The Right Way to Raise Wage

On Monday, March 28, California Gov. Jerry Brown, in conjunction with legislators and labor leaders, unveiled an initiative to raise the state minimum wage from the current $10 an hour to $15 by 2022. Over the course of last week, the legislation passed various hurdles relatively quickly, while stirring up quite a few dissenting opinions. Compared to the federal minimum wage of $7.25, California already has the highest minimum wage in the nation, and with the passing of this measure, would be the first state to enact a $15 minimum wage.

The minimum wage question is a constant debate nationally, with arguments falling along the lines of how increased wages would either result in hurting small businesses or in providing living wages for low-income workers. Though many have lauded California’s proposal as a historic moment for labor groups and minimum-wage workers, economic analysts are uncertain whether or not this will be beneficial. Such a large increase has never been done before, and there is no data to predict its consequences. More importantly, the living wage differs vastly across California, and imposing a single wage rate on counties with lower costs of living could hurt them economically.

Supporters of this legislation argue that this is an unprecedented win for workers in industries like agriculture, retail and restaurants, whose paychecks do not amount to a living wage. The Los Angeles Times reported that the new raise is estimated to increase the income of 5.6 million people, or nearly one in three Californians. A proponent of the bill, Democrat Sen. Mark Leno of San Francisco, also told the Sacramento Bee that it “will literally lift over 2 million Californians out of poverty because they are working full time today and earning a sub-poverty wage.” Though Governor Brown has similarly applauded the legislation, he was also quick to reassure panicked financial interests that it would proceed in a “careful and responsible” manner. As reported by the Bee, under the new plan the minimum wage would gradually rise to $10.50 next Jan. 1, then to $11 by the next year and subsequent increases of $1 a year, so that by 2022, it will be $15 an hour. Further, there are measures in place to suspend the increases if they have negative effects.

However, skeptics like Washington Post writer Charles Lane point out that this legislation is the opposite of moderation. In 2022, when the $15 minimum is fully implemented, he writes that the minimum wage would represent 69 percent of California’s median hourly wage. Typically, states set the minimum at just half the median wage, which is what California’s current minimum is. A wage increase as drastic and rapid as this one will possibly outpace businesses that can’t afford to pay their low-level employees more than the current minimum.

Another reason this new $15 minimum wage could be problematic is that the living wage differs vastly across the state. Though the living wage in San Francisco County is currently $14.37, according to the MIT living wage calculator, in Mariposa County just outside of Merced, California, it is currently $10.26. An increase in the minimum wage so that it matches an area’s living wage makes sense for expensive counties like San Francisco County. For rural areas where the cost of living is lower or where there are economic struggles, this new statewide plan could be very harmful.

In contrast, Oregon recently passed legislation to increase its minimum wage. Voice of America News reported that though Oregon’s law raises minimum wage to just under $15 by 2022, similar to California’s law, the rates will differ by counties. According to Oregon Live, the highest rate of $14.75 will apply to urban areas such as Portland, while in mid-sized counties it will be raised to $13.50. Rural counties, some of which are facing economic struggles, will have the lowest minimum of $12.50 by 2022. Oregon’s actions highlight how California’s new legislation could be forcing a “one-size-fits-all” solution to wage injustice on poorer counties.

The negative consequences that this new minimum wage might have on the state’s economies raise important questions for the current movement for a higher federal minimum wage. The current federal minimum wage, $7.25, has not been changed in six years and is currently just 38 percent of the national median wage. With the Bernie Sanders campaign pledging to raise it to $15 and Hillary Clinton’s promise to raise it to $12, various interests are uniting to adjust it to a liveable amount. However, before we jump on the bandwagon of what sounds like a great idea for low-level workers and those living below the poverty line, we should carefully read into the details of proposed plans and determine what the realistic problems are. Legislation like California’s may be too simplistic in its vision, ignoring the variety of counties’ economic situations. An unprecedented and drastic wage raise to $15 nationally could have unforeseen consequences for states with lower costs of living, just as California’s plan could backfire on poorer counties.

4 thoughts on “The Right Way to Raise Wage

  1. I would note another aspect that people, especially students, fail to realize. That would be the lack of entry level employment for HS and college students, minimally educated adults, and the current working poor. There is also the unintended consequences of having to increase the salary of supervisor/manager positions. This results in either fewer workers with benefits or fewer hours for more workers without benefits or a drastic increase in the cost of products and services including the cost of your education, housing, utilities, food, etc.

    1. Tim King, that IS a good read. Not sure students with the Attention Deficit Disorder so many of them have these days can get through it, but if they do, they will be richly rewarded.

Comments are closed.