Minimum Wage

Even in California's Progressive Paradise, Gov. Brown Understands Dangers of Minimum Wage Hikes

Warns $15-an-hour jump would wreck state budgeting.

|

This is California's voice of reason. Heaven help us all.
Credit: California Air Resources Board

Calif. Gov. Jerry Brown released his budget plan for the next fiscal year yesterday. It would increase general fund spending by 5.6 percent, an increase of about $6 billion, to $122.6 billion. Brown is also putting $2 billion more than required in the state's "rainy day fund," to get it up to $8 billion. There's more spending on colleges, increased per-pupil spending for public schools, and new sources of revenue (as in, more taxes and fees).

Remarkably, people are complaining that Brown is not spending even more money. There are pots that have not yet been delivered chickens. From the Associated Press:

Democratic legislative leaders complained that Brown did not spend enough on early childcare programs, did not expand grants to families on welfare, didn't devote more money to affordable housing and appeared resistant to further increases to the minimum wage.

"California has turned the corner. But not every Californian is feeling it," said Assembly Speaker Toni Atkins, D-San Diego. She said there remains "a laundry list of critical needs."

Yeah, about that minimum wage: California's minimum wage jumped to $10 at the start of the year. Union activists are pushing for a $15 minimum wage through a ballot initiative. So what happened is that the governor's office, while preparing the budget, has to deal with cost consequences of the increase, and in the introduction to the new budget, Brown actually details what's happening now and what would happen if California recklessly jumps to a $15 minimum wage:

In 2013, the Governor signed legislation to raise the state minimum wage by 25 percent, from $8 an hour to $10 an hour in two steps. The second increase to $10 an hour just went into effect on January 1, 2016. On an inflation-adjusted basis, the new level is the highest minimum wage in California since 1979. The higher minimum wage will raise the income of an estimated 2.2 million workers. However, higher minimum wage laws are not free. They raise the operating costs of many businesses, and the state must shoulder higher wages in its programs, particularly In-Home Supportive Services and developmental services. For example, the increase to $10 an hour has raised General Fund costs by over $250 million annually.

Already there are proposals to raise the minimum wage further. At $15 an hour, as two ballot measures propose, the General Fund would face major increased costs, estimated at more than $4 billion annually by 2021. Based on current projections, such a change would return the state to annual budget deficits—even assuming a continued economic expansion. Yet under the measures, one or more increases would likely occur at the same time that California is experiencing a recession. Such an increase would require deeper cuts to the budget and exacerbate the recession by raising business costs, resulting in more lost jobs.

Indeed, previous minimum wage increases for the state landed at the starts of 2007 and 2008, right in the heart of our financial crisis and recession, which hit California particularly hard.

While it's great that California's current governor has some common sense over minimum wage hikes, Lt. Gov Gavin Newsom, who will be running to succeed Brown, has endorsed one of the $15 an hour mandates.

But for those who think Brown might be getting a little bit too sensible, don't worry: The Cap and Trade Fund expenditure plan still includes $500 million for the boondoggle of a high-speed rail project, Brown's ugly baby that just won't die. That covers less than one percent of the estimated $68 billion project (though realistically it will cost much, much more). I suppose we should be glad there isn't even more money in the budget for it.

NEXT: Everybody Hates Vegans, More Accurate CRISPR Gene-Editing, and Welcome to the Anthropocene

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I believe libertarian entities (leaning libertarian) must make sure to present the Minimum Wage as a State-Mandated Wage – in this case the minimum is mandated.

      1. lol, you may see that as a consequence but that is really a jump to say that was the motive. Stick to the simple if you really want others to believe you.

        1. Did you read the article? It really was part of the motive. The original Progressives were quite explicit about it, which is what makes it such a devastating argument against today’s progressives.

          1. That may be fine as long as you restrict yourself to the defined group …. the original progressives . I say the more of this stuff you add on is merely a political point one way or the other. Stick to what everyone knows is true if you can. It is state-mandated.

            1. The point is that the original proponents agreed with today’s critics that the minimum wage causes unemployment, usually focused on the marginalized and less abled.

        2. Why don’t you address what the link says instead of just voicing your own beliefs?

          1. Me ? I think it is a mistake not to point out the obvious … that it is a state-mandated wage . The term minimum wage I am sure is a term the left wants to keep and have everyone refer to. It clearly helps them IMHO.

