $10.10 an hour would increase the price of a $16 product at Walmart, such as the typical DVD, by just a cent if all of the extra costs were passed on to consumers, according to an analysis by an economist for Bloomberg News. (http://goo.gl/G8e7py)

    #4. Those same Berkeley researchers estimated that the company could boost its pay to a minimum of $12 per hour and cover the additional expense by a one-time price hike of just 1.1%, costing the average Wal-Mart shopper only an extra $12.50 per year. (http://goo.gl/DHLIsB)

    “If someone on minimum wage would just save a fraction of their salary….”
    – You make it sound like it’s SOOOOO easy to get by on minimum wage. Yes, because people on minimum wage aren’t trying to save or they’re just indulging themselves day in and day out.

    “..pay their bills, that the housing market would boom.”
    – What in the world…..

    “Does someone on minimum wage need a smartphone for instance?”
    – Louie Gohmert (R-TX) is that you? Let the victim shaming begin. (Note: What’s with the assumption that your Average Joe will have a smartphone and not a prepaid plan? (I do.) What assume the worst in those paying pennies?)

  33. Wouldn’t raising the minimum wage also end up raising repair expenses due to higher material cost and higher labor cost? Workers who do dump runs would raise their fees and same for repair workers especially on the lower end. Any workers quoting at the lower end of $9/hr would prob raise to $14/hr

  34. Jonathan Godes

    http://www.npr.org/blogs/thetwo-way/2014/07/19/332879409/states-that-raised-minimum-wage-see-faster-job-growth-report-says

    http://seattletimes.com/html/localnews/2023116005_wageimpactsxml.html

    Maybe instead of everyone pontificating about what they think will happen and playing “armchair economist” you should just read what the actual economy is doing in states that have raised the minimum wage significantly.

    Of course everyone who is posting on here has a degree in economics, right? Guys, the verdict is in and the sky has not fallen. In fact, raising the minimum wage is actually good for the economy, which is good for everyone. But don’t take my word for it (I don’t have a PhD like all the other apparent expert commentators on this thread), just look at the results.

    • see this actual detailed study re actual effects of 2007 minimum wage increase and its effect on low skilled workers ( the ones that are this is supposedly meant to help)

      http://econweb.ucsd.edu/~mwither/pdfs/Effects%20of%20Min%20Wage%20on%20Wages%20Employment%20and%20Earnings.pdf

      In brief, from the study
      ” Over three subsequent years, we find that binding minimum wage increases had
      significant, negative effects on the employment and income growth of targeted workers.
      Lost income reflects contributions from employment declines, increased probabilities of
      working without pay (i.e., an “internship” effect), and lost wage growth associated with
      reductions in experience accumulation”

      This study was conducted by economists based at University of California, San Diego.

      • “Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.”

    • Troy Fisher

      Like all Journalism, this article says both sides. In Study A nothing Happened, Researcher B said this was the effect. Theory C says this won’t happen. But according to Think Tank X the opposite occurred, Policy Professional Y demonstrated that it did conclusively did happen, and government agency z is reporting this.

      The study was done by Nicholas Potter, now a researcher at Washington State University. He said some businesses in Santa Fe did close and some said it hurt their competitiveness. But workers were overwhelmingly positive about the pay hike. And the fear of massive restaurant closures didn’t happen, he said, though the cost of eating out did go up some.

      A study by the Congressional Budget Office last month found that raising the federal minimum to $10.10 would boost the earnings of 16.5?million workers, but an estimated half million would lose their jobs.

      But directly relevant, ask any of the SF investors what fun it is when you start investing in the city with rent control, and trying to purchase rental properties and the cost of doing business, and how many people actually qualify for:

      Please update your browser

      Based on the asking rental price. Source: RentVine.com

      when they are making $15/hr. A typical 1/3rd of income for living expenses still puts housing out of reach in this market. How is any of that helping people?

  35. Devin Woods

    I believe you do make a valid point, and the impact of the minimum wage increase may be beneficial for real estate investors in the short to mid term. The long lasting impact is what may be more difficult to measure.

