New year brings stifling new minimum wage hikes

Original Article:

  • Author: Michael Saltsman

  • Publication Date: December 2016

  • Newspaper: Orange County Register

  • Topics: Living Wage

Young job seekers in California have unwanted Christmas presents left under the tree: A series of minimum wage hikes given by state and local legislators that will reduce job opportunities in the new year. Unfortunately, these gifts don’t come with a return policy.

On New Year’s Day, the minimum wage rises in 12 California cities as well as in the state as a whole. Cupertino, Los Altos and San Mateo are all raising their starter wages by 20 percent to $12 an hour. Mountain View and Sunnyvale are both raising their starter wages by 18 percent to $13 an hour.

Labor union-funded activist groups championed these wage hikes over the skepticism of minimum wage realists like Gov. Jerry Brown, who warned, “Raise the minimum wage too much and you put a lot of poor people out of work.” Brown later changed his tune under political pressure, but his initial prediction was prescient. Stories of minimum wage-induced job loss are multiplying.

Last month, Competitive Edge, a San Diego communications firm, announced that it was moving 75 call center jobs to El Paso, Texas because of the costs of the minimum wage hike. In the Bay Area, San Francisco Eater reports that restaurants continue their year-end “death march” with dozens of closures, many of them at least partially a result of dramatic minimum wage increases. Book stores have been particularly hard hit, with local favorites like Black Oak Books (Berkeley) and Almost Perfect Bookstore (Roseville) closing because of cost increases.

Earlier this year, Adam Ozimek, an economist at Moody’s Analytics, calculated that 600,000 California manufacturing jobs paid $15 an hour or less. He said 31,000 to 160,000 jobs could be lost under the new minimum wage rate.

Proponents at the union-backed Center for Labor Research and Education at the University of California, Berkeley have argued that a $15 policy could generate savings for taxpayers. But their claims fall apart when you dig into the methodology. For instance, it doesn’t account for the reduced job opportunities that Gov. Brown and the vast majority of economists warn about. By this logic, why not raise the minimum wage to $30 to generate even more positive economic benefits? The answer, of course, is that it would cause widespread job loss. Same story with a $15 minimum wage.

Even setting aside the offsetting effects of job loss, the claim of minimum wage savings for taxpayers is dubious. According to California’s Department of Finance, the $15 minimum wage will cost the state at least $4 billion as tens of thousands of government employees get raises from the mandate and program expenditures adjust upward.

It may be a drop in the bucket for a Sacramento bureaucracy that’s unfamiliar with narrow profit margins. But the added costs in the private sector can mean the difference between staying open and closing down.

There is one group that will benefit from the wage hikes: unions. Census Bureau data shows that roughly 223,000 union members in California will receive a direct pay bump by the time the $15 minimum wage is fully implemented. Thousands more want in on the action: “My experience is that when you raise the floor, it creates tremendous pressure for raises at least a few rungs up,” said J.J. Jelincic, a past president of the California State Employees Association. Call the raises — and the subsequent boost in union dues — a return on investment.

Unions’ gain is young employees’ pain. Here’s to a New Year’s resolution that corrects this imbalance.