​Minimum Wage Hikes Hurt the Economy and the Poor

California has raised its minimum wage four times over the past 13 years, with each increase outpacing the federal minimum wage. California’s current minimum wage is 138 percent of the federal level, and with the impending statewide increase mandated by current law in 2016, California will have the highest minimum wage in the country.

Despite clear negative impacts on both California’s economy and low income citizens, Senate Bill 3 (Mark Leno, D-San Francisco) would mandate an additional statewide increase to $13 per hour with annual, auto-scheduled wage increases thereafter.

With another increase already teed up for January 2016, pre-programing additional increases is reckless.  The weight of economic data compels the conclusion that arbitrary minimum wage increases do more harm than good.  Motivated by the understandable desire to help the state’s lowest wage earners, the reality is that they reduce access to jobs for those citizens who need them most and further suppress upward mobility for those clinging to the bottom rung of the employment ladder.

Capitol Matrix Consulting studied the fiscal impact of a $13 minimum wage to the state and, not surprisingly, found devastating consequences.  The study identified a $200 million annual cost to the state due to the recent minimum wage increases already being phased in.  Worse yet, it projects a cost of $860 million to the state in the 2016-2017 fiscal year if the minimum wage is raised to $13.  (Most of these costs are incurred due to increased state payments for providers of In-Home Supportive Services (IHSS) and increased state costs to the Department of Developmental Services (DDS)).

These negative financial impacts would not be offset by any additional revenue to the state.  Paying for burdens would have to come from higher taxes – further accelerating an economic death spiral – or cuts to vital services and fewer public sector jobs.

While Capitol Matrix’s study analyzed the direct fiscal impacts of another increase, the projected costs to the state – totaling nearly a billion dollars a year – do not represent the full impact of such an increase.  Increasing labor costs on California’s millions of small businesses creates additional unintended consequences, including higher prices for the goods and services we rely on and reduced access to jobs for teens and low-skilled workers.  California’s recent minimum wage increase is not yet a year old, and another increase is only eight months away.  These two increases are a 25 percent wage increase in just 18 months, and small businesses are already feeling the pressure to cut hours, eliminate jobs and raise prices.

Like many well-intentioned progressive policies the actual effects of a significant increase in the minimum wage won’t match the promise of helping the working poor – in fact, just the opposite.  For struggling Californians looking for work, what good is an increase in the minimum wage if you can’t get a job?

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpa​yers’ rights.

Sen. Leno’s “Income Inequality” Lost Cause

California’s minimum wage is set to rise to $10 an hour on January 1st of next year. But for Senator Mark Leno (D-San

CA Senator Mark Leno, D-San Francisco

CA State Senator Mark Leno, D-San Francisco

Francisco), this already-dramatic wage hike isn’t nearly dramatic enough.

Citing an “income inequality crisis,” Sen. Leno has called for a minimum wage increase to $11 an hour in 2016, followed by another jump to $13 an hour in 2017. Unfortunately for the senator, the evidence suggests a hike in the base wage will do very little to solve this crisis — and might even make it worse.

San Francisco, which Sen. Leno represents, has one of the highest minimum wages in the country — and one of the country’s most dramatic gaps between the rich and the poor. (One analysis last year compared the city’s inequality level to that in a developing nation.) City voters in November resolved to fix this problem by approving a proposal to raise the city’s minimum wage even higher, to $15 an hour, by 2018.

Thus far, the looming $15 minimum wage only seems to be worsening the city’s inequality crisis. Several small business owners have been forced to close their doors as a consequence of the coming cost hike, hindering their own entrepreneurial dreams and those of the people they employed. This trade-off isn’t unique to San Francisco. If you’re an employee working at a business with small profit margins, your employer will be faced with one of two difficult choices when the minimum wage goes up: Either raise prices, or cut labor costs by reducing staffing levels or employees’ hours.

If the wage goes up and the terms of your employment don’t change, you may be better off; if you lose job and your co-workers do, too, then you’re most certainly worse off. That means Sen. Leno’s plan for a statewide $13 minimum wage will create winners and losers in the entry-level workforce. Unfortunately, a team of economists writing in the Journal of Human Resources discovered that the “losers” from a wage hike — employees who are pulled below the poverty line, or at least closer to it, as a consequence — outnumber the “winners.”

Put differently: Instead of redistributing income from the top 1 percent, Sen. Leno may unintentionally redistribute it among the bottom.