    On one hand, it is very conceivable to see our ability to increase rents. This may more specific to the actual market that each investor’s rentals are in though. If your rentals are in a lower income market, and worker’s incomes rise, you therefore would see an increase in the cost of renting. But, if you believe that some workers will lose their jobs, and there are estimates by economist from almost no job losses to 10 million job losses. If more people lose their jobs, then the higher rents may not actually be sustainable.

    On the inflation side, I believe you are correct that we would be protected from higher rates. With the Federal Reserve’s relentless quantitative easing taking place the last few years, and zero inflation still resulting, I don’t know that a minimum wage increase would have any impact. But again, it is difficult to actually project out for the future.

    I think you brought up many good points. One thing that I believe you did outline, is even if we do not benefit from the increase, we are at the very least protected economically from it. So if we don’t actually benefit, we shouldn’t see a loss as a result.

  36. Raising the minimum wage is, of course, a great idea. But if $15 per hour as a minimum wage would be great for the economy, $30 per hour would be even better! We could DOUBLE the stimulation of the economy!!! A $15 per hour minimum wage is for chumps! $30 per hour would be a true “living wage”, affording everyone “dignity” and truly recognizing the “value” of the work performed by “the working people.”
    : )

  37. Jennifer Tornus

    The arbitrary number of $15/hour for minimum wage is certainly ridiculous and is not going to happen any time soon. No offense at all to anyone on this post, but I am not even sure why people (other than protestors) are even talking about it.

    However, what is being talked about…at least by politicians…is raising the minimum wage to $10/hour. I am ALL FOR this increase and hope it comes soon. It’s disgustingly overdue. What that increase will do is really just “catch up” minimum wage to the same buying power it had decades ago. It will be good for the economy in both the short and long term. Most economists agree and even most politicians agree (Dems and the GOP) to the $10/hour level.

    Will some businesses suffer and even close? Sure. Will some employees lose their jobs? Sure. But it is for the overall good. Because, right now, there are hard working people slogging away for 40 hours/week and STILL not making enough to cover their basic necessities and receive govt. assistance. No one who works 40/hours a week should be forced to be on govt. assistance.

    And when so much of our working population is on govt. assistance because companies like Walmart and the local McDs don’t pay a living wage…WE THE PEOPLE and our taxes end up SUBSIDIZING businesses like Walmart and most of the national fast food chains. It is ludicrous. Think about it. Even if you have never set foot in a Walmart and never shop there….your taxes are, in essence, helping them pay their employees.

    And if a company cannot afford to pay its employees a living wage, than they SHOULD be out of business. Not that $10/hour is a living wage in many parts of the country, but at least it would pull a lot of people out of poverty and off of the gov’t. coffers.

  38. Joel Owens

    Paying 10 bucks an hour still will not do anything. The people will still be poor and will still have trouble paying the bills. Inflation is coming and people haven’t seen anything yet.

    What some are arguing on here is that raising minimum wages by dollars per hour will somehow with a magic leprechaun only increase costs of goods sold by a teeny, tiny amount thereby rocketing those that barely make it by into the middle class with all this extra cash. That is such a delusional proposition.

    The middle class has been dwindling for decades and it will continue to do so. To have a comfortable life you have to be outpacing inflation and growing your money at a faster rate of return. Many of these people that make minimum wage are not savers. They spend and buy junk all the time. Not everyone but if analyzed a big portion by crap. If they took that same money and invested it they would likely start to see their lives change. To get true change it is hard and not a magic pill. This is why many of them will still be doing what they do forever.

    • “Paying 10 bucks an hour still will not do anything. The people will still be poor and will still have trouble paying the bills.”
      – So a possible is solution is to keep wages the same? Eh?

      “What some are arguing on here is that raising minimum wages by dollars per hour will somehow with a magic leprechaun only increase costs of goods sold by a teeny, tiny amount thereby rocketing those that barely make it by into the middle class with all this extra cash. That is such a delusional proposition.”
      – It’s actually a fact. Depending on which evidence you look at and for what industry, the effect (on consumers) is an increase of 0.X to 2.X%. (Look at my 4 links above.)

