California Is Beginning To Feel The Negative Side Of Minimum Wage Hikes

www.forbes.com

After Massachusetts and New York, California is beginning to experience the negative side of minimum wage hikes, too; job losses.

That’s according to a recent University of California Riverside study, which shows that California’s minimum wage hikes have slowed job growth in the state’s booming restaurant industry.

California was among the first states to launch minimum wage hikes towards the “living wage” of $15 per hour by 2022—a 50% hike over 2012.

“Data analysis suggests that while the restaurant industry in California has grown significantly as the minimum wage has increased, employment in the industry has grown more slowly than it would have without minimum wage hikes,” the study says. “The slower employment is nevertheless real for those workers who may have found a career in the industry.”

The gloomy findings of the study are published at a time the US and the Californian economy are booming, near full-employment.

And the situation could become worse, according to the study. “When the next recession arrives, the higher real minimum wage could increase overall job losses within the economy and lead to a higher unemployment rate than would have been the case without the minimum wage increases.“

Recession or no recession, Phil Kafarakis, President of the Specialty Food Association and former Chief Innovation & Member Advancement Officer at the National Restaurant Association, sees minimum wage hikes undermining job growth in the industry through 2020. “The minimum wage increases could have major ramifications for California restaurants and more broadly, the state’s economy,” says Kafarakis. “There are some 1.83 million restaurant jobs in the state (National Restaurant Association) that represent about 11% of California’s employment base. Given that labor is one of the restaurant industry’s biggest costs, there’s a real danger that the higher minimum wage will stifle job growth, currently projected at 9% through 2020 and adding 164,000 new jobs.”

Worse, Kafarakis sees “the implications to California reach beyond restaurant tables given that for every dollar spent in table-service restaurants provides a $2.03 impact to state revenue compared to the same dollar spent in limited-service outlets, that contribute $1.75 to state revenue per dollar spent.”

To be fair, minimum wage hikes aren’t the only challenge the California restaurant Industry is facing these days. “For Quick Service Restaurants (QSRs), labor challenges have been brewing for some time,” says Corey Chafin, a principal in global strategy and management firm A.T. Kearney. “Though minimum wage hikes only deepen these challenges, it is not their sole challenge. Low unemployment has created cutthroat “labor wars” as QSRs compete to maintain a full workforce amongst a shrinking pool of available labor. (Just this week one QSR announced a partnership with AARP in an effort to hire older workers.).”

The problem, of course, is a strong economy, which gives workers more job options. “As individual workers have more options, restaurant turnover remains high and subsequently operational risks are plentiful from ensuring consistent service levels, product quality, and food safety.”

The solution? Technology, according to Chafin.“Battling these headwinds requires QSRs to adopt a long-term view to reduce labor reliance through technology. Kiosk ordering, kitchen automation, central prep, smarter scheduling, and automated delivery are in various phases of the R&D cycle and expected to ease labor risks in the years ahead.”

The pressure to replace technology with labor will differ across industry segments. “Near-term wage hikes may shift where QSRs prioritize the roll-out of these labor optimization programs,” adds Chafin. “Notably, delivery-based QSRs (e.g., pizza) will face higher long-term pressures from wage hikes than brick and mortar QSRs due to limited options to automate delivery; these QSRs can be expected to trim operations where automated delivery remains uncertain and wage increases extinguish favorable profitability.”

While it’s unclear how far technology will go to ease the burden of higher labor costs in the restaurant industry, one thing is clear: the debate over the positive and the negative side of minimum wage hikes will continue.

Senate Constitutional Amendment 5 – Horrible for California Homeowners

Senate Constitutional Amendment 5 (SCA 5), is set for legislative hearing this Tuesday. It deserves a quick defeat. Advanced by Sen. Ben Allen, D-Los Angeles, and Sen. Jerry Hill, D-San Mateo, SCA 5 would lower the current two-thirds vote requirement to pass local school district parcel taxes to 55% percent.

Here are the reasons SCA 5 is horrible for California homeowners.