The Senator’s office has pointed skeptics to comforting studies from a team of ideological researchers at the University of California-Berkeley, suggesting that the negative impact of a higher minimum wage in California—both on the city level, and statewide–would be minimal or nonexistent. But the Berkeley team’s estimates are looking less and less credible in the face of real-world evidence.

In San Francisco, for instance, one bookstore reported that the $15 minimum wage would cause a fatal 18 percent increase in operating costs—90 times greater than what UC Berkeley projected for city retailers. And in Oakland, where the minimum wage is rising to $12.25, restaurants are reporting price hikes of up to 20 percent—far greater than the 2.5 percent that the Berkeley team predicted.

These real-world examples are no doubt unsatisfying to the most dedicated ideologues, and it’s unsurprising that one of the Berkeley researchers insinuated employers might not be telling the truth. But spin like this only goes so far, especially in the face of real flesh-and-blood employees who no longer have jobs.

If Sen. Leno is serious about reducing income inequality and increasing opportunity, he owes it to the California residents who need those opportunities to examine the best way to help them. That starts by acknowledging that we should judge public policy by its outcomes rather than its intentions.

Michael Saltsman is research director at the Employment Policies Institute

Tech giants back privacy bill

Bolstered by crucial support from industry leaders and Republicans across the aisle, Sacramento’s most prominent privacy-rights proponent took another stab at restricting the state’s access to personal information.

State Sen. Mark Leno, D-San Francisco, repackaged some of his long-cherished plans for law enforcement reform in Senate Bill 178, the California Electronic Communications Privacy Act, or Cal-ECPA. In a press release, Leno’s officedescribed SB178 as a prudent piece of legislation with enough exceptions to ensure public safety and effective policing:

“Cal-ECPA protects all electronic communications, including personal messages, passwords and PIN numbers, GPS data, photos, medical and financial information, contacts and metadata. Exceptions to the warrant requirement are included in the legislation so that law enforcement officers can continue to effectively and efficiently protect public safety in the event of an emergency.”

A string of failures

Leno has tried and failed to enact similar legislation in the recent past.

His troubles emerged in the wake of a controversial California Supreme Court ruling in 2007. The plaintiff, Gregory Diaz, was incriminated after an arrest when an officer with the Ventura County Sheriff’s Department scrolled through the text messages on Diaz’s cellphone. The justices sided against Diaz, and the U.S. Supreme Court refused to hear Diaz’ case.

So in 2011, Leno’s attempt to require warrants for cellphone searches fell prey to a veto from Gov. Jerry Brown — even though it passed the Assembly unanimously. As CNN reported, Brown warned that “courts are better suited to resolve the complex and case-specific issues relating to constitutional search-and-seizures protections.”

Then in 2012, as the Sacramento Bee reported, state district attorneys and Brown sank a bill Leno introduced that would have required warrants for any search of location data. And in 2013, they did the same to a related bill that mandated a warrant for emails requested from Internet service providers.

New Allies

But this time, political attitudes have shifted enough that Leno has reasoned he stands a better chance at success. He found a co-author for SB178 in State Sen. Joel Anderson, R-Alpine, known for introducing privacy-related bills that would haveshielded Covered California data and prohibited state cooperation with the NSA in unwarranted surveillance activities.

What’s more, Leno was able to marshal the support of Silicon Valley luminaries, whose endorsement was key to building credibility and challenging California’s district attorneys. His bill, KQED reported, received the okay from titans like Google and Microsoft to social media heavyweights like Twitter and Facebook.

And it was backed by smaller startups like Dropbox, which offers secure online data storage.

In a statement released by Mufaddal Ezzy, California manager of public policy and government relations for Google, SB178 was portrayed as a natural extension of current Fourth Amendment protections against searchs and seizures:

“Law enforcement needs a search warrant to enter your house or seize letters from your filing cabinet — the same sorts of protections should apply to electronic data stored with Internet companies. California’s electronic surveillance laws need to be brought in line with how people use the Internet today and provide them with the privacy they reasonably should expect.”

Clarity in the courts

Most importantly of all, Leno finally has the U.S. Supreme Court in his corner. As Ars Technica reported, the court ruled unanimously in a 2014 case, Riley v. California, that warrants must be required to search a cellphone.

Instead of posing an awkward challenge to the courts, as Brown feared years ago, Leno’s desired protections would instead officially square California law with the holding in Riley.

While SB178 makes its way through Sacramento, Californians interested in privacy issues will also keep an eye on Washington, D.C. There, Congress will consider the Online Communications and Geolocation Protection Act, introduced by a bipartisan group of three lawmakers, including Rep. Zoe Lofgren, D-Calif.