      “Many of these people that make minimum wage are not savers. They spend and buy junk all the time. Not everyone but if analyzed a big portion by crap. If they took that same money and invested it they would likely start to see their lives change.”
      – Let’s see the evidence that poor people waste their money on crap. Even if you had non-bias evidence, it wouldn’t matter BECAUSE you think people could actually invest in anything at all when they make dirt?

      For Heaven’s sake, it costs $5-9 dollars for commission alone if someone decided to buy stock. Then there is the issue of actually being able to invest $XXXX for a period of >1 year without losing it.

  39. I understand the tongue-in-cheek nature of your argument, but you missed one key point. After the minimum wage goes to $15, all your $9 tenants will be unemployed. What employer is going to keep a high school grad on the payroll when they suddenly have to pay college grad wages. Once they start offering $15, they’ll have plenty of highly qualified applicants from which to choose.

    • Jeff Lee

      “After the minimum wage goes to $15, all your $9 tenants will be unemployed.”
      – Since when? There is a burger chain (Maddy Moo’s?) paying over $10 an hour and they’re doing just fine. Then you have a place called CostCo paying at least $13 for entry workers and benefits. How are they doing? Much better than Wal-Mart.

      “What employer is going to keep a high school grad on the payroll when they suddenly have to pay college grad wages. Once they start offering $15, they’ll have plenty of highly qualified applicants from which to choose.”
      – The issue here is the belief that $15 is a college wage. At 160 hours a month, that comes out to $28800/annually before payroll taxes.

      If you believe that amount comes near a college wage, I’m unsure of what else to say

  40. Joel Owens

    I agree with Jerry. Going to 15 an hour just doesn’t make sense.

    “Even if you had non-bias evidence, it wouldn’t matter BECAUSE you think people could actually invest in anything at all when they make dirt?”

    There are multi-millionaires and billionaires even that came to this country that couldn’t even speak English. They had nothing and worked their way to the top. Everyone has the same opportunity even if they have just the shirt on their backs to control their destiny. The key is can they handle rejection and being told no a bunch of times or do they quit and give up like most of the population out there. There is a way to break free from poverty but many people simply will not make the sacrifice to do it. Right now there might be someone dropping 100 a month on cigarettes or booze. 200 on cable. Take out those 2 items and bam 4,000 appears in a year to start investing. Those are just two changes out of money. Success is out there you just have to want it bad enough. That is why I take issue with the governments “robin hood” theory of taking from people who work hard to get to where they want to be only to try to redistribute it to the masses who didn’t make the sacrifices to get ahead. I think higher wages should be EARNED and not a MANDATORY handout by the government in the form of a wage hike.

    Life is what you make of it NO EXCUSES. I see people saying a job is to hard for them so they stay at home and watch TV. I then see someone with no arms and legs doing a marathon. People quit in their minds and sell themselves short.

    • Mark Lenox

      Bravo! I take heart that there are some who still understand what opportunity is all about.

      I have a question for those advocating that people making minimum wage have a “right” to a “living wage” (however they define it). Do you really believe that these people are too stupid to earn a better wage on their own? My point is that minimum-wage advocates must logically by definition believe that some people are BETTER than others – more capable. That may be the belief in other countries, but not in the United States. ALL are considered equal… equal opportunity for success and failure. The only obvious exception are those who are not physically or mentally able. Again I ask, do minimum-wage advocates believe that there are citizens who are not good enough to make it on their own?

      • “I have a question for those advocating that people making minimum wage have a “right” to a “living wage” (however they define it). Do you really believe that these people are too stupid to earn a better wage on their own? My point is that minimum-wage advocates must logically by definition believe that some people are BETTER than others – more capable.”

        It isn’t an issue of whether anyone feels X person is too dumb to climb up the ladder. It isn’t even about capability. (To you it is.)

        What it IS about is keeping up with inflation, among many things. The price of gas, milk, and other daily living expenses keep increasing annually. How can those at the bottom of the totem poll survive? It’s about maintaining a standard for the poorest of the poor.

