California Senate passes $13 minimum wage, jobs flee in terror

Posted by: Phineas on June 1, 2014 at 1:01 pm

**Posted by Phineas

Depression-era unemployment

“But at least they raised the minimum wage!”

Perhaps they didn’t want to be left behind by their progressive friends in Seattle, but the California State Senate last Wednesday passed a bill that would raise the minimum wage to $13 per hour by 2017. From the legislative analyst’s summary:

SB 935, as amended, Leno. Minimum wage: annual adjustment.

Existing law requires that, on and after July 1, 2014, the minimum wage for all industries be not less than $9 per hour. Existing law further increases the minimum wage, on and after January 1, 2016, to not less than $10 per hour.

This bill would increase the minimum wage, on and after January 1, 2015, to not less than $11 per hour, on and after January 1, 2016, to not less than $12 per hour, and on and after January 1, 2017, to not less than $13 per hour. The bill would require the automatic adjustment of the minimum wage annually thereafter, to maintain employee purchasing power diminished by the rate of inflation during the previous year. The adjustment would be calculated using the California Consumer Price Index, as specified. The bill would prohibit the Industrial Welfare Commission (IWC) from reducing the minimum wage and from adjusting the minimum wage if the average percentage of inflation for the previous year was negative. The bill would require the IWC to publicize the automatically adjusted minimum wage.

The bill would provide that its provisions not be construed to preclude the IWC from increasing the minimum wage to an amount greater than the calculation would provide or to preclude or supersede an increase of the minimum wage that is greater than the state minimum wage by any local government or tribal government.
The bill would apply to all industries, including public and private employment.

(h/t California Political Review)

“Leno” is Senator Mark Leno, whose district includes, naturally, San Francisco. You can kind of guess his politics. (He also backed a bill allowing children to have more than two parents. Yes, you read that right.) He’s also a prime example of Thomas Sowell’s observation about politicians who don’t have to suffer the consequences of decisions they impose on others. In this case, causing the cost of labor to skyrocket forces business owners to decide whether to pass on the cost to consumers, cut workers’ hours or whole jobs, or go out of business. As the head of CKE Restaurants told CNBC, people are doing all three:

CKE Restaurants’ roots began in California roughly seven decades ago, but you won’t see the parent company of Carl’s Jr. and Hardee’s expanding there much anymore.

What’s causing what company CEO Andy Puzder describes as “very little growth” in the state?

In part it’s because “the minimum wage is so high so it’s harder to come up with profitable business models,” Puzder said in an interview. The state’s minimum wage is set to rise to $9 in July, making it among the nation’s highest, and $10 by January 2016.

In cities in other states where the minimum wage has gone up considerably, Puzder said “franchisees are closing locations” after riding out lease expirations.

If the federal minimum hourly pay shoots up to $10.10 from the current $7.25—as many lawmakers and President Barack Obama are advocating—Puzder predicts fewer entry-level jobs will be created. If this happens, CKE would also create fewer positions, he forecast.

A recent nonpartisan Congressional Budget Office study also predicted mass job losses, estimating that a hike to $10.10 could result in a loss of about half a million jobs by late 2016, even as it lifted many above the poverty line.

(h/t California Political Review)

For some reason, I don’t think those who lose their jobs because of the wage increase will see themselves as “lifted out of poverty.”

Minimum-wage jobs are not meant to be lifelong careers. For people just entering the labor market, they’re ways to acquire skills needed to move on to better-paying jobs. For others, they’re a means to bring in additional, supplementary income into the household. The pro-increase arguments distort facts and wrap them in myth, all to disguise what is really a wealth redistribution program.

CKE’s Puzder goes on to relate how, when minimum wage increases are combined with the added expenses imposed by Obamacare, franchisees have chosen not to open new restaurants or have even closed locations, meaning these are jobs lost. But they do it because they can get a better return on their investment money elsewhere, such as by putting it in bonds.

It’s called economic common sense, something Senator Leno and his colleagues are woefully lacking in.

PS: SB 935 has now gone to the Assembly, and I will be shocked if it doesn’t pass. It’s frightening to think we have to rely on Governor Brown to be the sane one in the room and veto this bill when it shows up on his desk.

(Crossposted at Public Secrets)

RSS feed for comments on this post.

Trackbacks

8 Responses to “California Senate passes $13 minimum wage, jobs flee in terror”

Comments

  1. steveegg says:

    PS: SB 935 has now gone to the Assembly, and I will be shocked if it doesn’t pass. It’s frightening to think we have to rely on Governor Brown to be the sane one in the room and veto this bill when it shows up on his desk.

    What are the odds of Moonbeam being sane? Time to hit the eject button on Kalifornica.

  2. Drew the Infidel says:

    The Californians evidently are “slow on the uptake” as my sixth-grade teacher used to say. In a free market economy there is always room for another player. Businesses will take their act elsewhere instead of going broke in the beautiful vistas the Pacific coast offers.

  3. Carlos says:

    Yep, Guvner Choo-choo is as likely to veto this bill as he was to veto any bill dealing with his high-speed choo-choos.

    BTW, there is good economic reason for the likes of Guvner Choo-choo and Creepy Harry to push for things like this. Do you realize most of the contracts will be going to big-time donors, and what better way for them to line their own coffers than to push billions-dollars projects in the direction of friends?

    ‘Course, we, the people get screwed, but hey, their war chests are all that matter, right? And notice the media watchdogs are all over it, too…

  4. Land of CACA ….Situation Normal

  5. I often see the point above “( Minimum-wage jobs are not meant to be lifelong careers. People entering the labor market acquire skills needed to move on to better-paying jobs. )”.

    This point is not true and also undermines the argument against minimum wages. There is no grand scheme which “intends” that people can be underpaid because they will soon escape. It suggests that employers are particularly taking advantage of some people without needing to feel guilt about it. And, it begs the question “what about the poor who can’t move on?”.

    LINK

    Defenders of the minimum wage say it accomplishes a social good without much harm. They are wrong. The worst effect applies to people of low ability who may never earn more. They are thrown out of work or receive fewer non-wage benefits and accomodations, until inflation lowers the real burden of the minimum wage.

    There are proposals to index the minimum wage to inflation. This would permanently unemploy people of low ability or who now benefit from non-wage accomodations which lower their productivity.

    We should oppose the minimum wage especially on behalf of the low skilled, whether or not they are later able to learn more and advance in productivity.

  6. wth says:

    Price of tacos just went up!