First, SCA 5 is a direct attack on Proposition 13. Prop. 13 limits the base property tax, called the ad valorem tax, to one percent. To ensure that local governments didn’t heap additional taxes on homeowners, Prop. 13 requires a two-thirds vote for additional “special taxes” of which parcel taxes are a particularly insidious variety. SCA 5 specifically repeals that two-thirds constitutional protection currently in Article XIIIA of the California Constitution.

Second, lowering the two-thirds vote is unnecessary. With appropriate justification, the threshold can clearly be reached. According to the website California City Finance, a review of school district parcel taxes since 2012 showed that in November elections, 52 of 69, or 75% percent, were approved. Just last November, 11 out of 14 passed, an extraordinary success rate. Clearly, the two-thirds vote is not difficult to attain if a school district justifies its needs.

Third, lowering the two-thirds vote would open the door to a flood of new property tax levies.

To read the entire column, please click here.

$5 gas? California gas prices soar as national average approaches $3

Brace yourself, Californians.

The statewide average price of gasoline has soared over $4 per gallon in recent weeks – and now at least four stations there are charging more than $5, according to fuel-savings app GasBuddy.

That comes as the national average price of gas continues its customary spring climb as Memorial Day approaches.

The national average hit $2.90 on Friday, up 20 cents from a month ago and 8 cents more than a year ago, according to AAA.

California is a big reason for the spike in the national average. The state’s average price of $4.09 is up 44 cents from a month ago and 46 cents from a year ago, according to AAA. …

Click here to read the full article from USA Today

California Senate approves bill requiring presidential candidates to submit tax returns

California’s Senate approved a bill this week requiring presidential candidates to submit five years’ worth of tax returns in order to appear on the ballot, joining 18 other states in a jab at President Donald Trump’s refusal to release his tax returns.

California joins New York, Illinois and Washington, among other states, that have introduced bills requiring all candidates to release their individual tax returns to qualify for the presidential primary ballot. Tax returns have become a key 2020 issue, with Trump refusing to surrender them and Democratic presidential candidates sharing their tax information with varying degrees of timeliness.

The state’s Senate passed the measure by a 27-10 party line vote Thursday. The bill now goes to the state’s assembly for consideration. It’s not clear if California Gov. Gavin Newsom, a Democrat, would sign the bill into law should it make it to his desk. …

Click here to read the full article from CNN

Price Controls by Another Name

The costs of medicines continue to dominate the headlines, attracting the attention of Congress and the Trump Administration. Reforms are necessary, but many of the reforms under consideration will make the situation worse. Indexing U.S. prices to the prices in other countries that use price controls, or using third-party arbitration to set the price of prescription drugs, exemplify these wrong-headed policies.

The Trump Administration’s proposal would set Medicare Part B prices (prices for drugs administered in a clinical setting) to the average prices charged in more than a dozen countries. Senator Rick Scott’s proposal (the Transparent Drug Act) would set U.S. prices equal to the lowest price in five countries. Regardless of the particulars, these price indices are government-created price controls; only the U.S. government is outsourcing these controls to foreign governments.

Third-party arbitration proposals are no better. Under arbitration, both the government and drug manufacturers would submit prices to a third-party arbitrator, who would then select the price based on these submissions. So, here again, the U.S. government is outsourcing the authority to set price controls; except instead of outsourcing this power to a foreign government, the government is empowering random arbitrators to set prices for the U.S. health care system.

These policies will have adverse consequences for patients and will lead to higher costs elsewhere in the health care system. However, the complexity of the pharmaceutical market often clouds the obvious costs these ill-considered policies will create. If policymakers were proposing to impose these regulations on workers instead of medicines, then perhaps the consequences would be easier to grasp.

Toward this end, imagine the following story.

One day your boss comes into your office complaining that he needs to cut the company’s unsustainably high costs. He understands that the company spends a lot of money maintaining the factory and purchasing new equipment, but he has decided that the company will reduce its expenditures by lowering its labor costs. He also has an ingenious way of doing this.

