Is the minimum wage hike a good thing for commerce?
By Lori Bledsoe
The Alpine Sun
Good news for workers, or at least entry level workers across the state of California. Minimum Wage, as of January 1, 2015 increased to $10 per hour. This increase based on the California Minimum Wage Increase Initiative (#13-0050) was approved for circulation in California as a contender for the November 4, 2014, ballot as an initiated state statute. The effort did not reach the ballot, however. Initiative #130050 would have increased the state minimum wage to $10.00 per hour in 2015 and $12.00 per hour in 2016. Supporters of the initiative referred to it as the “Higher Wages for California Workers Act of 2014.”
“Under existing law, California’s minimum wage will increase from $8.00 per hour to $9.00 per hour, effective July 1, 2014. This measure would increase California’s minimum wage to $10.00 per hour, effective March 1, 2015, and then to $12.00 per hour, effective March 1, 2016.” While this plan did not come to pass, the increases are happening. San Diego will hike its minimum wage to $11.50 by 2017, a measure it passed last August despite a veto from the city’s mayor.
A factor that seems to have been deleted from the conversation about the rising of the minimum wage is the closing disparity between skilled labor wages and unskilled labor wages. Many have pointed out that while minimum wage is on the rise, regular wages that are above the current minimum wages are not affected at all. So effectively, such professions that make an average of $11 per hour, will soon be considered minimum wage positions. This is a problem as the skill set, and the experience that is needed for such positions do not warrent an entry level wage. While the minimum wage increase is benefitting the entry level worker, it is actually harming those in positions that they have worked in for years without raises. With the rise in minimum wages, it is unlikely that small businesses will be able to afford to spread the wealth to long time, and loyal employees through raises, therefore rewarding the beginning worker by not rewarding the longtime worker.
Another factor that has been studied is the increase in price mark-up to allow for the higher wages. In Emeryville, California, with a population smaller than Alpine, one restaurateur decided to voluntarily increase their paid wages. As the ultimate target for now is a minimum wage of $15, this restaurant began paying that wage. They advertised $30 pizzas and other food items as “sustainably served, really… no tips necessary. The sales at this location plunged 25%. The shop owner recognizes the need to pay people a sustainable wage, but as the wages go up, so does the prices for products and services to afford the increase. This is simple economics. This economic status was proven by other businesses in the same area who also increased their wages, and had to ultimately raise prices to afford it.
Anther impact is that businesses are slowing down their hiring efforts. Many workers are being tasked with extra duties and harsher work environments and smaller work forces. To say that businesses are understaffed will be cliché very soon. Where it used to be common place that shops would employ 2 workers to man a shop, it is more common that one worker will be on staff, making the workplace a less secure, and safe place.
In 2014, the California chapter of the National Federation of Independent Business (NFIB) estimated that the state’s 2013 legislation raising California’s minimum wage rate to $9 per hour in 2014 and $10 by 2016 would shrink the state’s economy by $5.7 billion in the next 10 years and would cost the state roughly 68,000 jobs–63% of which would come from small businesses.
A study was done in Seattle, using restaurant jobs as a subject. Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss of restaurant jobs in the Seattle area.