Brown admits, “Economically, minimum wages may not make sense.” Then signs law!
About a week ago, I noted that California lawmakers and public employee unions cut a deal to avoid a ballot battle over a $15/hour minimum wage within the state.
Now, Governor Jerry Brown officially signed it into law:
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 initially showed some reluctance in agreeing to the wage hike. The negotiated compromise Brown offered lawmakers includes a provision allowing the governor to postpone a wage increase in the event of an economic downturn.
However, in his signing statement, Brown shows that in this state, economic justice trumps economic reason:
Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense because it binds the community together to make sure parents can take care of their kids.
In fact, the new bill is probably one of the most economically unjust pieces of legislation ever to cross any governor’s desk! Why? Forbes contributor and former California candidate for the US Senate in California, Chuck DeVore, explains that the wage requirements will destroy one-third of the Golden State.
When California’s minimum wage hits $15-an-hour in 2022, the effect will be extremely uneven across regions. In San Francisco, where the minimum wage is already $12.25, $15-an-hour would buy an equivalent of $8.15 in goods and services nationally—about 12% more than the federal minimum wage of $7.25, once the cost-of-living is considered. But in Bakersfield, that same $15-an-hour would be worth $14.15 at the national level, when adjusted for average U.S. cost-of-living, or, about 95% higher than today’s federal minimum wage.
Regional price differences are one very large factor undermining the wisdom of using central planning to direct the economy. An entry-level worker in Bakersfield likely won’t produce about 70% more value than his counterpart in San Francisco, yet, the cost-of-living adjusted hourly wage assumes just that, demanding that relatively low-cost inland areas pay the same for their labor as the high-cost coast.
…California small businesses, already under siege by a complex web of state and local rules that set them back about $134,000 per year in compliance costs, will now see the price of entry-level labor rise 50% without a corresponding increase in productivity to pay for the greater costs. Some small businesses will adapt by spending more to automate while hiring workers with greater skills. But, for many others, $15-an-hour will be the final California barrier to small business that drove them out of state or simply forced them to close their doors.
But, hey, union workers are happy!
They may not remain that way for long. Over 9,000 businesses have left California in the past 7 years.
Additionally, automation is becoming a popular option. Given the high cost of living in San Fransisco and Los Angeles, little wonder that one of the fastest growing eateries in those cities is fully automated.
And to conclude with a final bit of rich irony, the biggest beneficiary of the new minimum wage laws may not actually be “working poor”….but the Silicon Valley moguls who have driven-up the cost of living by supporting progressive policies and politicians.
The state’s new minimum wage law, signed into law Monday by Gov. Jerry Brown, is expected to give a boost to Silicon Valley’s burgeoning robot and automation industry as businesses seek to replace increasingly expensive workers.
With wages rising and technology advancing and becoming cheaper, agriculture, restaurants and hotels are expected to turn more to automation. It’s an unintended consequence of a law designed to improve the lives of lower-paid workers struggling in pricey California.
“The higher the compensation, the greater the incentive to replace labor with capital. The other thing to figure in here is the declining cost of automation,” said Mark Muro, a senior fellow at the Brookings Institution, a Washington, D.C., think tank.
So, we may not get true economic justice…. but at least we Californians have surf and sunshine to enjoy during our FUNemployment!DONATE
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