Even prominent liberal economist against a statewide $15 minimum wage

Original Article: http://www.ocregister.com/articles/wage-676542-minimum-state.html

  • Author: Michael Saltsman

  • Publication Date: August 2015

  • Newspaper: OC Register

  • Topics: Minimum Wage

California Attorney General Kamala Harris this past week approved for signature collection a 2016 ballot measure that would raise the state’s minimum wage to $15 an hour by 2021.

The measure is backed by the powerful union SEIU-UHW, which collected more than $100 million in dues and fees last year and should have little trouble bankrolling the collection of 366,000 signatures needed to place the question before voters. But convincing less than 1 percent of the state’s population to put this wage hike on the ballot doesn’t make it a good idea. In fact, it’s such a bad idea that even left-of-center economists don’t support it.

The demand for a $15 minimum wage originated not in an economics textbook, but in a series of discussions between SEIU organizers and a few disaffected employees. As organizer Kendall Fells later described their methodology, “$10 was too low, and $20 was too high, so we landed at $15.” Not surprisingly, cities that have pursued minimum wage policy based on this evidence-free approach are now grappling with the unintended consequences.

In Seattle, for instance, the $15 figure is still phasing in, but small businesses such as Z Pizza have already made the decision to shut their doors. Further down the coast in San Francisco, established restaurants like Luna Park, Source and the Abbott’s Cellar have also closed, citing the city’s minimum wage increase as a determining factor. Even in Los Angeles, where a $15 wage was just passed, clothing manufacturer 5 Thread Factory said the boost will cause them to leave the city when their lease is up.

Despite these unfortunate (if entirely predictable) consequences, proponents in these major cities have gained traction with arguments about the high cost of living. Los Angeles and San Francisco are uniquely expensive, the argument goes – and the minimum wage should thus be higher. Whether you buy this line, the unmistakable conclusion is that a $15 minimum wage is not appropriate in lower-cost locales.

Don’t take my word for it. Ask Dr. Arin Dube of the University of Massachusetts-Amherst, one of the country’s foremost academic proponents of a higher minimum wage. His research has been cited by the White House in support of President Obama’s call to raise the federal minimum wage, and it’s been used by unions and wage advocates across the country in support of their goals. In a paper last year for the Hamilton Project at the Brookings Institution, he suggested that states and cities should set their minimum wage to half of the hourly full-time median wage to maximize the benefit and minimize the harm.

Statewide in California, this equates to just over $10 an hour – which happens to be the wage level that the state is already adopting next January. But in some of the state’s poorer metro areas, even $10 an hour looks radical. In lower-income cities like Bakersfield, Fresno, Chico and Merced, a minimum wage of half the median wage would suggest a wage floor much closer to the current federal minimum level of $7.25, rather than the $15 figure supported by the SEIU. And in impoverished areas like El Centro – where even the median wage is below $15 an hour – a $15 ballot measure wouldn’t just be a job-killer, but an economy-destroyer.

Of course, reverting to the federal minimum wage isn’t a realistic option in California, and reasonable people can disagree on whether the state’s current minimum wage is good policy. But there’s nothing reasonable about a statewide wage mandate that’s nearly 50 percent greater than what labor’s favored economist is comfortable with.

The SEIU seems content to ignore the evidence and even the counsel of its allies in the push for $15. Hopefully other Californians won’t be so foolish.