In the next town over, the government mandates a maximum wage. This maximum wage establishes an income ceiling or a salary threshold that no worker’s salary can exceed. This maximum threshold is below how much your company currently pays its employees.

While the purpose of this maximum wage is to make business costs more affordable, the actual effect is to discourage people from working in the town. In fact, the town is plagued with labor shortages.

Seeing these adverse impacts, no one in your town wants to pass such a bad law. But, your boss has a great way around it. Instead of imposing a maximum wage law, he offers you a choice between one of two options.

Under option one, your boss will set your wage equal to the wages of the people working your job in the neighboring town who are subject to the maximum wage law (e.g. the proposed drug price index proposal). Option two, you and your boss both submit a proposed new wage for you to an arbitrator, which could even include people working in your field from the neighboring town (e.g. the arbitration proposal).

After the initial shock, your first reaction would likely be, who cares between option one and two? The ultimate impact will be a reduction in your take-home pay. But, with respect to the actual proposals for pharmaceuticals, the more important question is: how would you react?

While you will continue working for this company in the short-term, since you have no other choice, over time you would clearly look for other opportunities. Everyone else at the company would feel the same. Soon, just like the neighboring town, the company would find it difficult to find qualified workers and might even face higher overall production costs as management searches for ways to alleviate its labor shortages.

While this scenario is ridiculous when applied to workers, it is exactly what policymakers are considering for the pharmaceutical industry. And, just like with workers, the consequences from these policies are clear: pharmaceutical price controls create access issues that worsen over time.

Precisely because there are no price controls in the U.S., Americans have access to nearly 90 percent of all of the new medicines that were introduced between 2011 and 2017. People living in Germany, the country with the next highest access rate, can only access around 70 percent; Australians only have access to one-third.

Policies that impose arbitrary price indices or mandate price arbitration are simply “price controls” by another name. If implemented, these policies will diminish medical vitality, discourage health care innovation, and jeopardize the creation of future cures. In short, they will make the health care system worse, not better.

This article was originally published by Forbes.com

The Power of Single Family Homeowners and SB50

If single family homeowners’ power can be harnessed it could mean the end of SB 50, the controversial bill designed to grant state authority to override local zoning laws in order to build high-density housing near transit lines.

Sen. Scott Wiener hopes to make strides in dealing with California’s housing crisis by allowing for development of multi-housing units near train, ferry and bus corridors that meet certain criteria. But the formula has been attacked as a threat to single family home communities that will see an altered character if the law permits multi-family structures with increased building heights and reduced required parking spaces to be built in single-family home neighborhoods.

The changing character of single family neighborhoods could motivate more middle class residents to consider leaving the state. The phenomenon of losing middle class residents is already been seen in surveys.

Single family homeowners’ dissatisfaction with the way government dealt with them has greatly influenced policy decisions in California. Think of the taxpayer revolt of Proposition 13 and the success of Proposition 218, the “Right to Vote on Taxes” act nearly 20 years later, largely motivated by mistreatment of homeowners under the property benefit assessment laws.

While SB 50 is considered by its author a matter of statewide concern (with some exceptions since he amended out small counties and some affluent small cities), the measure is a one-size-fits all plan for the state to dictate zoning law to local governments.

SB 50 enjoys support from a number of business organizations including the California Chamber of Commerce, the Bay Area Council, and the Los Angeles Chamber of Commerce. Realtors and developers are also on board. Not surprising, as the Senate Committee on Governance and Finance noted, “SB 50 also allows developers to choose the density at which they build, potentially allowing them to maximize profits by building larger luxury units instead of smaller, lower priced ones.”

Opposition comes from tenant groups, many cities, and notably a handful of resident, community and homeowner associations. If that segment of the opposition grows, the bill could founder.

While some of the tax measures mentioned above dealing with home ownership affected all homeowners in the state, the upshot of SB 50 on single family homes is not as wide. Therefore, it will be more difficult to rally homeowners against the bill. In addition, many homeowners may not know the consequences of SB 50 on their neighborhoods until after the bill passes and is put into effect.

