“When California passed a massive boost in its minimum wage six years ago so that it would eventually reach $15 an hour, the law included a component that tied the minimum to inflation levels. If inflation starts getting too high, the law forces a mandatory increase in the minimum wage.
This week, Gov. Gavin Newsom’s budget director, Keely Martin Bosler, announced that the massive inflation America is seeing is going to force the minimum wage in the state to automatically increase to $15.50 next January. The law requires this automatic adjustment if the inflation rate grows past 7 percent. The Los Angeles Times reports that it’s possible that the minimum wage might rise by another 50 cents if inflation continues.
Bosler, of course, sees only the positive here, saying it will help poor families pay for the higher food prices we’re all enduring: “They have a huge impact to those families that are living off of those lower wages and their ability to cover the cost of goods.””
“ising wages during this time frame is natural, but it’s also worth noting that California’s unemployment rate continues to be higher than the national average, sitting at 4.9 percent. Just four states and Washington, D.C., have a higher unemployment rate. According to data from California’s Employment Development Department, almost every county in California has higher unemployment rates than the average, and some are running more than twice the national average. Two counties—Colusa and Imperial—have double-digit unemployment rates.
At the same time, businesses have also been hit hard by inflation, and those that operate on tight margins (retail stores, restaurants, and pretty much every small business) are going to have new struggles. Combined, inflation and a higher minimum wage will make it difficult for these businesses to take on new employees and keep the ones they already have.”
“Younger, less-well-educated workers have been especially harmed by recent state-level minimum wage hikes, according to a study issued today by the National Bureau of Economic Research. The paper was written by economists Jeffrey Clemens of the University of California, San Diego, and Michael R. Strain of the American Enterprise Institute.”
“They found that “over the short and medium run, relatively large increases in minimum wages have reduced employment rates among individuals with low levels of experience and education by just over 2.5 percentage points.” By contrast, smaller increases, or ones resulting from indexing inflation to wages, have effects that are “variable and centered on zero.”
The data also offers “evidence that the medium-run effects of large minimum wage changes are larger and more negative than their short-run effects,” so we will often need time to unfold before we see those bad employment effects blossom.”
“Minimum wages reduce the employment of low-skilled workers—a group disproportionately represented by immigrants, inner-city minorities, and young people. Some workers lose jobs altogether, while others see their hours reduced. This doesn’t mean that there are no beneficiaries of higher minimum wages. Economic theory predicts that some workers who are currently employed will retain their jobs with no reduction in hours, even after the minimum wage is increased. For those workers, the increase means higher take-home pay, although the jobs themselves might become more demanding or less secure.
So, what do we know about raising the federal minimum wage to $15, even gradually? In theory, we know a lot, but the empirical evidence is limited since so few states and localities have tried it. There are, however, some noteworthy attempts to get a good grasp of what might happen.
First, the Congressional Budget Office estimates that a $15 minimum wage by 2025 would eliminate 1.4 million jobs over that period. The CBO also forecasts that this increase could decrease business income, increase consumer prices and tap the brakes on the economy.
Second, economists at the University of Washington studied the employment effects of Seattle’s move to gradually increase its minimum wage to $15. Seattle, already a high-wage city, first raised its minimum wage to $13 in 2016 and hiked it to $15 in 2021.
Summing up the findings in Seattle, Michael Strain writes in Bloomberg: “The economists found that this led to a 9% reduction in low-wage jobs. The pay increase it generated didn’t make up for the reduction in employment, and earnings fell for low-wage workers overall. The economists’ subsequent research found that the gains from the higher minimum wage accrued to more experienced workers.” As I noted, there are some winners (those who are already relatively better) and some losers (those already worse off).
In a recent Twitter thread, one of the authors of the study, Jake Vigdor, noted that the following pattern emerges for employers dealing with higher labor costs: “1) Don’t lay people off 2) Cut back hours 3) Cut back hiring 4) As workers quit, restore hours for those who remain.” He also warns that the negative employment effects are somewhat understated in the study because it ignores “a subset of the workforce: those who didn’t have jobs at baseline, before the wage increase.”
Workers who didn’t have a job at the time of the increase and won’t get one after may pay the steepest (and unseen or overlooked) cost of the minimum wage. As Williams explained in his autobiography, “Early work experiences not only provide the pride and self-confidence that comes from financial semi-independence but also teach youngsters attitudes and habits that will make them more valuable and successful workers in the future.””
“Mandated “hero pay” will add up to about $0 an hour for some grocery store workers in Los Angeles. Grocers there are closing three stores in response to newly enacted legislation that requires them to pay their workers an additional $5 an hour during the pandemic.
“It’s never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores,” said grocery store chain Kroger in a statement given to CBS Los Angeles, announcing that two Ralphs-branded stores and one Food 4 Less location, would be shutting down.”
“The company also said it would be shutting down three underperforming stores in Seattle, Washington, in response to that city’s hazard pay law.”
“”The fallout from the misguided extra pay ordinances is enormous and politicians are to blame,” said Ruben Guerra of the Latin Business Association in a Wednesday-issued press release. “Workers will lose jobs, and communities of color will be left with fewer grocery options and more food insecurity. Consumers in other areas where grocery stores are able to stay afloat will pay higher grocery bills.””
