California?s Economically Illiterate Legislature

Minimum Wage chartCalifornia?s minimum wage is set to rise to $15/hour over the next six years. While this topic has been beat to death, it is seldom pointed out that the inflation-adjusted minimum wage, based on 78 years of precedent, at most should only be around $10 per hour. A?recent UnionWatch post ?Raise the Minimum Wage, or Lower the Cost of Living?? proved this using CPI data. As can be seen, only once, in 1968, did the minimum wage in 2015 dollars exceed $10/hour.

A lot of things have happened since 1968, of course. To name just two, the?earned income tax credit?didn?t arrive until 1975, and the?Affordable Care Act, offering health insurance to low-income participants at give-away rates, didn?t arrive until 2010. Needless to say these programs make it easier to survive on minimum wage.

The point of this isn?t to suggest workers shouldn?t earn more money, or to argue about whether or not we should have a minimum wage. The point is that the minimum wage, at $15 an hour, has no historical justification. And because of this, the unintended consequences are more severe. Like?never?before, this minimum wage increase will kill small businesses and it will kill entry level jobs.

There?s another point missing from the debate over the minimum wage. It is an indictment of the members of California?s state Legislature, because collectively, they have a simplistic, ideologically driven view of economics that is divorced from reality. Their naive enthusiasm is harming the working families they claim they want to protect. California?s legislators, nearly all of them coerced and controlled by government unions and seduced by extreme environmentalists, have enacted policies that deny upward mobility to working people.

These policies only begin with an excessive minimum wage hike that is going to reward large corporate franchises and drive small emerging companies out of business. They extend to the unaffordable cost of housing, caused by misguided ?urban containment? policies in what is one of the most spacious?developed?regions on earth. They extend to the high cost of electricity and natural gas, elevated by policies inspired by a futile wish to set an example to the rest of the world ? regardless of their regressive impact. They extend to a pension system built by an alliance of government unions and powerful financial interests that guarantees retirement benefits to government employees that are literally five to ten times more generous than Social Security, paid for by taxpayers, teetering on the abyss of insolvency. The list goes on.

Legislator business experienceHere?s part of the reason why: California?s legislators do not have experience running a business. Most of them have never worked in the private sector. A 2014 UnionWatch post ?How Labor Money Undermines the Financial Literacy of California?s Legislators? documents, based on biographical analysis, the level of business experience in California?s 2014 state legislature. In all, 56 percent of them have NO experience in business ? having spent their entire careers in government or nonprofits. Of the majority democrats, 76 percent of them have NO experience in business. The 2016 class of legislators is unlikely to be any different.

Understanding that you can?t raise the minimum wage without killing entry level jobs is a basic economic concept. So is the fact that if you make it nearly impossible to develop land or energy, prices will rise for those commodities. And it isn?t much of a leap to realize that when you do this, you are hurting the most vulnerable members of society.

More sinister, and perhaps harder to grasp, upper division stuff, is the fact that every time you add a regulation, you further empower the monopolistic corporate special interests who are supposedly the bad guys you?re fighting. Every time you lower interest rates to stimulate spending, you invite people of limited means to go further into debt, and you decimate the savings?accounts of people unwilling or unable to gamble their modest fortunes in a volatile stock market. And every time you raise pay and pension benefits for government workers, you create deficits, pouring additional billions into the pockets of bond underwriters, and you redirect the money into the hands of the pension funds and their investment bankers.

And at the graduate level, in that rarefied space?where sound-bites (that perform so well in Sacramento) just echo meaninglessly in the vast alpine air, consider this: ?The impact of artificially elevating the cost of living creates an asset economy, so pension funds and rich people alike can ride the bubble for one more year, while ordinary folks endure servitude to their $700,000 mortgages.?It doesn?t take an economist, however, to know this can?t last. It just takes horse sense. That too, appears to be in short supply in Sacramento.

Could it be that if California?s Legislature were committed to?lowering?the cost-of-living via policies that encouraged competitive development of natural resources including land and energy, maybe they wouldn?t have to bestow such lavish benefits on government workers, nor the crumbs of minimum wage increases to private workers?

* ? * ? *

Ed Ring is the president of the?California Policy Center.

California?s New $15 Minimum Wage Will Accelerate Automation

Minimum wage1California?s Legislature last week?voted overwhelmingly to automate most of the Golden State?s fast-food restaurants, supermarkets, and mid-sized retail chains by 2022. No, that wasn?t the stated intent of Senate Bill 3, which sailed through the Assembly and Senate on mostly party-line votes and after little debate. But that will be the likely effect of the law, which is supposed to phase in a $15 hourly minimum wage starting in January.