SB 50 continues to move through the legislative process. If opponents of SB 50 get the word out to neighborhood groups to oppose the bill, especially in high-population areas with many voters such as Los Angeles and the San Fernando Valley, that would generate the formidable collective power of homeowners to have a major impact in the SB 50 debate.

This article was originally published by Fox and Hounds Daily.

Newsom scraps $16B plan for tunnels to deliver water to Southern California

California Gov. Gavin Newsom has formally abandoned a plan to build two giant tunnels to reroute the state’s water from north to south, an idea pushed by his predecessor, Jerry Brown.

Newsom had signaled the move in his State of the State address in February but made it official Thursday by asking state agencies to withdraw existing permits for the project and start over with plans for a single tunnel

“I do not support the twin tunnels,” Newsom, a former lieutenant governor and San Francisco mayor, has said. “But we can build on the important work that’s already been done.”

California has already spent $240 million developing the project, according to state Department of Water Resources Director Karla Nemeth. She told The Associated Press that some of that work will inform the new approach. …

Click here to read the full article from Fox News

L.A. Politicians Want to Spend Bullet Train Funds

In a sign of frustration over the state’s transportation priorities, several board members with the high-profile Los Angeles County Metropolitan Transportation Authority have made the argument that it makes far more sense to use money that Gov. Gavin Newsom wants to spend on a bullet train route in the Central Valley on Los Angeles-area projects instead.

Newsom made international headlines in February when he pulled backfrom predecessors Jerry Brown’s and Arnold Schwarzenegger’s commitment to have the California High-Speed Rail Agency build a statewide high-speed rail network. Instead of continuing to try to secure all the funds needed for the $77 billion project, Newsom said the state should focus on completing a 110-mile segment from Merced to Bakersfield that is expected to cost $12.2 billion.

Five L.A. Metro board members – Hilda Solis and Kathryn Barger, both Los Angeles County supervisors, Inglewood Mayor James Butts, Los Angeles Councilman Paul Krekorian and Glendale Mayor Ara Najarian – think that’s a bad idea.

At a recent Metro board committee meeting, Solis said that “many, many projects” in the Los Angeles region would be more helpful in meeting state transportation goals.

In a motion they crafted for the Metro board’s consideration, they wrote that the Central Valley segment “has little value for public transportation and limited greenhouse gas reductions. Regional rail transit improvements in the Los Angeles region would be more cost effective with more substantial mobility benefits.”

The Curbed Los Angeles website reported that the five decided not to ask the full Metro board to endorse the motion, evidently after being reassured that the state would help fund some of the local projects that Solis had praised. But the sharp criticism from five board members of Metro – one of the nation’s largest transportation agencies, serving 10 million people in a 1,400-square-mile region – is a powerful reminder that even with Newsom’s scaled-back version, the state’s bullet-train project faces considerable skepticism.

Cost, viability of Central Valley segment questioned

The Central Valley route faces two of the same key criticisms that the statewide project did under Brown.

Its initial cost estimate of $6 billion has more than doubled, just as the statewide plan’s cost soared from $34 billion to $77 billion.

Under Proposition 1A, the 2008 ballot measure providing $9.95 billion in bond funding for the project, every segment is supposed to generate enough revenue to be self-supporting, with taxpayer subsidies banned. But assumptions that linking Merced, population 83,000, with Bakersfield, population 380,000, will lead to ridership that is heavy enough to cover the cost of bullet-train operations is tough to square with the fact that presently, there are only six conventional train trips daily between the cities with an average ticket price of $27.

Questionable assumptions about ridership have been common from the state rail authority. For example, in 2015, the Los Angeles Times reported that the authority projected annual ridership of up to 31 million passengers after the Los Angeles-San Francisco route was complete. That’s about the same number of annual riders as Amtrak, which operates in 46 states.

On Wednesday, the rail authority is expected to release more detailed plans from the Newsom administration for the Merced-Bakersfield segment.

