Friday, October 24, 2014

California - Poverty

I read today that the U.S. census is using a new measure to gage the level of poverty. Gues which state makes the top of the list with the new measure? That's right, good ole California, where the poverty rate is over 23%. I am not surprised because even though we have many people who are above the poverty line, in California being above the poverty line is not enough. The cost of living in California is one of the highest in the nation. If you are too survive here, you need to make much more than just above the poverty line. In fact, to live a modest middle class life style you need to make over $60,000. Since the median wage in the U.S. is about $28,000 and the average wage about $43,000, most people are not even close to making it in California.

So what is California doing about? There is a new move to raise the minimum wage. Will that help? It would if employers actually hired people with low or no skills to work full time at that wage. Unfortunately they will not. There is a reason employers pay low wages to those who have low or no skills. It's because that's all the market will alow. You can't pay some one to do work that the market will pay for. Customers will not pay $10 for a Big Mac. What will happen is that if (and when) the minimum wage is raised employers will slash hours, cut the head count, and automate as much as possible. If that does not keep them profitable, then they will close up shop and move to another state (which is already happening in California). The end result is that employees will make more per hour, but fewer will make more in total pay because hours will be cut, people will be laid off and replaced with technology, or there just will not be any jobs to be had (because the business has moved or closed it's doors). The poverty level will actually increase.

What needs to be done is for the minium wage to be abolished, taxes lowered, regulation streamlined and reduced, workers compensation reformed and made less expensive, union power and influence curtailed, all business related costs lowered as much as possible, and to make the business climate made as positive as possible. Why? Because this will actually create a flood of jobs that will eventually pull people out of poverty.

The only thing that pulls a person out of poverty is a job. The only way that there will be jobs in good quantity (and eventually quality) is if businesses feel that it is in their best interest to be in California. Is that going to happen? Not in my lifetime.