Governor Jerry Brown?signed the bill?in Los Angeles on Monday, one week to the day after unveiling the wage proposal at a Sacramento press event where he was surrounded by the Democratic elected leaders and labor union bosses who helped put it together. ?I?m hoping that what happens in California will not stay in California, but spread all across the country,? Brown said. ?It?s a matter of economic justice. It makes sense.? Assemblyman Sebastian Ridley-Thomas, a Los Angeles Democrat, echoed Brown during Thursday?s floor debate. ?This is an argument about economic justice,? he said. ?Justice is not something that can be negotiated or compromised.?

As it happens, the bill was the product of several months of extensive negotiation and compromise, almost all behind the scenes and without a word of input from California?s many industry lobbying groups, or from the leadership of the state?s largely irrelevant Republican Party. The law?s most immediate practical effect will be to end a pair of union-backed initiative drives that appeared headed for November?s general election ballot. The Service Employees International Union had been agitating for a measure that not only would have imposed the $15 minimum wage sooner, but would have done so without regard to the state?s fiscal outlook or economic circumstances. Brown, ever the cautious progressive, thought the union?s proposal went too far, too fast.

Under Brown?s plan, California?s hourly minimum wage would increase to $10.50 in 2017 for businesses with 26 or more employees, followed by $11 in 2018, and another dollar each year, arriving at the magic $15 in 2022. After that, the law would let the wage continue to rise with inflation. Smaller businesses would have an extra year to implement the annual raises. Brown insisted on a provision allowing the governor temporarily to suspend the wage hikes in the event of an economic downturn or a large state budget deficit. But the legislation provides a limited window for action: the governor must make his decision in September; the wage hike takes effect the following January. And, the truth is, these emergency provisions are almost always for show. AB32 ? California?s ill-named Global Warming Solutions Act of 2006 ??included a similar escape hatch, which neither then-governor Arnold Schwarzenegger nor Brown ever considered using during the recession, or during any one of the state?s multibillion-dollar budget crises. They opted instead for budget gimmickry and tax increases. One result? California?s high-skill, high-wage manufacturing sector has never recovered. In February, it experienced its worst contraction?since 2009.

Advocates, including the labor-backed Fight for $15 Coalition and Senate president pro tem Kevin de Le?n, say the raise will benefit as many as 6.5 million workers, or upward of 43 percent of the state?s workforce. Mainly, though, the $15 minimum wage will be a boon for California?s public-sector unions. The state Department of Finance estimates that the wage hike will cost taxpayers at least $3.6 billion a year by 2023, owing to a raise (and new benefits) for in-home health-care workers. But the cost likely will be even higher than that, as many public employees?teachers, most notably?must contractually be paid at least double the minimum wage or receive overtime pay.

Businesses have the most to lose. ?I think very few business people will lobby against this bill, because then they will just be cutting their own throat,? Brown said at his press conference the other day. And he was right?the business lobby didn?t put up much of a fight, and its reasonable objections were scoffed at. California is a diverse state. What might appear economically feasible along the wealthier coast may not be such a good idea in some of the poorer inland areas, which have never quite come back from the recession.

Will a $15 per-hour wage really help workers in San Francisco? As the city began phasing in its own $15 minimum wage law last year, locals were shocked to discover the law of unintended consequences. Business owners who supported the city?s ordinance have found themselves raising prices, cutting hours, or in a few notable cases, shutting down altogether. ?If you can only raise prices so much,? one political consultant with the Los Angeles Area Chamber of Commerce told the L.A. Times this week, ?you?re going to be forced to cut hours, cut employees, change your business model and frankly, automate.?

That ? and maybe relocate your corporate headquarters to Tennessee while you?re at it. Last month, Andy Puzder, chief executive officer of CKE Restaurants (owners of the Carl?s Jr. and Hardee?s fast-food chains), announced that the company would leave Santa Barbara for the more accommodating tax and regulatory climes of Nashville. But Puzder?s greater sin, at least judging from the scorn and ridicule he garnered online, was his unapologetic view of how best to boost his company?s bottom line in the years ahead: robots all the way down. ?They?re always polite, they always upsell, they never take a vacation, they never show up late, there?s never a slip-and-fall, or an age, sex, or race discrimination case,? he told Business Insider. If labor is the biggest expense on the ledger, then that?s the likeliest target for cuts. ?With government driving up the cost of labor, it?s driving down the number of jobs,? Puzder said. ?You?re going to see automation not just in airports and grocery stores, but in restaurants.?