This article was originally published by CalWatchdog.com

Housing and Transportation – Why California’s Legislature Gets EVERYTHING Wrong

California, the welcoming sanctuary state, has a population on track to break 40 million by the end of this year. Its highway system was designed to handle a population of 20 million. Its cities, bound by legislated “urban containment,” are 3.5 million homes short of what would meet current housing needs. As a result, commuters spend hours stuck in traffic, and millions of homeowners endure indentured servitude to mortgages on ridiculously overpriced homes.

None of this had to happen.

There are many reasons it has come to this, but two causes stand out, because if they were corrected, the problems would be solved in a few years. The first is obvious but very tough to counter – there is a conventional wisdom that most of these damaging policies are necessary to save the planet. But upon examination, almost none of the ones with the worst consequences for housing and transportation were environmentally necessary.

With respect to housing, the environmentalist boogeyman was alleged “sprawl.” But California is a vast, spacious state, including tens of thousands of square miles of semi-arid wasteland that could easily be brought to life if used for housing. California is only five percent urbanized. If that allocation were just increased by half, to a mere 7.5 percent urbanized, ten million new residents could live in new homes on half-acre lots. It is absurd to think there isn’t enough land in California to accommodate this sort of development, which, in any case, would never be that expansive.

The problem with urban containment policies, set to get worse with the likely passage of SB 50, is the lack of balance. Increasing housing density in the urban core of cities is normal and inevitable. It is part of the natural evolution of all cities. But doing that without also permitting the outer footprint of cities to expand is destructive. Population growth that the urban core can’t absorb overflows into tranquil residential neighborhoods and destroys them. It ruins established low density communities, making them fodder for predatory investors and government rehousing schemes.

Environmentalists counter that housing must be near the jobs, and jobs must be near the housing. Notwithstanding the historical amnesia that must be making them unaware of how jobs and housing naturally flow to wherever new land development occurs, these objections ignore the future of transportation. There is no transportation conveyance more versatile than wheeled vehicles, no transportation conduit more versatile than roads.

What are quaintly still referred to as “cars” are on the brink of stupefying transformations. Vehicles over the next few decades will evolve to drive themselves, “convoy” in “hyperlanes” at very high speeds, operate as on-demand shared vehicles, public and private mini buses and full size busses; some of them will be mobile offices, conference rooms and hotel rooms; some of them will even fly. There is monumental folly in allocating funds for light rail and high speed rail, when car of the 2050 will be as dissimilar to the car of 1950 as an eagle is to a fruit fly.

There are other arguments for roads over rail. The supposedly lighter environmental footprint of rail is overstated, since it has to exist as an entire parallel transportation network that still requires cars and roads for anyone to get to the rail stops, or get to their destinations after they disembark. And the supposedly heavier environmental footprint of cars diminishes every year, as we enter the electric age, as cars become far more energy efficient, as their AI facilitates heavier road density at speed, and as more people share them.

As for other enabling infrastructure, it’s time that anyone willing to challenge the environmentalist fallacies that preclude development of civil assets such as roads, water projects, and nuclear power plants also challenge the supposed financial obstacles. One of the primary reasons California doesn’t have billions each year to spend on infrastructure is because, statewide, they’re pouring over $30 billion each year into state/local public employee pension funds – an amount set to double by 2025. Then, of the nearly $800 billion that California’s 83 state/local pension funds have invested, less than 10 percent is invested in California. Require 10 percent to go into public/private revenue bonds to finance infrastructure. Problem solved, assuming the money could be spent on bulldozers instead of bureaucrats.

There’s another cause for California’s failure to build homes and roads, however, one that’s rather elusive but even more fundamental. California’s liberal elites, nearly all of them aging boomers, are immune from the consequences of their voting patterns. These liberal voters never saw a piece of environmentalist legislation they didn’t like. Meanwhile, they’re all living in the homes they purchased well before the politicians they supported passed all those fine sounding, high minded laws.

This liberal immunity is challenged by SB 50, a law that threatens to fill wealthy liberal enclaves from Palo Alto to Brentwood with fourplexes filled with Central American migrants, living on public assistance. The horror! But don’t hold your breath. If SB 50 and similar legislation passes, those fourplexes will indeed be coming to a detached, single family home neighborhood near you, but they’ll skip the zip codes where the residents can afford attorneys. Why bother, when just up the road there’s a nice lower middle class block we can bust?