            1. But the argument “The state mandates it and thus it’s bad” cuts no ice with statists. They already know that. Government mandates are not a negative to them, if they agree with the goal.

              But pointing out that the original purpose was disemployment destroys the argument that it won’t have the effect of disemployment. And the fact that it was aimed at minorities, women, and the disabled also cuts to the heart of their ideology. I think the combination is devastating.

              1. I disagree … because the next step is to point out that fascists support state-mandates and state-mandated associations OVER Freedom of Association.

                1. If purely freedom-based arguments worked so well, the Libertarian Party would get more votes. Real-world consequences are much stronger arguments for most people.

                  1. This had 2 points… 1) that such beliefs are fascist and 2) that they are contradictory to freedom of association which is always thought of as a LIBERAL concept.

                    You can now (by implication) paint yourself as the “real” liberal.

                    I thi k this is far better than trying tpo teach other Austrian Economics or whatever

        3. If you had read the article, you’d see this quote from Fabian Socialist Sidney Webb (1912):

          What would be the result of a Legal Minimum Wage on the employer’s persistent desire to use boy labor, girl labor, married women’s labor, the labor of old men, of the feeble-minded, of the decrepit and broken-down invalids and all the other alternatives to the engagement of competent male adult workers at a full Standard Rate? ? To put it shortly, all such labor is parasitic on other classes of the community, and is at present employed in this way only because it is parasitic.

          1. Leonard documents an alarming series of academic articles and books appearing between the 1890s and the 1920s that were remarkably explicit about a variety of legislative attempts to squeeze people out of the work force. These articles were not written by marginal figures or radicals but by the leaders of the profession, the authors of the great textbooks, and the opinion leaders who shaped public policy.

            1. That was the Golden Age of progressivism laying down its roots and tracks. What we see today is thanks to that period.

              1. The Progressive Era, aka, The Nadir of Race Relations.

            2. We really need to bring those articles and books back into print and market them to progressives.

              1. We really need to bring those articles and books back into print and market them to progressives.

                That is an interesting idea. Market them under a Progressive brand name, brag about these are the early progressives, the founding progressives, and leave it to current progressives to explain away the shitstorm.

                1. Ha, good idea.

    1. Better to just explain it as an idea that came from old white men.

  2. “California has turned the corner. But not every Californian is feeling it,” said Assembly Speaker Toni Atkins, D-San Diego. She said there remains “a laundry list of critical needs.”

    Critical is in the eye of the beholder.

    1. As are “needs”.

      1. All free shit is needed. Why do you hate the poor?

        1. ‘Cause they’re too skinny to taste good when done rare.

    2. Given an infinite amount of money to spend, a ‘progressive’ would still say that more funding is required.

    3. We NEED income tax to not be over 10%, but I don’t think that’s on her list.

  3. But not every Californian is feeling it,

    The half that are propping up the other half beg to differ.

  4. Sure Brown is is resistant to the minimum wage for state budgeting purposes, because the state budget is “his” money that is being spent. I’m sure he’s less resistant to a ridiculous minimum wage being forced onto private-sector employers.

  5. Hmmm, ’bout time for the usual suspects to start burbling “just make the one percent pay their fair share” because of course that’s an unlimited source of revenue.

    1. The counter argument should be “The one percent will just print more money for themselves.” The stupid want to remain stupid, so you might as well feed them more stupidity.

    2. Any system defined by a rich 1% paying for everyone will never work, unless there’s always a rich 1% to have practically all of the money.

      They never seem to notice that: for their desired outcome to be stable, it explicitly requires huge wealth inequality.

  6. Why do businesses stay in Cali? What’s the appeal? The state is downright hostile to free enterprise.

    1. ~39 million people

      1. This is the main reason. It is too big and rich a market to walk away from.

    2. Relocation is expensive? Their owners and employees live there? There is a lot of capital there despite the high taxes? It absolves them of the sin of making a profit?

      1. Several of the wife’s friends and relatives have been relocated to Texas and Ohio from California.

        Apparently relocating out of California is lucrative enough that they company has paid for them to fly out to TX or OH, rent a hotel, and spend several days looking at houses not just once but 2-3 times. Additionally, they got money to help with a down payment and moving expenses.