        “They should go to college” you say? Awesome. But how can they when the cost of tuition is increasing year-by-year? When you have states (i.e., Louisiana) gutting funding for higher education, it falls to the Average Joe to have to pay for the increasing cost. And how can they when they can’t go to school to make more money?

        “Stop buying booze, cigs, and soft drinks” you say? What if they already do (or don’t) such things? How many different ways can you try to find fault in minimum wage earners?

        At the end of the day, the objective way – among many – to measure minimum wage is to match it to inflation ($10.75 in today’s dollars).

  41. Jennifer Tornus

    @Joel Owens
    I was trying not to make my previous post too long, lol, and did not address some of the down sides. And I actually agree with some of what you have said.

    Minimum wage/low wage earners will always be at the bottom of the financial ladder. They will almost always have a tougher life because of it. For some its an easy choice and they stick with it. For those who want to climb higher…it is hard, it’s very hard. It is certainly true that some of that “raise” will be eaten up by higher costs. But then, that is part of the problem. Minimum wage has NOT kept up with inflation. And, of course, inflation has happened anyway which puts minimum earners further and further behind every year.

    For example, between 1980-1990, minimum wage only increased by .70/hour. And again, from 1997-2007, it also only increased by .70/hour. Those are two different TEN year periods minimum wage didn’t go up even $1/hour. Currently, it has been over five years since the last increase.

    And, yes, generally speaking spenders will be spenders and savers will be savers…regardless of how much or little they make. But I would like a country…and I’m putting on my rose-colored glasses :)…where people can work full-time, even at minimum wage, and still pay their basic bills. Not work their butts off every year and STILL fall further and further behind because inflation outpaces their hourly wage. It is just a bit reminiscent of the old “company store” model that occurred during the Industrial Revolution.

    And, yes, some people bring it on themselves with foolish spending. But people at all income levels often spend their money foolishly and impulsively…and it is especially frustrating to see when it is people who can least afford to do that. But people should still be paid enough to pay their basic bills and then…if they run short because of foolish spending…that’s on them and hopefully their paycheck still reflect enough money earned that they don’t receive gov’t. handouts.

  42. JT Spangler

    Way to make REI political, Brandon! 😉

    Personally, anything we can do to close the gap between the working poor and the 1% is good by me. Wage disparity is a huge issue in this country, and I don’t honestly understand how anyone can even argue it.

  43. Jim Robertson

    Great article! I agree this will be a long term benefit for landords as inflation tends to benefit those with debt (mortgages). I dont think that anyone has brought up how this will affect maintenance of properties ( I am willing to discuss micro while everyone else discusses macro economics). If the minimum wage where I live doubles, I will be less likely to hire help for maintenance issues. Skilled trade, electricians and plumbers, probably won’t see their wages rise much as they are well over $15 per hour in austin. However I am probably going to do more cleaning/make ready work myself. A rise in minimum wages will change what my time free time is worth.

  44. Adam Moehn

    Regardless of what the minimum wage gets set at, I think the more important change that needs made is to index it to inflation. Then it will be at a set real level which will create better stability for anyone that is working at that wage and stability helps the economy as a whole. And as a great bonus, we won’t need to have this argument over what arbitrary hourly amount minimum wage should be every 5 years.

  45. Bill Neves

    Hate to be blunt but…. This is selective economics. A rising tide lifts all boats. Emphasis on ALL. However, you can’t select which boat to lift. If I’m at $15/hr now, what happens to me? What about the $18/hr wage, etc.

    If I’m at $14.50 now and someone else is at $10 and we both got to $15 should I feel shorted?

    I was totally broke when I started. Nobody gave me money, just a chance. EVERYONE has a chance. Some choose to be given a fish instead of going fishing.

    • “If I’m at $14.50 now and someone else is at $10 and we both got to $15 should I feel shorted?”

      If you’re at $14.50 now and min. wage goes up by +$5.00, then you should be making $19.50. If not, look to your employer, not government.