One cannot stop wealthy liberals from hiring lawyers to stop in its tracks anything they love conceptually enough to vote for, but not enough to suffer personally. But there is something that can be done. Repeal Prop. 13. Make every homeowner in California pay property taxes based on the current assessed value of their homes. That’s never going to happen, thank God. But the reason it will never happen is not what you might expect. The reason is because Democrats know that if they ever overreached that much, they would turn millions of voters into Republicans overnight.

The bigger shame is that the only reason these liberals aren’t conservatives is because they don’t have to live with the consequences of liberalism. They don’t have to buy homes at today’s prices, and as retirees, they don’t have to drive during rush hour. If they did, they might think more carefully about where their money is going, and they might question more urgently the environmentalist moralizing that served as the pretext for wasting so much of it.

This article originally appeared on the website California Globe.

Some bills are silly, and some are just dumb

Every session of the California Legislature generates some bills that can only be labeled as silly – that is, they defy common sense.

One example this year is a bill that would abolish paper receipts at retail businesses, thereby requiring customers to supply their email addresses so merchants can send them electronic records of their purchases.

The rationale for the legislation, Assembly Bill 161 by Assemblyman Phil Ting, a San Francisco Democrat, is to reduce paper waste that may contain dangerous chemicals.

The supposed problem this bill purports to solve is minuscule, or more likely infinitesimal, but if it becomes law, it will build databases for merchants that can be used for marketing, and make it easier for hackers to steal consumers’ identities.

Another is Assembly Bill 1162, the brainchild of Assemblyman Ash Kalra, a San Jose Democrat, which would prohibit hotels from supplying their patrons with tiny containers of shampoo and other personal care products, once again on the spurious notion that it would reduce the waste stream.

Kalra takes his cue from a local ordinance to that effect in Santa Cruz County. If the residents of that county want to engage in feel-good gestures, that’s their business. But why should their foolishness be foisted on the 40 million other Californians and the millions of people who visit California each year?

Both bills, as well as many others, reflect the current Legislature’s yen to regulate or eliminate every aspect of human behavior that doesn’t comport with current progressive dogma. But there’s a point at which silliness gives way to pure dumbness – and that brings us to Assembly Bill 857.

Carried by Assemblyman David Chiu, also a San Francisco Democrat, the measure would authorize local governments to create their own banks.

During an Assembly committee hearing on the measure last week, Chiu railed at “Wall Street bankers” that have mistreated consumers. He portrayed local government-owned banks as an antidote that would provide financing for progressive projects and services and shun loans to such politically incorrect activities as oil drilling and the manufacture of guns and cigarettes.

“The private banking system has unfortunately failed,” Chiu said, contending that local government-owned banks would “keep taxpayer dollars in local communities.”

While Chiu demonized big banks – who certainly have not been paragons of ethical operations – shifting local government funds into their own banks would have virtually no impact on the big guys.

Rather, as the Assembly Banking and Finance Committee was told by several witnesses, it would undermine the liquidity of local community banks, create unfair competition to those banks, and disrupt the pooled money investment accounts that county treasurers maintain for other local governments.

From that standpoint alone, AB 857 is very flawed. But that’s just the beginning of its dangerous aspects.

At the very least, local politicians would be under terrific pressure to provide funds from their banks for cockamamie schemes that can’t pass muster with regular banks.

Furthermore, under the legislation, any local government entity could create a bank – even the tiniest mosquito abatement or water district.

We’ve seen time after time how sharp operators gain political control of such obscure agencies and then devise ways to manipulate their powers, such as issuing bonds and awarding lucrative contracts, to loot their treasuries. It’s why the speaker of the state Assembly, Anthony Rendon, calls his Los Angeles County district a “corridor of corruption.”

Creating local government banks would be creating new conduits to such chicanery. And that makes AB 857, which won committee approval, a very dumb bill.

This article was originally published by CalMatters.org