Raising California's Minimum Wage May Kill More Jobs Than People Think

State regulations tie salary rules to minimum wage


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California's Assembly voted Thursday to increase the state's minimum wage from $8.00 to $9.25 in phases by 2016 and then tie future increases to the rate of inflation. Given the Democratic supermajority ruling the state, it has a pretty good chance to become law, though attempts to ban plastic shopping bags and limit fracking were defeated this week as well, so it's not a sure thing. Here's how bill sponsor Assemblyman Luis Alejo (D-Salinas) explained the need, courtesy of the Sacramento Bee:

Assembly Bill 10 by Assemblyman Luis Alejo, D-Salinas, passed 45-25 mostly along party lines. It would be the first bump in minimum wage since 2008, when it was raised by 50 cents to $8.

"The last time the minimum wage was increased, gas was $3.25 a gallon in California," Alejo said. "I don't know about you, but I haven't seen gas prices at that level in a long time."

And you never will, given that California has the highest gas taxes in the country and will be sticking drivers with another 3.5 cent-per-gallon increase come July. It's quite remarkable how oblivious he is about the reason why gas in the state is so expensive. And given that gas station employees likely fall on the low end of the wage spectrum, he might well make it even more expensive. (And no doubt somebody out there who doesn't understand franchises will wonder why all those huge oil company profits don't trickle down to gas station employees)

Plenty of economically savvy folks talk about how minimum wage increases actually kill low-wage jobs so I won't get into that redundancy. But there's an additional potential economic harm hidden in California's employment laws when it comes to salaried employees. In California, in order to classify an employee as an "exempt" salaried worker (exempt from the state's rather inflexible overtime laws and other officious monitoring rules) that employee must earn at least twice the minimum wage.

As noted above, the last bump in the minimum wage took place right in the midst of the recession. From my own anecdotal experience at a newspaper company (which admittedly was struggling due to industry-wide problems as well), this jump didn't just eliminate some low-level positions. It resulted in the elimination of some mid-level supervisory positions. When this minimum wage increase reaches its maximum in 2016, employers will have to pay salaried workers at least $18.50 an hour in order to exempt them from the tiresome wage-slave laws and grant some flexibility. This will most likely prove most burdensome on smaller businesses who can only afford a small cadre of people in supervisory positions. It may even make it harder for those low-wage employees who have jobs and show promise to move up within their companies.