      • Bill Neves

        Econ 101 – If the minimum is $15 no one will automatically get a raise compared to the minimum. How would that happen? If you buy material from Home Depot for $100 and tomorrow it’s $120 where does the extra $20 come from? Air?

        The minimum wage folks don’t consider the impact. Supply and Demand dictates if there are a lot of something the cost goes down. Christmas lights are cheap right now right? If there are a lot of workers out of work, wages go down, not up. That’s counter to economics.

        • Jeff Lee

          “If the minimum is $15 no one will automatically get a raise compared to the minimum. How would that happen?”

          Why not? it’s common sense. If the new minimum is $15 and you’re currently making X over the current minimum, when the new minimum takes effect, you should be making the same amount ($X) over the new minimum.

          Not increasing it for veteran workers makes it unfair to them (to make near the same amount as the new employees). Again, this is management’s issue/fault.

          “If you buy material from Home Depot for $100 and tomorrow it’s $120 where does the extra $20 come from? Air?”

          First, the premise of the price increasing by $20 is wrong. (I have to point this out before allowing you to continue with this premise.)

          Second, you need to look at the bigger picture. Product prices will increase A LITTLE. Benefits? Increased purchasing power for the consumer AND local business. When everyone is making more money, that is (a) increased tax revenue and (b) more money injected into the local economy.

          Home Depot may be paying $10-20k more in wages, but they’ll mark items up to help coup the cost AND make $50-60k thanks to everyone making more money.

          “The minimum wage folks don’t consider the impact.”

          Sorry, but anti-minimum wage folks don’t look at the long-term benefits.

          GDP growth of over $22 billion
          (http://www.epi.org/publication/raising-federal-minimum-wage-to-1010/#_note1)

          The Chicago Federal Reserve Bank showed that every dollar added to the hourly minimum wage resulted in $2,800 in yearly additional consumer spending by that worker’s household.
          (http://blogs.reuters.com/great-debate/2012/07/24/where-is-obamas-promised-minimum-wage-hike/)

          Additionally, a 2009 study from the Economic Policy Institute predicted that upping the minimum wage to $9.50 an hour would result in $60 billion in additional spending over two years.
          (http://blogs.reuters.com/great-debate/2012/07/24/where-is-obamas-promised-minimum-wage-hike/)

          Furthermore, this additional consumer spending would lead to more job creation—an estimated 100,000 new full-time jobs.
          (http://www.csmonitor.com/USA/DC-Decoder/2012/0829/Obama-vs.-Romney-101-5-ways-they-differ-on-jobs/Minimum-wage)

        • Bill Neves

          I am 64. I had some pretty high powered corporate jobs for 35 years. I lost money from a corporate retirement like a lot of people. NO ONE is going to hire me for anything now other than ‘would you like fries with that’? Should I complain and ask to get bailed out by those who didn’t lose money? It’s not FAIR! Instead, I chose to get going again, in the greatest country on the planet. We all can choose to do better, I’m doing real estate and am doing fine again.

          Barring injury and disease, usually choices, good and bad, put or keep people where they are.

          I mention my age because I’ve been around the block a bit so have seen a lot of things. Some of these arguments are great but not reality based. Doesn’t work in the real world.

          And old quote: He (or she) convinced against their will is of the same opinion still.

          It’s a waste of valuable time to argue over ideals when people are so diverse.

          Best to agree to disagree and move on. Oh, excuse me, I have another real estate lead call coming in. I choose to go that route.

          Thanks for playing…

      • Troy Fisher

        So if minimum wage is going up everyone should get the same increase? In september there were 122.2MM employed individuals in America (http://www.bls.gov/news.release/eci.t01.htm)

        In November, the average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.6 hours. (http://www.bls.gov/news.release/empsit.nr0.htm)

        $5×34.6hrs x 122.2MM = $2.1406B in increased wages a week across the nation! That’s 105.70300B over the course of a 50 week year. Where is all the money going to come from?

        Let’s be realistic, when the ocean rises, the mountains get shorter, not taller.

