Here we go again. The latest scheduled round of minimum-wage increases, to $15 per hour ($14 for small companies), starts Jan. 1. It hasn’t even gone into effect, yet calls are going out for a $18 wage. Why not $28? Or $58? Or $118?
Joe Sanberg, identified by the Sacramento Bee as a “Los Angeles anti-poverty activist and entrepreneur,” is working to put on the November 2022 ballot an initiative that would boost the minimum wage to $18 by 2025. Actually, a real, “anti-poverty activist” is anyone who favors America’s free-market system that has produced all the wealth in this country, including that used to help the poor.
Sanberg also seems not to have noticed all the Help Wanted signs throughout the state. Business owners tell me the current $14 an hour ($13 for small companies) minimum is just a “starting wage,” raised as soon as the employee gets to know the job and is adding value to the company.
Despite the current labor shortage, California’s unemployment rate remains, as it has been for two decades, at least 2 percentage points above the national average. According to the U.S. Bureau of Labor Statistics, in October California’s unemployment rate was 7.1 percent, tied for worst with Nevada. The national rate was 4.6 percent. That is, California’s rate was 2.5 points above the U.S. rate.
- Texas has a minimum wage of $7.25, also the national rate. Unemployment is 5.4 percent.
- Florida’s minimum wage is $10. Unemployment is 4.6 percent.
- Tennessee’s minimum wage is $7.25. Unemployment is 4.2 percent.
“Cost of living is rising faster and faster,” Sanberg explained as a major need for raising the wage rate, “but wages haven’t increased commensurately.”
But if wages are raised due to government decree, businesses will have to pay for that either with yet higher prices—or going out of business.
He also doesn’t take into account how inland California remains much cheaper than Coastal California. Yet a statewide minimum wage would force inland businesses to pay the same high wage already common on the coast.
A check of Zillow.com shows many homes available for $250,000 in Bakersfield—less than a quarter of asking prices in Orange County. In San Francisco and Silicon Valley, it’s even higher.
The late economist Walter Williams also pioneered research on how a high minimum wage hurts minorities the most. He said it’s like cutting off the first rung on a ladder, making it harder to get started upward. Young people especially are hit hard because they’re just starting out and don’t have much to offer, but are willing to learn; after which their wages will rise—or they will move to another job where they are paid more.
Williams wrote, “The minimum wage law gives firms effective economic incentive to hire only the most productive employees which means that firms are less willing to hire and/or train the least productive, which includes teenagers and particularly minority teenagers. But holding all else constant, such as worker productivity, such a wage law gives firms the incentive to indulge in whatever preferences that they may hold.”
He noted how black youth unemployment in the 1940s and early 1950s actually was less than for white youth. In 1948, it was 9.4 percent for black kids, but 10.2 percent for white kids.
But then in the late 1950s, the minimum wage was increased by 33 percent, to $1 an hour. That pushed black youth unemployment above that for white youth, and it never has gone the other way since.
In November 2021, according to the St. Louis Fed, black youth unemployment (16 to 19 years old) nationally was 21.9 percent, almost double the 11.2 percent rate for all youth that age.
If Sanberg’s initiative makes it to the ballot, we can expect heavy support from the Democratic Party and unions, and opposition from the restaurant and hospitality industries. And if it passes, California will in yet another way become less hospitable to businesses and jobs creation.
