Surprisingly, Golden Staters should take a cue from the Greeks. While Greece is scaling back its anachronistic benefits for public sector workers, California policymakers are poised to adopt an eventual $10/hour minimum wage — the highest in the country. While Greece is hardly the model for fiscal discipline, this recent belt-tightening is a step forward. If only leaders in another temperate, coastal paradise would follow suit.
The Center for American Progress Fund put out a wistfully inaccurate graphic showing the goodies a family could buy with what they calculated as $4,160 in additional earnings under the new wage law. They fancied the law would do just enough to lift families above the poverty line. But the reality is that many minimum wage workers aren’t household heads, they’re young, single adults and teenagers. And fewer of them will be able to work under this new wage scheme because more of them will be laid off and fewer new jobs will be created due to the growing labor cost.
During President Obama’s term, youth unemployment has skyrocketed. It boggles the mind why people of my generation continue to support a man whose administration backs policies that harm them the most. Few secondary schools require offering or taking economics courses, and that translates into misguided votes at the ballot box.
Cutting jobs by inflating wages means unemployed hourly workers are left socially immobilized. Economist Thomas Sowell pointed out that most working people in the bottom 20 percentile for income do not stay there over time. More of them end up in the top 20 percentile than remain behind in the bottom 20 percentile. But if the labor market becomes more constricted, there will be less fluidity in the workforce and by consequence, less societal fluidity. In essence, minimum wage hikes can increase class rigidity. Tell that to the Occupy Wall Street crowd still sporadically protesting at Zucotti Park.
The argument that raising the minimum wage will reduce poverty doesn’t work either since it contributes to merely moves the goalpost further away. It helps push up the poverty line, which means that in reality folks on hourly jobs are still in the same position as before — just with a higher cost of living.
And even if, as some economists argue, increasing the minimum wage doesn’t cause a dramatic or even noticeable increase in unemployment, there are many other spillover effects and corporate strategies that businesses undertake to compensate for the increased labor costs. They may cut benefits or hours overall, which would hurt the average family and worker.
Raising the minimum wage is government intruding and telling businesses how to manage shop so that select hourly workers can make a few more bucks at the expense of their peers and customers. In response to rigid wage mandates, businesses can also increase prices, which again raise the cost of living for the average family. And which families get hit the most? Those with easiest access to, say, fast food (a common hourly wage job): low income and minority communities.
California’s wealth redistribution via wage hikes is misguided policy; let’s hope other states prove wiser.
Carrie Sheffield is a writer in Manhattan.