  46. There is an (advanced) economic principle that states “It is really easy to spend someone else’s money.”

    Brandon, you would like to invoke that principle, albeit, on an indirect basis. You would like the government, that imposes prices (minimum wages) to raise that minimum wage so that your customers have more income to spend on your product. You note that you would lose some tenant who would, with a higher income, qualify for a loan and thus would buy their own home. You may also gain when some minimum wage earners (I assert without proof that most min wage earners are in their first job and many still live at home with their parents) get their first apartment. But what about the number of current minimum wage earners who would lose their jobs when their employer decides to shut down rather than pay the higher wages to many or all of their current employees since doing so would cause that employer to lose money every month?

    Why not impose a minimum interest rate. With that higher rate, bankers and lenders will earn more money and thus can spend more on everything. Or perhaps require minimum payment to plumbers, electricians, carpenters, property managers etc)? After all, with higher incomes, these groups could go out and buy more,

    While you may be a meat-eating capitalist, these views that you espouse do NOT make you a free market capitalist.

    Think about it.

    (OK flame on …. but I will only reply to Brandon’s responses)

  47. Matt Schelberg

    I heard that Brandon Turner is planning a follow-up article on abortion next week. Something to do with population growth and the demand for rental housing. Just kidding! 🙂 Cheers, Brandon, on a gutsy article. Though I disagree with you on this issue, it is an interesting debate.

    For all the Econ majors out there who are looking for a thesis topic: oDesk just instituted a $3/hour “minimum wage.” Opportunity to solve once-and-for-all the effect of the minimum wage on employment!

  48. Joel Owens

    It has become clear to me that some of the posters here espousing raising the minimum wage rate have never owned a business or employed workers.

    Theory is fun to talk about but until someone has actually been on both sides they do not have credibility to talk about raising rates like snapping your fingers and then all this profit is going to magically appear out of thin air.

    People run businesses because it gives them a level of success and income they likely wouldn’t otherwise have for working for someone. It’s what is called a FREE MARKET. If you do not like what you are getting paid working for someone quit and go do something else where you feel validated and compensated appropriately. If you do not have the skills to earn what you want then get the training and get off your butt to do it.

    I went and ate at steak n shake today. We go there maybe once a month or so. Nice server there who is always jovial and energetic and eager to please. Other servers stand around doing the minimum and twiddle their thumbs complaining all the time about they work too hard and not enough pay. Guess what we go back today and that energetic server is promoted to a manager position making much more than he did before. The person decided to handle their own destiny versus &itch and moan about how society is against them and life isn’t fair. I am just tired of the wining people wanting handouts out there. Get out there and make things happen.

    • Jeff Lee

      “It has become clear to me that some of the posters here espousing raising the minimum wage rate have never owned a business or employed workers.”
      – Oh, so we (non-owners) can’t possibly understand the cost of labor and the impact an increase in labor will to for a business?

      “If you do not like what you are getting paid working for someone quit and go do something else where you feel validated and compensated appropriately.”
      – Sounds great a pep rally. But how do people find a job they feel pays them what they’re worth when, for example, they can’t afford the rising cost of tuition due to stagnant wages?

      “The person decided to handle their own destiny versus &itch and moan about how society is against them and life isn’t fair.”
      – It’s easy to categorize workers into “Those Who Deserve” and “Those Who Don’t.” This isn’t about analyzing who was raised right and taught the value of a work ethic. This IS about how we protect our fellow, poor Americans.

      – The lack of empathy for poor American is amazing.
      “They need to save and stop buying junk.”
      “They need to get an education.”
      “….manage their money.”
      “….find a better job.”

      – None of the anti-min. wage crowd talks about matching min. wage increases to inflation to help keep the number OBJECTIVE. Le sigh.

    • Bill Neves

      Agreed. It’s stunning how many uninformed people think because you’re a biz owner you can just give $5/hr or whatever more to everyone on a whim. Until someone has run a company, bid jobs for free, had employees, made payroll and gone home with nothing because they had to pay the employees first and accounts payable checks are late, they have no clue of the ‘real world’.