      2. kbolino|1.8.16 @ 12:00PM|#
        “Relocation is expensive?”

        This drives a lot of the tolerance for taxation; to where do you relocate? It’s not like NY where you can move a cross the river. CA’s business is concentrated on the coast; how far do you move and how many new employees will need training?

        1. Yeah, but other states are making that less painful. Texas has pulled a decent number of employers from California.

          A big driver of staying there is the culture. A lot of people think that California is the greatest place on earth, even if they haven’t been anywhere else.

          1. A lot of the point of living in California is signaling. I hear a lot of the in-laws friends talking about how they’re so much better than their family living in Kansas? the most common sort of people.

    3. Cheap black market labor.

      Every time the minimum wage is increased, another hard working but “illegal” Mexican gets a job.

      1. Forgot to finish.

        The harder-working Mexican is more productive AND cheaper. Business Management 101.

    4. CA’s regulations are highly biased against manufacturing; only cronys like Musk manage to get enough favors to really make it pay.
      Services are less effected, especially if you can structure a business such that directly employs very few.

      1. A lot of California regulations don’t apply if you have fewer than 25 employees, so there’s a lot of 24 person businesses out here.

  7. alt-text is good with this one.

    1. Missed it; wonderful!

  8. Even in California’s Progressive Paradise, Gov. Brown Understands Dangers of Minimum Wage Hikes
    Warns $15-an-hour jump would wreck state budgeting.

    You mean… ok I don’t know what you mean… by “wreck” do you mean take the vast wasteland that is the California budget and pour gasoline on it and light it on fire?

    1. Uh, if it weren’t for those GOP obstructionists California wouldn’t be in this pickle.

      1. I am waiting for that to be trotted out in California’s next recession.

      2. It’s all the fault of the 1 GOP Assemblymember who keeps the Democrats from having a supermajority!

        Never mind that Team Blue had a supermajority before the last election and still blamed things on GOP wreckers.

    2. I wish they would do it and show the US how great jacking up your minimum wage is.

  9. I saw a hilarious claim made by progressives that in 2015 states that increased minimum wage saw a higher average job growth than states that didn’t.

    Obvious problem: There were like 7 states that raised minimum wage. This means your entire claim is being run off one data point with 7 subjects. If one of those states had very high job growth for whatever reason, the entire group would show higher than average job growth because one outlier can cause extreme movement among a group of 7 that it can’t cause in a group of 43. Furthermore, many of those states raised the minimum DURING THE YEAR which means that they didn’t even spend the entire year with the higher minimum wage rate so you can’t understand the effect until people start adjusting to the higher minimum.

    Also not mentioned was whether the minimum wage had the actually desired effect of decreasing poverty, which progressives never seem interested in actually looking into.

    This is your brain on the Party of Science.

    1. Meanwhile, Venezuela raised the minimum wage like 10 times in the last 4 years and it doesn’t seem to be helping them any. See? I can make sweeping claims based off of a single anecdote too.

    2. Other good questions to ask:

      1. What does “job growth” mean? Does it actually mean total employment went up?
      2. What was the trend in the state before?
      3. What is the trend in similarly situated states (if any), and across the country as a whole?
      4. What is the distribution of wages, before and after the change?
      5. What is the distribution of hours worked per position, before and after the change?
      6. What is the distribution of full- and part-time jobs held per person, before and after the change?
      6. How does this hold up after 1, 5, … years?

      1. 6. (Just to complete the ‘666’) How many of those new jobs were government jobs.

      2. WHAT IS REALITY?

        1. Is this the real life? Is this just fantasy?

      3. There you go getting all science-y.

    3. Also, it seems entirely plausible that the arrow of causality runs the other way – those states were more amenable to raising the minimum wage because of a generally good economic climate, not that raising the minimum wage caused the job growth. That should be pretty easy to test by checking job growth the year or two before the minimum wage increase, actually.

    4. Reminds me of stories when California was still trying to recover employment after the last recession, while most of the red states were already fully recovered.

      Headline: “California has fastest growing jobs rate in the nation!”

      Sometimes, there’s no place else to go but up. And that’s a feature, apparently, no matter how far ahead anyone else is.

