A new study projects that the bill signed by Gov. Jerry Brown (D-Calif.) last year slating California’s minimum wage to reach $15 per hour by 2022 will cost the state 400,000 jobs.
By 2023, every business across the Golden State will be affected by the legislative deal backed by Democrats and many low-income workers, immigrants and other minorities, but research conducted by Employment Policies Institute (EPI) indicates that – according to employment trends tracked from 1990 to 2017 – the effects will be devastating for all Californians.
“[E]ach 10-percent increase in the minimum wage in the Golden State has resulted in a corresponding 2-percent decline in employment for affected employees,” Fox Business reported. “The impact was larger (5 percent) for lower-paid workers. By those estimates, the EPI projects that the pending $15 minimum wage hike would cost California 400,000 private sector jobs, with heavy losses in both the foodservice and retail sectors.”
Good intentions? … For who?
It is believed that Brown’s so-called “good intentions” – which critics argue were overcome by his desire to pander for the minority vote – will soon catch up to him and everyone living in the state … a doomed fate the governor appeared to acknowledge when he signed the $15 minimum wage into law.
"[E]conomically, minimum wages make no sense," Brown admitted when moving the bad legislation forward, according to Forbes.
Early indicators have already shown that the minimum wage hike is sending America’s most populous state’s economy – which is already in massive debt – into a continued downward spiral.
“The warning signs started early; dozens of stories chronicled businesses closing, cutting staff, or leaving the state,” Forbes reported. “A rash of restaurant closures in the Bay Area led one food-industry publication to describe it as a ‘death march.’ Even child-care providers were hurt. A team of economists at Harvard Business School and Mathematica Policy Research determined that the rising minimum wage in the Bay Area contributed to these closures.”
Even though many lead themselves to believe that a minimum wage hike helps the disadvantaged, there is no way around the fact that it is bad news for the economy – from the top to the bottom of the labor market.
“[Real firms could] respond to higher minimum wages in ways that cause divergent effects, [but] what is not in dispute [is that] rising minimum wage has depressed employment opportunities in the most heavily impacted industries,” EPI researchers noted in their study.
The incremental increase will commence on New Year’s Day, until every business – large and small – falls under its veil in five years.
“As of January 1, California’s minimum wage will increase to $11 per hour from the current level of $10.50 per hour for businesses with 26 employees or more,” Fox Business’ Brittany De Lea explained. “From that point, it will be a $1 per year increase trajectory through 2022. Businesses with 25 employees or less will reach the $15 per hour threshold by 2023.”
Two specific job markets are predicted to be hit the hardest by the minimum wage hike.
“The job loss is not spread evenly,” EPI researchers impressed. “Slightly more than one-half of the job loss is projected to be in two industries: accommodation and food services, and retail trade.”
We knew better
Two widely known detrimental effects of the $15 minimum wage spike have not been kept a secret.
“After the $15 minimum is set, it will continue to rise with inflation,” TheBlaze stressed in a report.
It appears as if the Democrats pushing the wage hike bill gave little thought to the hundreds of thousands of jobs they would kill by pushing their progressive legislation forward.
“The loss of jobs didn’t go unpredicted,” TheBlaze’s Chris Enloe contended. “Economists stated last year when the bill was signed into law that it could cost 5 to 10 percent of low-income, low-skilled workers their jobs.”
With minimum wage being one of the most-studied topics in economics, it is a well-known fact that a floor on wages slashes job opportunities.
“Recent research using a wider variety of methods to address the problem of comparison states tends to confirm earlier findings of job loss,” the Federal Reserve Bank of San Francisco stated in its late 2015 study. “Coupled with critiques of the methods that generate little evidence of job loss, the overall body of recent evidence suggests that the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers – with possibly larger adverse effects than earlier research suggested.”
This cause-and-effect is common sense to those who take an objective view of the economy.
“Job cuts in the service industry don't happen because businesses are mean-spirited,” Forbes’ Michael Saltsman explained. “Rather, it's because they're caught between price-sensitive customers who can always stay home if a burger is too expensive, and narrow profit margins that provide little room to absorb the cost of a mandate. The only option is often to reduce staff – perhaps opting for self-service technology that takes the place of a job once done by an employee.”
Leftists: Minimum wage hike not all bad
Flying in the face of studies published by top economic analysts, one of the nation’s most left-leaning universities – and leftist papers – sides with the Democratic Party’s take on the subject of minimum wages, as its researcher’s findings clearly cater to the demands of the state’s swelling immigrant population.
“The empirical consensus has failed to sway politicians inclined to support a wage hike for ideological reasons, or editorial boards at papers like the New York Times,” Saltsman noted. “They take comfort in ‘reports’ from sympathetic researchers from the University of California-Berkeley, who were caught this year working closely with politicians to undermine credible research on minimum wage consequences.”
Even though higher costs and increased automation are readily recognized as potential job killers, research generated on the liberal campus claims that the exact opposite is the case.
“The Institute for Research on Labor & Employment (IRLE) at U.C. Berkeley, found that a higher minimum wage would actually add a small amount of jobs to the state economy by 2023,” De Lea pointed out. “Without the increase, IRLE forecasts employment would grow 1.4 percent annually. The minimum wage increase would raise employment by 0.1 percent – equal to about 13,000 jobs – by 2023, according to the group’s study.”
The Berkeley study maintains that there are some benefits that come along with the obvious negative consequences of raising the minimum wage.
“A higher minimum wage induces some automation, as well as increased worker productivity and slightly higher prices; these are the negative effects,” IRLE maintained. “A minimum wage increase simultaneously reduces employee turnover, which reduces employers’ costs, and it increases worker purchasing power, which stimulates consumer demand. These are the positive effects. As it turns out, these negative and positive effects on employment largely offset each other.”
But it is contended that the dire consequences of Brown’s $15 minimum wage are waiting to unfold and will felt by many Californians in just a couple of weeks.
“Meanwhile, the victims of the policy – small business owners, young disadvantaged jobseekers, and nonprofits – suffer in relative silence,” Saltsman concluded. “In 2018, it's time to tell their story.”