CA Minimum Wage Hike Would Hurt Workers' Purchasing Power

Despite evidence that big government policies have resulted in “internal devaluation,” California’s State Senate has approved a minimum wage hike that would cost California taxpayers an estimated $80 million plus over the next four years, and that’s just the start.

SB 935, a bill introduced by California State Senator Mark Leno (D-San Francisco) would replace existing legislation that increases the minimum wage in California with a more aggressive plan. Currently, the $8 minimum wage in California is set to increase to $9 on July 1, 2014 and to $10 on January 1, 2016. 

Under the new legislation, the minimum wage will increase “for all industries” to “not less than $11 an hour for all industries” on January 1, 2015; not less than $12 on the same day in 2016; and not less than $13 January 1, 2017. It then provides for an increase yearly, starting January 1, 2018, equivalent to the previous year’s inflation rate.

According to Senate Floor Analysis, the implementation of the bill will cost the state a minimum estimated amount of $82 million through 2018. That does not include additional increases in payments to private individuals. The fiscal effect analysis states, “The related impact of this bill’s raising the minimum wage is unknown, but likely to be in the high tens of millions of dollars annually.”

Proponents of big government policies argue that actions like raising the minimum wage will result in pulling Americans out of poverty. The L.A. Times quoted Senator Leno as saying, “Income inequality has been spoken of by our president as the defining challenge of our time” while addressing his fellow Senators concerning his bill. Analysis of the bill cites supporters of the bill as claiming the bill will help to strengthen the middle class. Further, it states the bill could result in “lifting hundreds of thousands of Californians out of poverty.”

SeaTac, Washington implemented a nationwide-high $15 minimum wage this past January. Since then, reports have pointed to more trouble than good. Assunta Ng of Northwest Asian Weekly wrote of her conversations with minimum wage workers in the small city of SeaTac. What she heard was accounts of lost benefits, increased costs, and unequal treatment between union and non-union workers. She noted one waitress who had made $7 an hour, but with tips was making more than $15. Now, with the hike to $15 minimum wage, her tips are much less, she no longer receives company free food, and she must now pay for her parking. Ng also reported: “The wait staff said the hotel across the street is unionized. Therefore, management is not required to pay the $15 wage.”

After pointing to Obama’s admission on ABC’s This Week with George Stephanopoulos that income inequality was up 50% during the current administration, economist and Breitbart Contributor Chriss Street wrote in January, “I believe the main reason behind the dissatisfaction with Obama’s big-government liberalism is that despite a robust 9% gain in American worker productivity since 2008, American workers understand that their wages after inflation actually fell by 1%.”

Analysis further states, “This bill will result in cost pressures to increase wages for state employees who at present earn slightly more than the current minimum wage to avoid salary compaction.”