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Raise The Wage: Why California Should Lead the Nation (Again)

Nathaniel Haas |
February 21, 2014 | 9:55 p.m. PST


"It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

- Justice Louis D. Brandeis, 1932

On the minimum wage, California can lead the nation once again. (Jaclyn Wu, Neon Tommy)
On the minimum wage, California can lead the nation once again. (Jaclyn Wu, Neon Tommy)

A report out Tuesday from the Congressional Budget Office is likely to put the brakes on a push at the federal level to increase the minimum wage. The report concluded that the hike would increase income for 16.5 million people, but that 500,000 (3 percent of those helped by the hike) would lose their job. Nine hundred thousand people would be lifted out of poverty by the increase. 

What does that mean for California, where the state minimum wage is already expected to increase to $9.00 an hour come July, and to $10.00 an hour in 2016? 

It means that California should lead, rather than follow.  The dire job loss predictions contained in the CBO report has put Democrats in Congress onto their heels. While it doesn’t take a math wizard to discover that the federal increase would still help a number of people exponentially larger than those that would lose their jobs, it also doesn’t take a political science expert to know that voting for job loss of any kind in a midterm election is more foreign to politicians than answering questions in plain English.

SEE ALSO: California's Minimum Wage Hike Boosts Workers' Morale

To be fair, the job loss findings are under heavy scrutiny, and as will be discussed, for good reason. But when was the last time a politician convinced the American people that a law wouldn’t kill jobs by waving around an economics textbook? 

To return to the states, policies on the minimum wage vary—nearly half of the labor force lives in a state where the minimum wage is equivalent to the federal minimum wage, $7.25 an hour. The remaining half of the labor force is divided about evenly between those who live in states with a minimum wage above $8.01 an hour, and those who live in a state where it is in between. 

A new measure pushed by Ron Unz, a Silicon Valley software developer, would raise the California state minimum wage to $10.00 an hour in 2015, with another two dollar increase coming the following year. According to Unz, the measure is especially important given California’s high cost of living. The measure comes as the Los Angeles City Council recently moved to study the implication of imposing a living wage of $15.37 an hour for workers in hotels with over 100 rooms. 

California voters should adopt Unz’s measure, for two reasons. 

Four of the ten cities with the highest cost of living are in California, according to the Council for Community and Economic Research. Almost 1 in 4 Californians live below the poverty line: figures released last month by the government that calculate poverty using the supplemental poverty measure (which factors in cost of living), showed that California has the highest poverty rate in the nation. Raising the minimum wage would not only lift thousands of California workers out of poverty, but would also allow those just above the poverty line to make a living wage, as opposed to a subsistence level wage. 

SEE ALSO: The Minimum Wage Must Be Raised

Second, though job loss may occur, California can live with that. For Unz, the economic gains of a raise in the minimum wage should sufficiently stimulate economic activity. In an interview with ABC News, he said of the measure, “probably between $150 billion and $175 billion a year would go into the pockets of the lower-wage families that spend every dollar they earn. It would cause a tremendous boost in economic demand.”

More so, the economic argument that the minimum wage increases job loss is supported by lots of theory, but little evidence. 

Take for example, the San Francisco experiment. A new report by a group of economists at UC Berkeley uses as a benchmark almost 15 years of data collected on San Francisco’s minimum wage increase that began in 2004. The San Francisco minimum wage, $10.74 an hour, is the highest of any city in the nation. 

The experiment, which was localized to the service industry to exclude high paying jobs from accounting for the results, revealed that San Francisco employees experienced reduced turnover and improved work performance. Furthermore, the report compared changes in the employment rate between San Francisco and neighboring states, whose minimum wages are far less, and the result was negligible. In fact, between 2004 and 2011, private sector employment grew 5.6 percent in San Francisco, and fell in other counties.  

While the measure undoubtedly increased costs for employers, these were costs they could live with. Ultimately, the benefits received from reduced turnover, lower absenteeism and better job performance were more than enough to offset the increased cost of paying a higher wage.  

Contrary to popular belief, teenagers don’t hold most California minimum wage jobs, a common criticism from those who feel that the raise would benefit those who don’t really need it. Despite that such an argument naively ignores those teenage workers who aren’t in school, have no parental support and need a minimum wage job to survive, the 2010 Census reveals that teenagers make up just 5.3 percent of California’s minimum wage workforce. 

It’s interesting to note that raising the minimum wage in California would also insulate the state’s workers from the politics of raising the minimum wage at the federal level. This is due to a phenomenon known as the ripple effect, which the Congressional Budget Office explains as the increase in a wage for people who make even more than the proposed federal increase, due to market forces. The closer a state's minimum wage is to the newly increased federal level, the less its workers depend on change at the federal level for support. 

The November elections provide California voters a chance to lead the nation in being a single, courageous state on something other than the poverty rate. Approving another minimum wage increase would put California out in front of the war on poverty and income inequality—an example for the nation to follow.


"State Of The Golden State"is a biweekly column on California state politics that runs every other Wednesday. Reach Columnist Nathaniel Haas here; follow him here.     



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