This is part 2 in a 4 part blog series
I am assuming that the first polls to indicate that a $15 minimum wage proposition on the ballot in the coming November election will prevail, will end the steady rise in the price of homes and condos in San Francisco. Furthermore it will begin a decline in the price of homes at all price levels as more people figure out what is happening to home prices.
I assume that among the 52,000 Republican voters there are at least 1500 homeowners who will see the consequences of this election as dramatically harming the city. They will put their homes on the market. There are roughly 120,000 residential homes and condos in San Francisco. Approximately 500 of these are put on the market every month. In the current hot market there are as many as 10 over bids in cash for these, mostly million dollar homes. I believe that an increase in the number of homes on the market of 1,500, in a few months, will stop the rapid growth in home sales and reverse it.
For me, this can mean a loss of several hundred thousand dollars in the price of my home. I am not planning to sell my home despite this paper loss because this is an extraordinary once in a lifetime opportunity to study the impact of an anti Commerce political move. I can report on it firsthand.
Who will be impacted by a $15 minimum wage?
The first step in understanding the consequences is to understand that the prices of labor in an open market are on a ladder of fairness. If you have been a manager, as I have, you will be aware that wages are based on a ladder from lowest to highest in which each person is paid in a way that he/she is willing to believe is justifiable based on their contribution to the enterprise. When the bottom wage is raised by a minimum wage law, all the levels of wage above that are also raised in order to maintain the structure of output and contribution within the business. This doesn't impact wages above $100,000.
The same is true from the top down. I have been an expert witness on executive compensation in the utility industry for decades and I can demonstrate that raising the executive wages has direct impact on raising everyone else's wage inside the company. Additionally since there are many identical technical jobs that overlap in the market such as an accountant or office manager they act as wage markers. Consequently, the whole local labor market reflects the contribution level of most wages based on a legal minimum wage that are transmitted throughout the wage structure of the area.
The consequence is, when the wages at the bottom go up by 40% in San Francisco, it will raise all local wages by roughly the same amount.