In fact, Puzder wasn?t saying anything particularly new or novel. Automation is coming, no matter what. Fast-food kiosks are commonplace in Europe, where labor costs are even more prohibitively expensive than here, with McDonald?s leading the way. But it isn?t just the corporate monoliths that are embracing automation. Smart start-ups are making automation hip. Puzder was overjoyed with Eatsa, a new restaurant chain with locations in Los Angeles and San Francisco that is almost completely automated. Customers order from a screen in the front of the restaurant. A small crew in the kitchen assembles the meals in the back. ?The entire process requires zero human interaction between customers and workers.?

Brown may be right that California will lead the way for the rest of the nation. But progress isn?t a $15 per-hour minimum wage. It?s an automat in San Francisco.

The Horror Movie of Capitol Lawmaking

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

The state Capitol building in Sacramento is a popular destination for school groups. The kids tour the historic legislative chambers, while adults explain how laws are made.

A more accurate tour of how laws are made can be found on Netflix. Look for the 1931 horror classic ?Frankenstein.?

There you?ll get a good look at how it?s really done. Peek into the laboratory as the mad scientist pieces together grisly remains from the local graveyard, while the villagers assemble outside with pitchforks and torches.

Consider, for example, the $15 minimum wage law.

On the Saturday night before Easter, word escaped from Dr. Frankenstein?s lab that Gov. Jerry Brown had made a deal with labor union leaders and state lawmakers to ratchet up California?s minimum wage to $15 an hour and beyond.

In January, Brown warned that a minimum wage hike of that magnitude would ?put a lot of poor people out of work? and would be too costly for taxpayers. The state is an employer, too, and those wage hikes would add $4 billion to the annual budget by 2021.

But everything changed because of an unfortunate accident in the laboratory in 2014 that caused the state?s beloved initiative process to mutate. When the smoke cleared, initiatives could no longer appear on the June ballot, but were pushed into a November crowd scene. And suddenly new initiatives were born with a cord around their necks. This allowed their sponsors to yank them back if a deal for similar legislation could be reached in time.

In the latest experiment, two of Dr. Frankenstein?s trusted assistants, the Service Employees International Union state council and SEIU-United Healthcare Workers West, created competing $15 minimum wage initiatives. The unions hired costly consultants to qualify the measures for the ballot, paying $3 or $4 for each voter signature on the petitions. In earlier years, signatures could be had for a dollar or two, but the crowded field for November pushed prices up.

On March 22, the health care workers union announced that their initiative had qualified for the ballot with 423,236 signatures. They put Gov. Brown on notice that unless he signed a state law to raise the minimum wage to $15, they were taking it to the voters.

Four days later, the pre-Easter deal was announced.

Work in the laboratory commenced immediately on a long-buried minimum wage bill that had passed the state Senate in 2015. With a few spare parts grafted in place, the Assembly Appropriations Committee passed it in 90 minutes and sent it to the Assembly floor. Within 24 hours, the creature was passed by the Assembly and state Senate and sent to the governor?s desk.

Soon the thing will be fully electrified and walking around California. You?ll feel it taking extra money out of your pocket every time you shop, eat or pick up dry cleaning.

Out in the streets of the village, the California Restaurant Association and other business groups are massing and angry. They could storm the laboratory and steal the antidote. It?s in the tall cabinet, in a bottle labeled ?Referendum.?

The business community could gather signatures for a referendum to repeal the law.

But then the unions could gather signatures for ?Bride of Minimum Wage.?

Ballot fights cost many millions of dollars for advertising, but initiatives are inexpensive bargaining chips now that they can be withdrawn after they qualify.

It?s all cooked up secretly in the laboratory or in the back room of the local inn, where sometimes the villagers and their torches win a few concessions.

And that?s how laws are made in California.

Bwaa-ha-ha-ha-ha.

Jerry Brown signs $15 minimum wage in California

As reported by the Sacramento Bee:

Gov. Jerry Brown, casting a living wage as a moral imperative while questioning its economic rationale, signed legislation Monday raising California?s mandatory minimum to $15 an hour by 2022, acting within hours of a similar bill signing in New York.

The bill?s enactment comes one week after Brown, Democratic lawmakers and labor leaders?announced an agreement on the wage increase, averting a brawl on the November ballot.

