Back in February, I wrote a column for Fox and Hounds declaring Senate Bill 935 a ‘Main Street Menace’. We were hoping that the ‘heads up’ to those in the California State Legislature would help to prevent the bill’s passage. Unfortunately, in late May, the bill passed on a party line vote of 21-12. It is beyond disappointing that our elected officials opted to pass this legislation and further strive to decimate private sector small businesses and working families.
Today, NFIB released a study on the impact of Senate Bill 935, which would increase California’s minimum wage to $13.00 per hour in the next three years and pave the way for future increases in the minimum wage depending on future inflation. This increase comes less than a year since Governor Brown signed Assembly Bill 10 in September 2013, which raised the minimum wage to $10 an hour – a 25 percent increase on employers.
The study, conducted by NFIB’s Research Foundation in Washington D.C., found that the long-term effect of SB 935 would be a severe loss of jobs and economic productivity in the state. Depending on the future rate of inflation, the passage of SB 935 could result in more than 323,000 jobs being lost in California over a ten-year period and a reduction in real output of $224 billion. In addition, the study found that 57 percent of the more than 300,000 lost jobs would be from small businesses – a truly terrifying prospect.
To put that number into perspective, imagine the total population of the City of Riverside (316,619) or Stockton (298,118) evaporating over the course of a decade – because that’s the effect SB 935 would have, if passed.
So – to those under the Capitol Dome – are you listening now? Have we reached the threshold of job loss that you were looking for?
The passage of AB 10 last year is already costing employers annually over $4,600 per full-time minimum wage employee, including the 15% employer payroll tax and assuming they take two weeks off of work each year. For a small business with 10 employees, that is $46,000 in increased costs! This money will have to come from somewhere, and that will mean cutting employees’ hours or increasing the costs of goods and services, which will only hurt consumers.
SB 935 seeks to increase employer costs by yet another $6,900 per year. This means that costs will go up by $11,500 per employee by 2017 over the 2013 rate. That is a whopping $115,000 increase for an employer of 10 minimum wage employees! Keep in mind that many of these small businesses are already operating on a razor thin margin.
In small businesses, the lowest skilled employees are usually the ones who are hardest hit. A previous study by the NFIB Research Foundation found that nearly 50 percent of the time, small business owners would lay off employees, cut hours, or leave vacancies open. President Obama and Congress learned this the hard way in 2009 when they raised the federal minimum wage only to see 600,000 teenage jobs disappear in the subsequent two months. Coincidence?
Many small business owners may consider price increases to compensate for increased wage costs, but the truth is that employees pay for the minimum wage increase in the form of fewer hours, lost jobs and benefits, and increased living costs.
Employers who are able to pay above minimum wage to be competitive will be forced to increase their wages, as well. Additionally, employees who started at minimum wage but have earned pay raises will see their status diminished as new employees start at higher levels.
So the bottom line is this to those who have voted or may be considering a vote for the second minimum wage increase in less than a year: are you prepared to explain to your constituents this election year why their teenage son or daughter can’t find a job to pay for college? Are you ready for more vacant store fronts in your district?
We urge those in the Assembly to resist pressure from union bosses and vote “No” on Senate Bill 935, and we urge every voter that cares about creating – not decimating – jobs in our state to hold your politicians and candidates accountable on this issue. Heaping new costs on struggling mom and pops already grappling with the highest minimum wage, statewide sales and income taxes, most sweeping regulations and highest number of frivolous lawsuits in the nation is bad for business and bad for the state and economy.
For more than 70 years, the National Federation of Independent Business has been the Voice of Small Business, taking the message from Main Street to the halls of Congress and all 50 state legislatures. NFIB annually surveys its members on state and federal issues vital to their survival as America’s economic engine and biggest creator of jobs. NFIB’s educational mission is to remind policymakers that small businesses are not smaller versions of bigger businesses; they have very different challenges and priorities. Learn more at www.NFIB.com/ca.