Few issues defy consensus like the minimum wage. Voters strongly support raising it. Most business owners, especially in retail and hospitality, decry government-ordered wage hikes. Economists are decidedly mixed on the subject.
California has raised the minimum wage five times since 1998, which was the last time voters themselves had a say in the matter.
At $10 an hour, California’s minimum wage is the highest among all states (tied with Massachusetts; slightly lower than the District of Columbia). Locally, 13 cities have separately raised wages even higher than California’s minimum. Most of these cities are in the San Francisco Bay Area, plus some big cities in Southern California.
Since the minimum wage rate is unhinged from classical notions of labor productivity, its level will always be arbitrarily set, inevitably in a political context. For 20 years California’s preferred method of raising the minimum wage has been via legislation or ballot measure. Only once over the past two decades was the waged hiked the old-fashioned way: an administrative process, with investigations, hearings and a panel of experts making the final decision. Indeed, the Legislature has become so comfortable passing detailed wage and hour statutes that it hasn’t even funded the Industrial Welfare Commission for more than a decade.
Voters may again face a decision whether to raise the minimum wage on this November’s ballot. Therein lies a tale.
In 2015, even before the latest wage hike went into effect at the beginning of this year, labor unions were agitating for yet a higher wage. Legislation setting the wage at $13 an hour in 2017, with inflation adjustments thereafter, was stopped at the end of the session, in part from objections by the Administration concerned about costs to state and local governments.
Undeterred, unions are bringing out their big guns, with two rival unions sponsoring competing measures aimed at the November ballot. The first measure, which is on the verge of qualifying, raises the wage to $15 an hour by 2021. The second measure, which is collecting signatures rapidly, also raises the minimum wage to $15 an hour, but by 2020 for larger companies and by 2021 for small businesses. The latter measure would also double paid sick days an employee could use each year from three to six days.
That two unions are vying for the lead on this issue is unusual, but not surprising. Enmity between the giant Service Employees International Union and its United Healthcare Workers West local spilled into public view last year. So the dueling measures could be as much about union politics as they are about public policy.
Will one or the other or both wind up on the November ballot? The opaque politics of the unions will obviously play a major role, as will the early efforts of businesses and trade associations lining up to oppose these measures. But a third and possibly determinative influence will be Governor Brown, who early on signaled his disapproval of further hikes in the minimum wage.
When he unveiled his 2016 state budget proposal last January, the Governordefended his administration’s record on raising wages of low income workers. Explaining that the $10 wage will raise the income of 2.2 million workers, the budget document went on to say that “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.”
The administration estimated that the $10 wage increases state costs by more than $250 million annually, while a wage hike to $15 will rise state costs by a whopping $4 billion annually. According to the budget document, “such a change would return the state budget to annual deficits – even assuming a continued economic expansion.”
The final twist is a new statute that permits ballot initiative proponents to withdraw already-qualified measures from the ballot by June 29; in this case giving the rival unions a chance to work out their differences and join behind a single measure or even prevailing on the Legislature and Governor to broker a legislative compromise.
While the politics surrounding the minimum wage debate this year are unusual and even entertaining, raising the state wage mandate is expensive to many businesses, providing both benefit and harm to low wage workers, and disrupting local economies.
What to do? Check this space tomorrow for a modest proposal to improve minimum wage policies in California to address our diverse economy and widespread poverty.