“Supporters of hazard pay have argued that grocery stores’ record profits during the pandemic make wage premiums easily affordable, and that store closures are nothing more than cynical politics.
Profits for some grocery chains increased by as much as 100 percent during the height of the pandemic when restaurants were closed and everyone was stocking up on groceries.
The Washington branch of the United Food and Commercial Workers International Union (UFCW)—which represents grocery store workers and has been a driving force behind hero pay laws—called the store closures in Seattle “a transparent attempt to intimidate other local governments,” noting how profits for grocery store companies had “soared.”
“They absolutely can afford this increase,” Los Angeles City Councilmember Paul Koretz said in February about grocery store companies when discussing that city’s hazard pay proposal, reports the Los Angeles Times. “They absolutely should be paying this increase. And if they shut down stores, it’s just out of spite.”
Grocers counter that while their profits did go up, those increases came on top of the very slim one or two percent margins supermarkets typically earn.
A CGA-sponsored analysis of hazard pay mandates found that at $5 an hour, these laws would increase the average grocery store’s labor costs by nearly 30 percent, and their overall costs by about 5 percent. That’s about twice the profit margins most grocery store chains were making during the height of the pandemic. The same report says that those record profits are already starting to recede.
A report by Los Angeles city staff noted that the likely economic impacts of that city’s hazard pay law would be some mix of higher wages for some workers, higher prices for consumers, and the potential for companies to either close stores or delay openings, renovations, and promotions.
The debate about hazard pay laws is a very compressed version of the debate about minimum wage laws. Proponents focus on the fact that a lot of workers will get a pay increase, while detractors note the potential for higher disemployment (meaning job losses but also hours cuts and reduced hiring) and higher prices.
Unlike the minimum wage, however, the costs of hazard pay laws are obvious, immediate, and visible for everyone to see.”
“The Senate parliamentarian on Thursday dealt Democrats a disappointing blow in the fight for the $15 minimum wage, ruling that it can’t be included in a Covid-19 relief package if lawmakers want to use budget reconciliation.
That decision likely means that the $15 minimum wage is effectively dead — for now.”
“Sanders, Sen. Ron Wyden (D-OR), and other Democrats also floated the idea of establishing a tax penalty that incentivizes large corporations to pay their workers a $15 minimum wage and gives small businesses a tax credit for doing so. That change wouldn’t set a new federal standard for the minimum wage, but it could help nudge businesses into offering their employees better pay. Schumer, too, had offered his backing for a plan that dings corporations that don’t raise their wages. But over the weekend, Democrats determined the idea is a no-go for now.
Ultimately, Democrats may have to consider a potential compromise with Republicans to advance any type of standalone change to the minimum wage. Thus far, five Republicans — led by Sens. Mitt Romney (R-UT) and Tom Cotton (R-AR) — have backed legislation that would increase the minimum wage to $10 by 2025, a change that would also be tied to immigration enforcement. Sen. Josh Hawley (R-MO), too, has introduced a bill that would require a $15 minimum wage at companies that make $1 billion or more in annual revenues.”
“the CBO estimates that raising the minimum wage would cost 1.4 million jobs, reducing total national employment by 0.9 percent in 2025, the first year in which the full $15 hourly wage would be in effect. Some people’s wages would increase, lifting about 0.9 million people out of poverty in the process; the evidence suggests these higher wages would be largely paid for by consumers in the form of higher prices. The knock-on effects to employment, taxation, and various federal programs would raise the deficit by about $54 billion over the next decade.”
“You can always argue with the CBO’s estimates and models, and at times it’s been quite wrong. But it’s fairly obvious that substantially raising federal wage requirements would result in some number of employers choosing to employ fewer people, especially in rural areas with lower costs of living where employers are likely to be more sensitive to increased labor costs.”
Making Sense of the Minimum Wage: A Roadmap for Navigating Recent Research Jeffrey Clemens. 5 14 2019. CATO Institute. https://www.cato.org/publications/policy-analysis/making-sense-minimum-wage-roadmap-navigating-recent-research Gradually raising the minimum wage to $15 would be good for workers, good for businesses, and good for the economy Ben Zipperer. 2
“House and Senate Democrats on Tuesday reintroduced a bill to raise the federal minimum wage to $15 an hour by 2025, more than doubling the current $7.25 hourly rate.
The House reportedly plans to include the measure in its upcoming COVID-19 relief legislation. The main problem: That would provide the polar opposite of relief to businesses buckling under the weight of COVID-19 and the associated government lockdowns.
As has been the case over the past year, the congressional aid package is, in part, supposed to resuscitate livelihoods decimated by state-required closures and restrictions. It’s richly ironic that a heightened minimum wage would be yet another mandate that business-owners might need help counteracting. Relief from the relief.”
“The Democrats’ measure is unlikely to pass in conventional fashion, as it would require the votes of at least 10 Senate Republicans to overcome the filibuster. Sen. Bernie Sanders (I–Vt.) said instead that they will pursue a backroad and seek to make it law via budget reconciliation, though the restrictions on that process make success there unlikely as well.
Sanders is undeterred. “Let’s be clear. The $7.25 an hour federal minimum wage is a starvation wage,” he said in a statement. “No person in America can make it on $8, $10, or $12 an hour.” There are a few problems there. The foremost: It’s even harder to make it on $0 an hour.”