  10. As this was explained to me: the higher pay will provide higher income taxes – and greater take home pay will mean the happy proles will spend more and the state will get even more sales taxes – and the grasping capitalist running dogs will make big profits and be able pay more korporate taxes.

    The the states coffers will overflow with ducats.

    ~people really believe this~

    1. All you have to do to combat that idiocy is ask them so why not 100 per hour?

      1. Not really. I tried $200 per hour, and my lefty GF didn’t think that would destroy the economy. Though her sister, who wandered by, rolled her eyes … at one of us. Not sure which of us, come to think of it.

        1. Haha well you need a another gf!

          200 would make everyone a 1 pcter!

        2. The standard response is ‘you’re being silly’, without explaining why it is any more silly than what they propose.

          1. That’s why you have to be the first one to say it.

        3. I tried $200 per hour, and my lefty GF didn’t think that would destroy the economy.

          Tell her at that rate you’d be incentivized to pimp her out.

        4. Get a smarter GF.

    2. It’s the economic version of a perpetual motion machine. If you raise the minimum wage, for some reason employers won’t respond by raising prices thus causing the increased minimum wage to have no impact. Instead, everything in the economy will remain the same except people will be richer. At no point, do they explain why, if this is true, you can’t just raise the minimum wage as high as you want and it won’t create overwhelming prosperity.

    3. It is idiotic because it only looks at one set of indicators in a selected group (those who will still have jobs)

      It ignores the negative feedback side of the increase, which modern ‘economists’ have somehow decided do not exist.

      1. My favorite bit is that it ignores that labor costs partially determine prices, therefore if you increase labor costs prices will logically increase and it’s very possible no one ends up with increased purchasing power.

        1. Not necessarily. When the burger machines (and other robots to replace low wage workers) go into mass production, the unit cost of the product will probably drop lower than it would have been if the minimum wage had been cut in half in the first place.

          1. In the long run, maybe, thanks to amortization of the costs. But the upfront costs will still be high, and that may bar competition from driving the prices down, at least for a while.

            1. I realize that. I was being snarky – just trying to point out that other externality of wage increases: They make capital investments more economically attractive.

            2. But the upfront costs will still be high

              Which means only giant corporations can afford the minimum wage.

              1. “Progressives” claim to be sticking up for the little guy against the big corporations, but they support things that benefit big corporations more than anybody.

                They want a minimum wage that only big corporations can pay. They want a jungle of regulations that only a big corporation can navigate (with the aid of their high-dollar compliance departments).

          2. Not really. If the automation would save money over time compared to hiring minimum wage workers, they’d already be doing it.

            The price point where automation is cheaper than hiring workers is currently higher than the federal minimum wage.

            Though I suspect places like Seattle and LA that moved to a $15 an hour wage will be in for a bit of a surprise.

            1. The price point is currently higher, but that is also partly because the market for automation is smaller at present.

              When the production runs for the machines get longer, the price will drop.

              I am guessing that every orchard worker will be replaced by a machine no later than 2035.

              1. All apples sold in the US are picked by hand and inventors have been working on apple picking machines since the 1940s. The trouble is that apple picking machines tend to either tear up the tree or the apple.

                The same thing was true for tomato picking machines when Jack Hanna invented it in 1949. They spend the next decade trying to perfect it so that it didn’t turn the tomato into mush. What they ended up doing was instead of fixing the machine, they bred tomatoes that could stand up to mechanical picking, sorting, etc.

                I’d be interested in seeing if Momentum Machine’s burger maker actually makes burgers or if it makes burger mush…

                1. I am aware of the history of mechanized harvesting. Most such attempts were made long before Intel sold its first chip and the only computers were 15 ton monsters that required code written in binary.

                  The technology has improved and gotten orders of magnitude cheaper. In 20 years, not only will automatons pick fruit faster and cheaper than manual labor, they will cause fewer bruises.

                2. And now we get shitty tomatoes.

                  I imagine that burger machines are easier to crack that fruit picking machines. Burgers are already mush before you cook them.

            2. Go to a Taco Bell or McDonalds – the number of folks manning the registers has gone down significantly, and they’ve been replaced with a very inexpensive “Order using your phone” sign. Those will be the first jobs to go before the cooks.

