Happy Tuesday, as I woke up and did my routinely Facebook/Instagram/Email check, I stumbled across an article from Forbes about the minimum wage hike in California. As a small business owner in California who is up to date with legislature that will have a large impact on me, and thinking there was no way one silly article could rain on my morning parade, I clicked on it. Now before I tell you the content, my thoughts, or my prediction of this article, I feel that I should tell you a little more about me.
I run, with my wife, a small real estate brokerage comprised of all W-2 employees, no other Realtors or Independent Contractors under the brokerage. That means that everyone I employee is either on salary, or on an hourly pay. This is important because independent contractors do not have minimum wage laws because they essentially work for themselves. Our company sells roughly 50-60 homes per year and manages over 500 units in California, which takes 8-10 employees to handle at any given time. These employees range from receptionist, to general manager, to maintenance worker, so there are quite a few different employment fields to this company.
Back to the Forbes article. The article basically went over the statistics of California in a very gloomy way and really highlighted the negative qualities California has to offer. I've always read these articles with a grain of salt because I like my city, state, and country. I think owning a business anywhere is difficult, but I also think that if I lived in the toughest place in the world to own a business, I very well might already be living here, I would still own a business. California's taxes, regulations, sometimes the people, and the political climate, definitely make running a business difficult, but I can think of no other place I would rather be, and no other career I could have. The article also talked about a similar law that New York passed, however they made the law based on counties in the state as opposed to statewide. I think this is probably the best solution to an issue like this, although I take the more individualistic approach to just about every law.
I have a couple different predictions and thoughts on how this is going to impact housing whether you are buying, selling, renting, or investing. Firstly I think that all business and goods are going to be more expensive, pretty easy prediction there, however I think all housing will go up in price, with the lower priced properties seeing the most increase. I also think that the rental market is going to jump up significantly for tenants in Kern County, with the lower properties, again seeing a higher hike than larger properties. As a medium sized property manager in Bakersfield, we are going to eventually have to raise our prices to the owners we manage for, losing some clients, yet retaining a high percentage of our current clientele, and the owners are going to immediately pass that service cost to each tenant we have as a result. This will also cause some companies that currently manage properties to get larger, sell their business, or raise their prices substantially to keep up with the labor costs for our central city. The other impact it will have is the Realtors that are cutting their fees, or on large teams, or are even on salary will be looking for more steady work close to what they are currently making. This will make it much harder to survive selling minimal houses and cutting their fees to make ends meet, which will dwindle down the number of Realtors in this city.
The other negative impact this has as a small business owner is showing appreciation to employees. If we give an employee a $1/hr raise, it seems insignificant because thats the rate that minimum wage is increasing regardless of their current salary or pay. This could lead to feeling under appreciated, over worked, or any other negative feelings towards a company trying to keep up in this state. All in all, this increase could be great for some parts of California, but the less impacted places such as Bakersfield, are going to feel a 50% increase in labor costs, as well as very significant increase in goods and services throughout the next 4 years.