Foon Rhee

The Numbers Crunch: Cost of living could factor into minimum wage fight

Participants in The Fight for $15, a nationwide campaign to raise the minimum wage, stand in front of a McDonald’s in Sacramento on April 15, tax day.
Participants in The Fight for $15, a nationwide campaign to raise the minimum wage, stand in front of a McDonald’s in Sacramento on April 15, tax day.

We all know the cost of living is higher in California, so a new study mostly provides more annoying proof of how much more a buck buys in the rest of the country.

But the analysis also shows that purchasing power varies widely across the state and that, in fact, in some cities, a dollar goes further than the national average. And the numbers are likely to be used as ammunition in the political fight over raising the minimum wage, now coming to Sacramento.

In the study, the Tax Foundation used 2013 data from the U.S. Bureau of Economic Analysis to figure out how much stuff you can actually buy with $100.

While it only gets you $89.05 in California, this isn’t the most expensive state. In the real value of $100, residents are worse off in the District of Columbia, Hawaii, New York and New Jersey, while people get the biggest bang for the buck in Mississippi, Arkansas, South Dakota, Alabama and West Virginia.

It’s not surprising that among metro areas, Silicon Valley ranks as the nation’s third most expensive and San Francisco is fifth. It gets more interesting elsewhere in California. While the cost of living is significantly higher in Los Angeles and San Diego than the national average, it’s actually lower in Fresno and Merced.

In Sacramento, $100 will buy $97.66 worth of goods, reasonably close to the national average and substantially more purchasing power than L.A. and San Francisco.

You can bet that won’t go unnoticed by business groups, which are citing Sacramento’s relatively lower living costs to try to stave off any minimum wage hike. They warn of economic disaster if the city follows the lead of San Francisco, where the wage will increase to $15 an hour in 2018, or Los Angeles, where it goes to $15 in 2020.

Mayor Kevin Johnson plans to officially announce a task force next week to study the issue in Sacramento. It will find that there are conflicting studies on whether raising the minimum wage costs jobs.

The statewide minimum wage goes from $9 to $10 an hour on Jan. 1. The state Senate has passed a bill to raise it to $13 in 2017.

Now, four states and Washington, D.C., have a higher wage than California, according to the Economic Policy Institute, which put out an interactive map this week. It says that 29 states and D.C. have a higher benchmark than the federal wage of $7.25 an hour, which kicked in six years ago Friday. Democrats in Congress are pushing to raise the federal minimum to $12 an hour.

The cost of living matters far more for those making minimum wage, living paycheck to paycheck.

For those in better-paying jobs, the differences in purchasing power even out somewhat because in many places the higher cost of living leads to higher salaries for the same job, the Tax Foundation researchers say.

Plus, many are willing to pay a little more for the benefits of living in California and other pricier states. I am, even if it means a little frugality.

I got used to pinching pennies during a fellowship year in Honolulu, the nation’s most expensive metro area, where $100 buys you only $81.37 in stuff. Because so much has to be imported to the islands, food and many other basics cost a lot more than on the mainland.

But the gorgeous scenery – I remember the beaches and rainbows the most – more than made up for it. Some things go beyond dollars and cents.

By the numbers

How much $100 really buys in selected California metro areas:

  • San Jose, $81.97
  • San Francisco, $82.44
  • San Diego, $84.03
  • Los Angeles, $84.60
  • Sacramento, $97.66
  • Modesto, $100.91
  • Fresno, $102.46
  • Merced, $104.38

Source: Tax Foundation