A clerk rings up a customer at the Smart & Final grocery store in Visalia. File Photo

published on December 14, 2017 - 12:32 PM
Written by David Castellon

A Washington, D.C., think tank estimates that when California’s mandatory minimum wage law hits $15 in 2022, the higher wages will come at a cost of 400,000 jobs across the state.

Those are the findings of a study released Thursday by the Employment Policies Institute, which describes itself as a “non-profit research organization dedicated to studying public policy issues surrounding employment growth. In particular, EPI focuses on issues that affect entry-level employment.”

It goes on to say the study conducted by economists David Macpherson of Trinity University and William Even of Miami University looks at the “consequences of California’s wage-raising experiment and estimates the future impact of California’s current minimum-wage law.”

Last year, Gov. Jerry Brown signed a law raising minimum wage in the state incrementally starting this year to $10.50 an hour for employers with 26 or more employees, while the $10-per-hour didn’t change this year for employers that have 25 or fewer people.

That act alone puts California’s minimum wage rate at the highest in the nation, but the rates for small and larger businesses will rise incrementally every year until they reach $15 an hour by 2022 or 2023, depending on the size of the business.

“Their findings are stark: The economists’ preferred model show that past minimum wage increases in California have caused a measurable decrease in employment among affected employees,” the report states.

It goes on to say that the researchers concluded that each 10-percent increase in the state’s minimum wage causes a nearly 5-percent reduction in employment among California industries with larger percentages of low-paid employees, noting that nearly half of the projected job losses probably would occur in food service and retail industries.

“The economists’ findings are in line with other recent minimum wage research,” the release continues, citing a December 2015 Federal Reserve Bank of San Francisco report that found minimum wage increases — none as high as $15 an hour — had been more harmful to low-wage employment than previously thought.

That study stated “a reasonable estimate based on the evidence is that current minimum wages have directly reduced the number of jobs nationally by about 100,000 to 200,000, relative to the period just before the Great Recession.”

EPI cited another study earlier this year by researchers at the Harvard Business School and Mathematica Policy Research — the latter describing itself as a nonpartisan research organization dedicated to improving public well-being — looked at San Francisco’s $15 minimum wage and its effects on increased labor costs on restaurant closures there, noting that lower-quality restaurants were particularly vulnerable.

“Our point estimates suggest that a $1 increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale),” states the findings released by Harvard.

“California has positioned itself as a ‘leader’ on new mandates, but this so-called leadership comes at a cost for small businesses and the people they employ,” EPI’s Managing Director Michael Saltsman said in a written statement. “This study furthers the economic consensus that California’s $15 minimum wage will have real consequences for the people it’s trying to help.”

But EPI has its critics who have accused the group of siding with labor and being left leaning.

What can be said about its study on California’s increasing minimum wage is that it seems to fall in line with concerns expressed by many Valley employers and employees — particularly in restaurants and other service industries — that the higher labor costs will result in job losses and possible business closures.

And the Federal Reserve Bank of San Francisco study notes that a decline in employment rates “should be weighed against increased earnings for still-employed workers because of higher minimum wages. Moreover, weighing employment losses against wage gains raises the broader question of how the minimum wage affects income inequality and poverty.”

And the EPI study concludes that, “The conclusions should give pause to states or localities interested in emulating California’s wage experiment.”

This year California’s minimum wage began an incremental rise that will end with $15 an hour being the minimum rate for all businesses. Here is how the wage increases are scheduled to progress:

26 or more employees / 25 or fewer employees
2017: $10.50 / $10.00
2018: $11.00 / $10.50
2019: $12.00 / $11.00
2020: $13.00 / $12.00
2021: $14.00 / $13.00
2022: $15.00 / $14.00
2023: $15.00 / $15.00

Source: California Department of Industrial Relations

e-Newsletter Signup

Our weekly poll

Should businesses have legal immunity from COVID-19 lawsuits from customers?

Loading ... Loading ...

Central Valley Biz Blogs