      Funny – someone posted about basically being heartless and telling people to stop wasting their money and buying junk. No accountability. They want to keep wasting money and buying junk. I need a big screen, internet, cell phone and cigarettes. That’s a minimum lifestyle. Really? Then pause the XBox and go make money to pay for it. Classic.

      Easy to espouse how things ‘ought to be’ with no basis. Interesting discussion though! Gets people worked up for sure!

  49. Joel Owens

    Jeff part of growing is accepting the fact that no matter how much you feel passionately about your position it won’t change everyone’s minds on theirs.

    Some might come to your side not all. I could talk for 24hrs to someone and at the end of it we see things still very differently. Doesn’t mean someone is right or wrong.

    I made minimum wage once as a kid. I worked 70 to 80 hrs a week at 15 years of age at a fruit market. Back then in the late 80’s in came under farming so there were no hourly limits like they have placed today. I did get time and a half over 40 each week so it came to maybe 7 an hour or so.

    I didn’t complain as I was making more money than others at my age. At 15 they would have 10 bucks from their parents for the week and I would have 200 to 300.

    I make much more today but I worked and learned the skills to get there. If you feel a job should pay more and it doesn’t then simply find another job or business you love that pays well and go after that. In a perfect world everyone would be millionaires and no poverty or sickness, hate, or crime would exist in the world. We have to be here on Earth though where reality is what we have to deal with whether we like it or not. There are a lot of costs business owners face that unless you have ran a business wouldn’t know about. So until someone has walked in a business owners shoes the complete perspective is not obtainable.

    Many workers just see business owners as people who can give them unlimited hours and every increasing wages and they are rich etc. They do not see that person started out with nothing years and decades ago and created the success they have today.

    I often mention people do not need to go to college unless they are sure they can get a high paying profession. Many go to appease parents and then get out of school with a bunch of junk student debt that is not dischargeable in BK. That college degree does nothing for them in a lot of cases.

    One of the biggest problems out their is NOT the minimum wage but trillions of student debt loans hanging over our society with degrees that do not pay squat.

  50. Business owners will not accept lower profits. Yet, the minimum wage MUST be raised.

    In the interest of fairness, why not simply reduce the hourly wage of all laborers making over $15 per hour, down to $15 per hour, to pay for a minimum wage rate hike? In the short term, the guy who was reduced from $20 down to $15 per hour might be temporarily saddened but ultimately, how can anyone argue against equality and fairness????

    Owners and senior managers might see a short lived drop off in the productivity and enthusiasm of labor in those whom made the small sacrifice of wage reduction, but how can any rational person argue against equality of outcome!!!

  51. A few thoughts:

    I’ve spoken with Brandon in the past and after listening to all these podcasts get the idea that he’s a fair guy. However, I think that this post opens up a topic that wasn’t quite thought out in terms of how it would be received.

    For starters, everyone here please realize that there are paid shills that troll posts and incite a certain line of thinking. Reading through a good amount of these, I think I’ve probably identified at least 1.

    Second, the issue of “fairness” didn’t actually require comment. I recommend you stick to the issue (does higher minimum wage support RE investing?) and leave out the editorial. Mostly, this may help quiet issue one above. I don’t think anyone deserves anything for whatever it’s worth. It’s all a gift and potentially a relatively short one in the human saga.

    Finally, take a look at the faces next to all these (mostly respectful) posts. These faces don’t reflect the American demographic of color and given the nature of this site almost certainly don’t reflect its SES. It’s easy to go on about “entitlement mentality” when in such safe company.

    On the topic itself, I’ll offer that we don’t live insulated in the world. No matter what the minimum wage is here, other countries will continue the global wage race to the bottom. I suspect burgers and walmart crap will remain pretty much the same. I bet oil drives inflation more than minimum wage in America.

    Respectfully,

    Chris

  52. tyler smiarowski

    Just let the free market determine the minimum wage. The true minimum wage is different across all segments of the economy…some industries require higher wages..others do not. Setting a economy wide minimum wage is like trying to fit a square peg in a round hole. If you want to arbitrarily set a minimum wage at $15 why stop there? $15 isn’t all that great…I think it should be $30 per hour..or how about $50??

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