In adopting the measure, California joined New York as the first states in the nation to enact a plan to raise their statewide minimums to $15. New York Gov. Andrew Cuomo signed his state?s legislation and was cheered by labor unions at a rally moments before Brown spoke in California.

Brown, a fiscal moderate, had previously expressed reservations about a wage increase. But amid growing concern about income inequality …

Pause Mechanism Does Not Ease Discomfort Over Minimum Wage Hike

Minimum WageAs Governor Jerry Brown signs the new minimum wage increase law this morning, many in the business community are studying the proposed temporary pause mechanism built into the bill that is supposed to reassure businesses. It does not.

The mechanism is power in the hands of a governor to pause the minimum wage increase during economic downturns. There are two scenarios in which a governor can hit the pause button.

It is important to note that this power granted the governor is optional. Even in a recession political pressure could prevent the governor from pulling the trigger.

The first trigger is pulled when nonfarm employment for a 3 or 6 month period declines and sales and use tax has dropped over a 12-month period compared to a previous year, all these measurements to be taken at the end of the budget year in June.

The second trigger is based on state budget projections. If the Department of Finance projects a deficit in the then-current fiscal year or in either of the following two fiscal years the governor can pause the minimum wage increase. The budget trigger can be used a maximum of two times.

According to a quick review by the California Business Roundtable?s Center for Jobs & the Economy, this trigger power, which the business group labels an ?Off-Ramp? provision, if it had existed during recent past recessions, would have complicated economic conditions as California was trying to pull itself out of a recession. The analysis says the minimum wage increase would have resumed after the pause while unemployment was still high.

From the Roundtable?s Center for Jobs & the Economy brief examining the last two recessions:

The 2001 Recession?

Most of the country went through a relatively short 2001 recession, but in California it was extended due to Silicon Valley being the epicenter of the dot.com bust and spiking energy prices as a result of the state?s regulatory and other energy policy decisions.? While the triggers would have provided a one-year delay in 2002, the minimum wage would have continued its annual increase as unemployment continued to rapidly rise from an average of 5.4% in 2001 to a peak of 7.3% in 2003.

The 2007 Recession??

The minimum wage increases would have resumed in 2012 when unemployment still averaged 10.4% or even earlier in 2011 when unemployment averaged 11.7%. Most importantly, the minimum wage increases would have kicked back in during the critically important 5-year recovery period where California slowly struggled to regain the two million jobs lost throughout the state.

The brief also noted how the resumption of the minimum wage could put California at a disadvantage with other states: ?the state will then resume raising its wage level above other states just as the recovery begins?a time when competitive factors will be particularly crucial to how quickly the state can restores its economy.?

For the full Center for Jobs & the Economy brief go here.

Originally published by Fox and Hounds Daily

Helping The Poor By Hurting Them

Minimum WageIt appears that a $15 minimum wage will become law in California. Almost invariably, the rationale offered by proponents includes the assertion that it will help ?the poor.? But, as labor economist Mark Wilson put it, ?evidence from a large number of academic studies suggests that minimum wage increases don?t reduce poverty levels.
Beyond the host of logical and empirical issues involved in deciding whether a minimum wage bump will provide more income to ?the poor? as a group, there is another ethical issue that never seems to get discussed. Even if low-income households did gain current income as a group in statistical studies, only individuals bear actual benefits or costs, and such wage mandates redistribute wealth away from many low-income individuals in the name of helping ?the poor.? As a consequence, much of the desired help for the poor will actually come from others who are poor.
How can a requirement to pay low-skilled workers more harm low-income individuals? Some lose jobs. Others lose work hours. Further, for those who keep their jobs and hours, on-the-job training and fringe benefits will fall, and required effort will rise, to offset hiked wages. And higher current wages are often less valuable than what is given up, particularly on-the-job training that enables people to learn, and therefore earn, their way out of poverty. That is why labor force participation rates fall and quit rates rise when the minimum wage rises (an effect that will be heightened by the large magnitude of the current proposed hike), which is the opposite of what would happen if all workers who kept their jobs benefitted from higher mandated wages.Higher minimum wages will not only disadvantage the least skilled compared to automation and outsourcing possibilities, their increased cost will also force them to compete with more skilled labor. That explains why unions are the biggest backers of such measures ? their members will gain from an increased demand for their services regardless of whether the poor gain or lose. But those with more limited skills will suffer from the undermining of their one big competitive advantage ? a lower price. And those with the fewest skills, least education, and job experience will face the greatest employment losses now, as well as having rungs to advancement removed from their potential career ladders. These effects will be further magnified by the fact that employers pay far more than the minimum wage to those workers, through added costs for the employer half of Social Security and Medicare taxes, unemployment insurance taxes, worker?s compensation premiums, etc.

