Last year, Democrat Gov. Jerry Brown signed a law that raises California’s minimum wage to $15 per hour over the next few years. The left cheered, but nothing comes for free.
A new study has found that the skyrocketing minimum wage will likely mean the loss of 400,000 jobs… and low-skilled sectors will be the hardest hit.
Yes, the same group of people that liberals claimed to want to help will be the ones hurt the most by the law.
“The job loss is not spread evenly. Slightly more than one-half of the job loss is projected to be in two industries: accommodation and food services, and retail trade,” explained a report from the Employment Policies Institute
The study was run by two professors of economics, and looked at employment trends going back to 1990. After carefully studying the link between minimum wage hikes and employment, the economics experts came to a startling conclusion.
“The EPI study found that for every ten percent minimum wage increase the state passed, employment declined two percent,” summarized Breitbart.
“California’s minimum wage increase had a greater impact on lower-income workers, where employment among that group decreased five percent.”
The detailed study went beyond simply reporting that the law would hurt California, but also warned other states to avoid falling into the same trap as the Golden State.
“California’s rising minimum wage has depressed employment opportunities in the most heavily-impacted industries,” explained the study.
“The conclusions should give pause to states or localities interested in emulating California’s wage experiment.”
In 2014, with minimum wage at $8, California leaders approved measures that will steadily increase its minimum wage to $15 by 2022. In 2016, San Diego voters approved a measure that at least initially phased in even bigger minimum wage hikes — to $11.50 this year — and indexed the wage to inflation beginning in 2019.
Whatever happens, the best response to income inequality isn’t a steadily climbing minimum wage. It’s an education system that puts much more emphasis on high-value job skills. That should be a bigger focus before too many people are left behind.
How about the numbers?
While a high-wage, high cost-of-living city like San Francisco might be able to absorb a $15 minimum wage without experiencing significant negative employment effects, that same $15 wage could inflict serious economic damages and result in job losses for many of the state’s 500 cities that are in low-wage, low cost-of-living areas.
To help understand how the “one-size-fits-all” approach of a $15 an hour state minimum wage will have a disproportionately adverse impact on low-cost communities in California, the table below displays the “living hourly wages” for California’s 26 metropolitan statistical areas (MSAs), based on data from MIT’s Living Wage Calculator for the year 2014 (most recent year available).
According to the MIT website, the cost-of-living adjusted living wages are the “hourly rates that individuals must earn [in a given MSA] to support their family [and cover basic family expenses], if they are the sole provider and are working full-time (2,080 hours per year).” Living wages for adult workers with 1 to 3 children are also displayed in the table.
The living wage data shown above reveal huge differences in the cost-of-living between low-cost California MSAs like Yuba City, El Centro, Chico, and Merced (living wages are below $10 an hour) and high-cost cities like San Francisco and San Jose, where the cost-of-living adjusted living wage is 38% higher.
If $15 an hour is an appropriate minimum wage for San Francisco, it should be less than $11 an hour in MSAs like Yuba City and El Centro, where the cost-of-living is significantly lower. It’s also important to note that all four of those low-cost MSAs had jobless rates above the state average in February, and three of them (all except Chico) had double-digit unemployment rates in February, with El Centro having the distinction of once again being the MSA with the highest jobless rate in the entire country at 18.6%.
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