Expert: $15 Minimum Wage Could Cost 700K California Jobs
California lawmakers could reduce employment by 700,000 jobs statewide over a plan to raise the minimum wage to $15 an hour, according to a labor policy expert published Tuesday.
California Democratic Gov. Jerry Brown arrived at a deal with lawmakers and unions Saturday to phase in a $15 minimum wage. The plan could void a union-backed measure that was already approved to appear on the November ballot. American Action Forum Labor Policy Director Ben Gitis said the plan could cost the state over half-a-million jobs.
“Proposals to raise the minimum wage often hurt those they intend to help by increasing joblessness among low-skilled workers and failing to deliver income gains to those who are actually in poverty,” Gitis said in a written piece. “This massive minimum wage increase could cost the state almost 700,000 jobs.”
The University of California, Berkeley, said the increase will not have an overly negative impact on employment or businesses. UC Labor Experts Ken Jacobs and Ian Perry found that while many across the state will rise out of poverty businesses will have little issue absorbing the added costs of labor.
“We estimate that 5.6 million workers would receive wage increases under this proposal,” Jacobs and Perry said in an analysis of the proposal. “Higher wages will be absorbed by employers through reduced worker turnover, improved productivity, and small price increases.”
The analysis estimates that the workers posed to get a wage increase represent 37 percent of the statewide workforce. Texas A&M University Professor Jonathan Meer and Massachusetts Institute of Technology Research Associate Jeremy West recently found that raising the minimum wage by 10 percent can result in a 0.3 to 0.5 percentage decrease in job growth. Gitis applied the data to estimated potential job loss in California, based on projected employment growth from the state.
“This means that if the minimum wage were to be $15 in 2023, by 2026 employment would be 3.5 percent lower than it would be if the minimum wage did not increase,” Gitis said. “Using California Employment Development Department projections as a baseline, this translates to a loss of 692,235 jobs.”
Brown has been hesitant to embrace the $15 minimum wage out of concern it could harm the state economy. Lawmakers and unions said they addressed the economic concerns, including a longer phase in period, in the plan Brown eventually agreed to. The plan is to raise the minimum wage gradually to $15 an hour by 2022 before indexing it to inflation. Small businesses will have a year longer.
The proposal could put California on track to have the first statewide $15 minimum wage. The state currently has a $10.00 minimum wage. At the moment the $15 minimum wage has only been passed on the local level including a few cities in California. Oregon recently passed a measure designed to phase in a $13.50 minimum wage by 2022.
The American Action Forum is a center-right nonprofit group with a focus on policy research. Brown did not respond to a request for comment by The Daily Caller News Foundation.
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