With a higher minimum wage, some of those low-income workers lucky enough to already have job experience and a work history will keep their jobs. Many others will simply find themselves to be unemployable. The main consequence will not be that the poor gain, but that some low-income households benefit at the expense of other low-income households.

Minimum wage hikes thus illustrate a very serious, though all-but-ignored issue. Even if poor people in the aggregate end up with higher incomes (a position far from established), it only means that one subset?s increased earnings will be at least somewhat greater that another likely to be even poorer subset?s decreased earnings, greatly harming many of them. And such government-imposed harm cannot be justified by the intent to help the poor.

Gary M. Galles is a professor of economics at Pepperdine University and research fellow with the Independent Institute. His books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Labor Unions, Legislature, Governor Reach Deal to Raise Minimum Wage

Minimum wage1Labor unions, legislative leaders and the governor came together on a minimum wage deal to presumably keep a minimum wage initiative off the ballot ? presumably because there is more than one way to get on the ballot. More on that later.

The governor got what he wanted from the reported deal. Labor got pretty much what it wanted, albeit, with a slight delay. Details of the deal as reported in the Los Angeles Times?include a 50-cent minimum wage increase for the next two years, hitting $1 a year after that, reaching the $15 mark by 2022, a year after the initiative planned. Businesses with 25 employees and less will have an extra year to adjust.

The hit on the General Fund will not be as great if the minimum wage increase to state workers is half what is proposed in the initiative. To some extent, that satisfies the governor?s office, which warned that a larger, faster increase in the minimum wage would put a heavy burden on the General Fund. State minimum wage workers would cost the state an additional $4 billion at $15 an hour according to the governor?s office.

Significantly for the governor, the immediate effect of the increase on the state budget is lessened and the full force of the deal comes into play once Governor Brown and his administration will be well into the history books.

Apparently, the business community and small business were not a part of the final negotiation and they don?t like the result. The business community raised concerns that the speedy wage climb to $15 and additional increases would hurt employment and threaten small businesses that survive on the margins.

Two issues the business community sought in minimum wage negotiations were a pre-emption for local government seeking their own $15 or higher minimum wage and preventing an automatic cost-of-living provision that would increase future minimum wage amounts to inflation. Reportedly, neither of those provisions made it into the negotiated settlement. The only reported provision to deal with economic uncertainties is power given to the governor for freezing minimum wage increases in economic downturns. The details are unclear.

If the deal is passed by the legislature and signed by the governor and the union is satisfied with all aspects of the plan, the already qualified initiative can be pulled from the ballot by proponents.

However, the minimum wage question could still find its way to the ballot by referendum.

If the business community objects to the final deal, a referendum gathering the necessary signatures would freeze the law passed by the legislature until the next scheduled election. Depending when the bill passes and is signed and when a referendum qualifies that referendum vote could be in 2016 or possibly 2018.

Is a referendum possible? Cost of signatures brought in by professional signature gatherers is prohibitive right now with many initiatives circulating. However, while labor said that a pre-emption of local minimum wage laws was a non-starter for any negotiated settlements, business made the same argument about the automatic cost-of-living issue.

If the negotiated settlement becomes law with no adjustments for business concerns, the business community will have to decide if it will take its argument to the voters.

The piece was originally published by Fox and Hounds Daily

Proposed Minimum Wage Hikes Hurt More Than Just Small Business

Minimum wage1Despite the heavy mudslinging and name-calling that never ceases to accompany an election year (this one clearly setting a new low standard), there?s one thing that Democrats, Republicans and persons of most every political persuasion are likely to agree upon: every red-blooded American deserves the right to and a fair shot at earning more money to realize their dreams.

Work hard, get paid, provide for one?s self and family ? something our parents repeatedly hammered into our brains and a cornerstone of the red, white and blue capitalism that makes our country great. Every employee that has met minimum qualifications for a position deserves a reasonable ?foot in the door? from day one ? something that offers a temporary first plank from which to prove themselves to the employer, customers and workplace.

Now enter the Minimum Wage ? a topic that is probably not foreign to you unless you?ve been hopelessly abandoned on the Red Planet a la Matt Damon. Labor unions are pushing the ?Fight for $15? without first understanding the empirical data and repercussions of current minimum wage increases that have yet to fully manifest.

