A plan to increase California’s minimum wage to $15 an hour by 2022 has opened the biggest fault lines yet between advocates of higher pay and critics who say it kills jobs and raises prices for consumers. Proponents say the Golden State’s bold move will provide a decent living wage for millions of low-income residents, prove a bonanza for California’s economy and prompt other states to follow. “They’re showing that it’s economically realistic to restore decent wages at the bottom” of the pay scale, says Paul Sonn, general counsel of the National Employment Project.
But opponents say it will force employers to replace workers with technology and sow particular hardship in a diverse California economy that includes many rural and distressed areas whose businesses can’t afford such a lofty base wage. “We’ll have a lot of businesses close,” says Michael Saltsman, research director for the Employment Policies Institute, which is partly funded by the restaurant industry. Under the plan, the state’s minimum wage would rise from $10 to $10.50 in 2017 and increase gradually each year through 2022. Sonn says $15 an hour – or about $30,000 a year – would simply allow families to afford the basics.
John D’Amanda, 56, a McDonald’s worker in Oakland, says the wage increase will allow him to get beyond just paying the bills and getting by. D’Amanda is single but hopes to get married and move into a nicer apartment. He’s making $12.55 a hour now, and says he can’t both pay rent and afford basic necessities, like getting a new pair of glasses. “I’m very excited about this,” says D’Amanda, who also has part-time jobs doing janitorial and housekeeping work to make ends meet. “I’d like to get married…can’t really afford it right now. I can barely pay the bills for myself. It’s very difficult.”
A study released this month by the University of California, Berkeley, found that an increase in New York State’s $9 hourly minimum to $15 an hour by 2021 would increase wages an average 23% for 3.2 million workers, or about 37% of the state’s workforce. Employers’ higher payroll costs would be partly offset by lower worker turnover costs and increased productivity, the study says. The rest could be absorbed by raising prices just 0.14%, well under current inflation. The wage hike would prompt employers to automate some tasks and cope with lower sales, leading them to cut payrolls by 77,000 jobs through layoffs or less hiring, the study says. Yet workers’ higher incomes would juice spending, adding $17 billion a year in economic output. That, the report says, would produce 81,500 new jobs, resulting in a modest net positive impact on employment.
Saltsman disputes the study’s findings, saying the positive economic impact of a wage hike is far less certain than the harm to employers and resulting job losses. He says a minimum wage of $12.25 in San Francisco and Oakland already has forced many restaurants to raise prices 15% to 20%. The median wage in cities such as Fresno, El Centro and Merced is around $15 an hour, Saltsman notes, making it difficult for employers in those areas to set $15 as a base pay.