              1. And all cashiers could be replaced by touchscreen consoles like “self check-out” at the grocery store in about 10 minutes if it makes financial sense.

                1. “And all cashiers could will be replaced by touchscreen consoles like “self check-out” at the grocery store in about 10 minutes if it makes financial sense.”

                  FIFY

          3. In Atlanta, I have been to several restaurants that now have small Kiosks on each table. Currently, they display a menu and allow you to order refills on your drink. A manager said the next step is to actually order from the menu and to pay at your table. He estimates he can cut his wait staff by 50 to 75 percent.

            He also said the speed of the changeover will be driven by how quickly the minimum wage increases and by how much.

            Keep picketing for that $15 an hour wage, dummies. .

        2. It also ignores jobs that pretty much go away. How many elevator operators or gas station attendants pumping gas are now happy with their increase in the minimum wage? McDonald’s and other similar companies are working on finding ways to use fewer employees. Thus, some employees will find themselves out of a job with an hourly wage of $0.

          No matter what your position is on the minimum wage, technology moves on and many of these lower wage jobs will be replaced by machines/robots.

          I lived in Japan for several years. (I am back in the US now.) Japan is funny in that they still like to use cash for many transactions yet for certain other types they don’t and even when they do use cash they deal with a machine – not a person. There is rarely a need to deal with a human when riding the trains. There are a lot less jobs for ticket sellers or ticket takers. Also, just before I moved back to the US I was beginning to see more automation in grocery stores at the check out; just swipe your basket of goods(not each individual item) in front of a scanner. This machine totals the price of all the items and then hold your cell phone or an electronic prepaid card (similar to your train pass card) to a scanner and the cost of your items are deducted from your card or from your bank account. Are there still cashiers that people can go to if they want? Yes, but not as many are needed as before.

          1. I’d like to see RFIDs so when you go to the grocery store, you put bags in your cart and pick groceries and put the directly in the bag, and when you’re ready to check out, you push your cart through a gate like an X-ray scanner and it reads all of the RFIDs in the cart as it goes through and generates the total once the cart is through the gate.

    4. Why doesn’t the government just send everyone a check for whatever $15/hr * the average hours worked per year (usuall about 1800, IIRC) * (1- tax rate for that amount of incone for an individual with the standard desuction)? If there’s no such thing as price inflation, we can just fix the problem.

      1. This reminds me of when Reagan noted that the amount spent on anti-poverty programs in the US exceeded the number of the poor x poverty threshold. Congratulations gentlemen, we’ve just ended poverty he joked.

      2. That’s kind of the idea behind Basic Income.

        1. Sure, but the Basic Income fails because it is too universal. Polticians are like consultants, there’s far more value in working on the problem than fixing it.

    5. Raising the minimum wage pleases the animal spirits and they bless us with multipliers.

  11. I was in LA for meetings this week. What’s the deal with baggage at LAX? I waited an hour – some people waited even longer.

    1. I blame it on the abbreviation. The handlers think it’s an indication of how to treat the baggage — like “HEAVY”.

    2. What airline? Some of them really suck.

      1. Which ones don’t?

        1. The ones that get you your baggage in less than an hour.

        2. My bag usually gets to the carousel before I do on Southwest, Jet Blue, and Virgin America.

          1. How is that possible?! Do you just put the bag on the plane and drive to your destination?

          2. My bag also gets to the carousel before I do sometimes.

            Not at the same airport, maybe, but it’s there before I am.

    3. LAX is probably the worst airport I’ve been to. Flying in and out of John Wayne is so much better.

      1. “Here he comes. Here comes John Wayne. ‘I’m not gonna cry about my pa. I’m gonna build me an airport, put my name on it.'”

      2. Bob Hope Airport is so much better than LAX.

        Plus? Air Stairs!

    4. If Jeeves took more than 15 minutes to get my bags to the limo, his ass would be unemployed.

  12. There’s more spending on colleges[.]

    AKA more tuition increases. Thanks, Jerry!

    /rational Californian

  13. California has turned the corner.

    Into a dead end.

  14. Why dont vegans worry about plant well being? #plantslivesmatter

    1. Whoops wrong thread

      1. Are you sure? We ARE talking about California, after all.

  15. If it could California would tax the ocean and the mountain.

    It’s communism by other means.

Please to post comments

Comments are closed.