As with many government programs and activities that were created with the best intentions ? think social security, welfare-to-work and state retirement systems ? the minimum wage these days is spinning more out-of-control than The Donald in front of a microphone at an Iowa pep rally. Efforts to push, push, push for a higher minimum wage without seeing the existing ones take shape is making it impossible for small businesses and even many social programs to keep pace. And, at the end of the day, something ? or more commonly, someone ? will feel the negative fallout.

To put things into perspective, Californians have witnessed a 25 percent increase in the statewide minimum wage over the past two years ? an increase from $8 to $9 in 2014, and another $1 increase, spiking it to $10 an hour, this past January.

Peering ahead and atop these already-dramatic increases, we?re witnessing other proposals and jurisdictions taking it even higher without knowing or seeing how the current increase in California will play out. Los Angeles and Santa Monica just hiked their local wage to $15, Long Beach to $13, Pasadena to $13.25 and Sacramento to $12.50. Add to that a legislative proposal to hike the minimum wage to $13 an hour and two measures aimed for the November ballot ? one that would hike the wage to $15 over five years, and the second that would raise it to $15 over four years and add six days of mandated paid sick leave ? and it leaves many asking ?When is enough, enough?? as well as ?Why the rush??

Some in the Capitol and in many council chambers are heard uttering, ?We can?t afford to wait ? the time is now!? However, we must bear in mind that minimum wage hikes at any level that are too much, too fast, too soon will have negative consequences for many more than just small businesses in our communities.

Our policymakers need to take a careful look at other notable stakeholders that are very likely to be affected by a reckless, ill-conceived, rushed minimum wage increase policy:

In-Home Supportive Services (IHSS)/Persons with Disabilities

According to discussions with experts in the IHSS and disabilities community, a minimum wage hike will unquestionably be passed on to clients with disabilities because the resources simply aren?t there. There are over 300,000 IHSS workers in California, most of them unionized. This will be a higher cost to scores of private clients ? yes, our most vulnerable patients ? who are on a fixed income and they won?t be able to afford to sustain same level or duration of care. Counties, especially those in rural and disadvantaged regions, will tell you they simply won?t be able to absorb those costs. And keep in mind that many IHSS workers are family members of the clients and are likely to lose hours and in many cases health benefits because of this.

Many Californians with disabilities will be forced into institutions at a major cost to the state rather than keep them in their homes and having people care for them. To put a fine point on it, one person with special needs noted that their agency rate is about $200 a day for 24-hour in-home care, but for many it?s upwards of $350. He noted that a $5 an hour increase would be ?a huge hit and for me and many disabled because that money simply isn?t there.?

Education

A representative from one Central Valley school district said a minimum wage increase of this magnitude would impact schools in two ways: (1) raising the wages of everyone who makes less than $15 currently; and (2) the compaction of the salary schedule that will create a ripple effect and force increases up the ladder and competition in the workforce. How can schools compete with others who are offering the same or more? While schools have received funding the past few years, that money isn?t appropriated in the future. By 2019, schools are expected revert to ?cut-back mode.? What then? Unlike a small business, schools can?t raise prices on customers.

What are some examples of programs where reductions are likely?

  • Class size reductions
  • Hiring freezes such as grounds, maintenance, custodial staff, resulting in deterioration of facilities
  • Transportation cuts, resulting in decreased number of bus fleet runs and not enough drivers to transport students to events
  • Reduced technology dollars, resulting in network failures and computers and activities simply not there to meet the needs
  • Reduced work days
  • Reduced discretionary budgets for school sites ? field trips, copy machines, etc ? and other opportunities such as athletics or music.

Career Tech/Workforce Development Programs

According to a notable vocational education leader in California, these programs have already been decimated over the past thirty years, reducing the career prep they?ve been providing California students. Employers are facing untrained, undertrained workers with little or no job skills. Access to good programs is limited ? with a minimum wage increase, this access will continue to decline. There will be fewer internships and work experience opportunities. The impact will be a further reduction or elimination in job readiness programs and opportunities for young workers, minority workers and low-skilled workers.

At the end of the day, school boards will face pressure on wage compression to drive wages higher. The boards can?t increase revenues so they must make cuts. The irony is that the very employees who get these raises will be among the first ones to be cut. It?s not just mom-and-pops singing the blues here.

Seniors

Seniors and retirees on fixed incomes are not likely to support any program to increase the minimum wage, as long as their own increase isn?t in the equation.

The federal government ? in freezing any increase in social security ? are stalling this direction, but maybe there will be a change one day.

Many seniors look for post-retirement jobs, but this would dry those up and edge seniors out of the market. And many others have made it clear that, on a fixed or limited income, they simply cannot afford a minimum wage increase in grocery stores and on the retail goods that sustain them. And remember, many of these individuals also will face higher costs with their in-home workers, making it impossible for them to keep them on their current schedules, thus lowering the quality and time of care.

We?ll all be there one day ? why aren?t we thinking about this now before we all must face the grim realities of such pressures on the greying population?

Small Businesses ? Our #1 Job Creators

Make no mistake ? Main Street gets hit with such a hike, and when that happens, nobody wins. No matter how small and in which distressed neighborhood a small business may be, many politicians make the brash assertion that ?You can foot the bill.? If someone has first-hand understanding running a California small business, they?ll tell you that?s simply not the case, especially with the thin operating margins most confront each day.

If unions truly cared about lifting the neediest out of poverty, they would fully embrace the ?Total Earnings? concept, which allows employers to exempt from the minimum wage increase those employees already earning $20, $30, $40 or more, well north of the minimum wage in tips and commissions as total earnings/wages. This would actually allow employers to dedicate those scarce labor dollars to those employees who, as it was ruled this past week in the courts, are prohibited from sharing in tips ? ?heart of the house? employees such as prep cooks, line cooks and others. Why is labor pushing for such inequity ? giving a wage increase to the highest-earning employees of a business while leaving those in the back, well,in the back and out to dry? Whose interest are they really looking out for?

The Governor was wise to recently criticize and warn against the two ballot measures that would increase the statewide minimum wage to $15 an hour, noting that they would cost the state as much as $4 billion a year by 2021 and return the state budget to annual deficits. The nonpartisan legislative analyst has noted that the first ballot measure proposal would result in ?an increase to state and local government spending totaling billions of dollars per year?, with an independent fiscal analysis pegging this annual increase as high as $1.7 billion. Just last week, the American Enterprise Institute revealed the raw numbers revealed through evidence from the Bureau of Labor Statistics from the $15 minimum wage increase approved for Seattle by its City Council, with the first increase to $11 an hour taking effect on April 1, 2015. The effect of an eventual 58% increase in labor costs does not look pretty. Since that first phase of the increase went into effect:

  • Seattle?s employment has fallen by more than 11,000
  • The number of unemployed workers has risen by nearly 5,000
  • The city?s jobless rate has increased by more than 1 percentage point

Our policymakers and voters need to heed the Governor?s advice, nonpartisan state numbers, and data that?s trickling in from other cities that are now grappling with grim reality of these hikes before moving forward in any way. Let?s allow the ink to dry, dust to settle and current minimum wage policy ? notably our statewide increase ? to first play out so we can see what the impacts truly are. Otherwise, instead of branding it a ?fair wage? we?ll all see it for what it truly is: a ?fare wage?, with every one of us taxpayers ? seniors, schools, disabled and many others ? paying down an outrageous bill and debt for generations to come.

resident of Kabateck Strategies, and former CA Executive Director of NFIB

Originally published by Fox and Hounds Daily

New Year Brings Country’s Highest Minimum Wage to CA

Minimum WageCalifornia will?start the new year with a record-setting wage floor.

?On Jan. 1 California will have the highest minimum wage in the country,? as Capital Public Radio?noted. ?California workers earning minimum wage will get an extra dollar an hour at the beginning of the year. The state raised the rate from $8 to $9 in July 2014. Soon it will be $10 an hour.? Legislation hiking the wage was sponsored by Assemblyman Luis Alejo, D-Salinas. According to Alejo, the increase would result in about $2,000 more net dollars over a year?s time working 40 hours a week at the new minimum wage.

A few other added benefits passed into law were set to?take effect at the same time. ?Workers will also be able to use job-protected leave to address child-care or school emergencies as of New Year?s Day,? CBS?reported. According to data from the federal Bureau of Labor Statistics, the channel noted, the new rules were expected to impact over?9 million California workers?at or below the $7.25 federal minimum wage. (This year, legislators?made one additional change to state labor law, the station noted, requiring ?the cheerleaders and dance teams of professional sports organizations such as the Los Angeles Lakers to be classified as employees.?)

Faced with setbacks in Congress, Democrats nationwide increased pressure on state legislatures this year to hike their minimum wages. But in California, their push gained even more traction at the municipal level.??According to the UC Berkeley Labor Center, there are 29 cities and counties in the United States that have wage floors higher than their state?s minimum,? the Bakersfield Californian?observed. ?Fourteen of those local governments are in California.?

Local blowback

But some Golden State municipalities have balked. A new city leadership in Desert Hot Springs killed an ambitious minimum wage ordinance that??would have hiked the minimum wage for such employers to $10.20 per hour next year, with $1 increases in each of the following two years and jumps tied to the consumer price index after that,? as the Desert Sun?reported. ?Unions and franchisees would have been exempt,? it added ? unlike Walmart, which signaled it would re-evaluate its long-time plans to add a franchise in town if the wage proposal went through.

The Southland?s economic situation has become a bone of political contention this election season, with Lt. Gov. Gavin Newsom taking heat for already pushing a $15 minimum wage statewide. ?Labor markets in Imperial County, for example, already struggle to supply even more-experienced job-seekers with work,??wrote?Michael Saltsman in a column for the Orange County Register. ?The unemployment rate for all employees hovers around 22 percent. Across all occupations, the median hourly wage is $13.79. Even supporters of a higher minimum wage are uncomfortable with a wage floor that?s much higher than half of the median wage, which means $15 would be economic suicide for Imperial County.?

Replacing workers

Critics of dramatic increases in the state minimum have long contended that their impact?includes cutbacks on hiring. ?In an analysis of Los Angeles? wage hike commissioned by the Los Angeles Chamber of?Commerce, Beacon Economics argued the wage ordinance could lead to businesses employing fewer low-wage workers, resulting in a higher unemployment rate among unskilled workers,? as the Californian observed. But now, concerns about the outright replacement of workers by machines?have?been added to the mix. ?Employer groups opposed to raising the minimum wage say labor costs are already driving decisions to replace human labor with technology,? KPCC?reported. ?They say higher minimum wages will accelerate automation trends in the workplace.?

Richard LoGuercio, president of an?event rentals company in Van Nuys, told KPCC he was ?just screwed? with the fast hike, although he?supported gradual increases in the minimum wage. ?After the minimum wage ordinance was approved, LoGuercio invested in a $150,000 industrial dishwasher he had been eyeing to save on utility costs,? the station recounted. ?The machine will also allow him to stop paying six to eight people who earn $10 to $11 an hour washing dishes. LoGuercio expects to recoup his costs in nine months, and save a couple of hundred thousand dollars a year going forward.?

Originally published by CalWatchdog.com

Fight for $15 Hits Setback in Unexpected City

Minimum wage1In a huge setback to $15 minimum-wage supporters, voters in Portland,?Maine rejected a proposal Tuesday to enact the policy in their city.

City residents voted nearly 58 to 42 percent against the increase. The city ordinance was designed to phase in over time. The Portland Green Independent Committee fought to get it on the ballot.?While advocates argued it would help low-wage workers, critics warned it could severely limit job opportunities.

?Right now I?m feeling a huge sense of relief for every small business owner in Portland, and everyone who works for me,? Play It Again Sports Owners Scott Rousseau said, according to Portland Press Herald. ?I think it?s great news for the future of our city.?

Critics warn businesses would have few options to offset the added cost of labor? they could increase prices or hire less workers. In some cases, the businesses could?have to close. The potential problem is especially true for low-profit industries like restaurants. Supporters, however, say the increase would allow more people to afford basic necessities. The increased spending would then stimulate economic growth.

Seattle led the way in passing the $15 minimum wage back in June 2014. San Francisco and Los Angeles followed not long after. Each local ordinance phased in the new wage over the course of several years. Some Seattle businesses, though, have reported problems because of the increase.

Much of the debate boiled down to rival media campaigns. Patriotic Millionaires launched ads in support of a $15 minimum on television, as well as online. The group normally fights for minimum wage increases on the national level.?Its latest advertisements latest advertisements focusing on Maine premiered Monday. The Portland Regional Chamber has been opposing the policy with its own media campaign.

Nationwide, the group Fight for $15 has led much of the effort. The group is backed by the Service Employees International Union (SEIU). Conservative opposition research group AR Squared (AR2) alleges that?the push is more about helping the union as opposed to low-wage workers.

?By voting against a $15 minimum wage, voters in Portland, Maine sided with their local businesses and rejected the SEIU?s effort to increase its membership rolls,? AR2 Communications Director Natalie Gillam said in a statement to The Daily Caller News Foundation. ?From Portland to the Clinton HQ in Brooklyn, yesterday was a bad day for union bosses at SEIU in D.C.?

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Originally published by the Daily Caller News Foundation