CA wage hike shock waves begin

 

Minimum wage fight for 15Confronted with an impending hike to $15 in the California minimum wage, businesses, labor advocates and political analysts have all begun to shift strategies and tactics. Given current trends, the combined impact could be a smaller, more unionized workforce — that doesn’t always see the benefits wage activists have promised.

The consequences will be quick and could be dramatic. “Most state raises over the past decade, when there have been any, ranged from 1 percent to 3 percent annually. The law Gov. Jerry Brown signed will increase bottom-rung pay roughly 10 percent per year starting in January,” as the Sacramento Bee reported.

Manufacturing flight

One immediate result of the hikes has already appeared in Southern California, where the garment industry faces an especially rough road. Sung Won Sohn, former director of apparel company Forever 21 and economist at Cal State Channel Islands, told the Los Angeles Times a veritable “exodus has begun,” with manufacturers already tempted to shift garment production overseas to retreat from the Golden State still further. “The garment industry is gradually shrinking and that trend will likely continue.”

“In the 1990s, as borders opened up, foreign competitors began snatching up business from Southland garment factories. Eventually, many big brands opted to leave the region in favor of cheaper locales. Guess Jeans, which epitomized a sexy California look, moved production to Mexico and South America. Just a few years ago, premium denim maker Hudson Jeans began shifting manufacturing to Mexico. Jeff Mirvis, owner of MGT Industries in Los Angeles, said outsourcing was necessary to keep up with low-cost rivals.”

The problem, particularly acute for business owners who can’t automate jobs as readily as, say, fast food restauranteurs, was encapsulated by Gov. Jerry Brown himself, who signed the $15 wage into law despite clear reservations about its economic wisdom. “Economically, minimum wages may not make sense,” he said, defending the law on moral and sociopolitical grounds. A high minimum wage, Brown claimed, “binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way.”

Incentives in tension

According to critics of the change, the tension involved in using poor economic choices to encourage good moral ones has driven labor unions themselves toward a predictable, if hypocritical, shift in their own policy objectives. Many of the same unions that agitated for a higher wage “have been quietly — and often successfully — lobbying cities to let employers who hire union workers pay them less than the mandated minimum,” as Quartz observed. “Unions say it gives them the flexibility to negotiate packages for their workers that supplant wages with health insurance and other benefits.

“Critics say that it’s a shrewd move by unions to drive up membership dues and ensure that their workers are the cheapest in town. The exemption gives cost-conscious employers little choice but to hire union, and workers who want jobs little choice but to join their local.”

At the same time, however, workers who have been rallied to the $15 cause have been swiftly pressed into service for pro-unionization demonstrations. “The demand from the original strikes in 2012 was $15 and a union,” said Mary Kay Henry, international president of the SEIU, according to the Times. “Underpaid workers in California are now on a path to $15, but we think the way we can make these jobs good jobs […] is through a union.”

In an added twist, some economists defending the wage hikes have raised the question of whether subsequent job losses are a price worth paying. Gov. Brown, in fact, has referred favorably to that view. “We understand that this can be difficult,” he said, as the Washington Post recalled. “But the fact is that there’s a principle called the living family wage, which is a doctrine that has been around for a long time, since probably before the 1900s, which is that you can’t expect someone to work if the wages for that work can’t support a family.”

26 comments

Write a comment
  1. phood
    phood 21 April, 2016, 05:41

    The state’s inability to pursue other policies that would make it easier for people to live has led us to the $15 minimum wage. There is little doubt that $15 is too high for many small employers. The best place to pursue changes to the minimum wage is at the federal level. States will find they are not islands. We need policies that pursue cheaper education, cheaper housing and other opportunities that present a leg up for low-income workers.

    Reply this comment
    • Dyspeptic
      Dyspeptic 21 April, 2016, 14:59

      Your comments are nonsensical. You can’t ameliorate an irrational and counterproductive policy like Crazyfornia’s minimum wage law by implementing it on a national scale. That just makes the inherent problems with this stupid policy even worse. Your claim about an “inability to pursue other policies” makes no sense. There is nothing stopping DemocRat politicians from implementing whatever policies they want since this state is effectively a one party monopoly.

      Your claim that we need cheaper education and housing is just more thoughtless blather. The same government that is artificially driving up the cost of everything with a $15/Hr. minimum wage is also driving up the cost of housing with restrictive zoning, slow growth policies, high taxes, regulatory overkill, green building codes and exorbitant fees charged to developers.

      I have no idea why you complain about the high cost of education given that any low income individual can get a free K-12 education at tax payers expense as well as cheap job training through a community college or various state and federal training programs administered by the California Employment Development Department.

      Maybe you meant that teachers, administrators and education bureaucrats should work for free. That would certainly make education cheaper, but that is not what the arrogant, corrupt and greedy California Teachers Union wants.

      As usual government is the problem, not the solution. Why can’t people figure that out?

      Reply this comment
    • Adam Smith
      Adam Smith 21 April, 2016, 17:30

      The problem with this is that there are a lot of rural areas where $15 an hour is a fortune, housing costs are low and 90% of the workers in a town make less than that. It will shut down whole town’s economy.

      Reply this comment
  2. Richard Rider
    Richard Rider 21 April, 2016, 05:53

    Frankly fast food robots have been little more than conjecture and curiosities up until this past year. But the key to boosting this robot industry is to boost the minimum wage.

    Now that political sentiment seems widespread for pretty much a national $15 and up minimum wage, it seems inevitable that this bootstrap automation industry will quickly evolve into big-time business, with some major manufacturing corporations rushing into the development stage — and from there the scramble for factory production will be quite a spectacle.

    Moreover, the price of these robots will rapidly tumble because of the economy of scale that such mass production provides, the vendor competition and the burgeoning demand. Check out this video:
    https://www.facebook.com/UniversalFreePress/videos/1126818470697724/

    Fortunately none if this automation will reduce the number of minimum age jobs. Ask any Progressive, and you’ll see I’m right (pun intended).

    Reply this comment
    • Ronald
      Ronald 22 April, 2016, 10:03

      You’re right. In a world economy, higher local labor costs are incentives to pursue lower costs locations throughout the world to lower those labor costs, and/or seek automation to reduce those labor costs.

      High wage costs in the auto industry were the catalyst to implement more and more worldwide manufacturing, and robotic automation, reducing the need for much labor and increasing the efficiencies within the auto manufacturing arena.

      Reply this comment
  3. Richard Rider
    Richard Rider 21 April, 2016, 05:56

    “Cheaper education” is not gonna help. 2/3 of the people attending CA community colleges pay ZERO out of pocket tuition. 55% of the students attending UC colleges pay no tuition.

    JOBS are what is needed, and the “Golden State” is the most anti-job state in the nation.

    Reply this comment
  4. Ronald
    Ronald 21 April, 2016, 06:18

    The net out-migration of1.2 million Californians out of the state people between 2005 and 2014, ranking 49th is the result of the “silent” majority voting with their feet in favor of states with better economic opportunities, while the “vocal” minority of our elected official continue to over regulate.

    How will California’s new minimum wage increase our competiveness with the rest of the nation and the world? Our elected official’s crusade is to put a “band aid” on the wound of these ever increasing costs, by raising the minimum wage.

    With one stroke of the pen, the do-something Legislature has bought the votes of the high wage earners and the financially challenged. Higher wage earners are rejoicing as the impact on their wages will be fantastic in the next 10 to 20 years. Our elected officials never look at the unintended consequences that higher wages for everyone will benefit the rich more than those on minimum wage.

    The better solution would be to HEAL the wound by DECREASING the over regulations, over taxation, and uncontrollable “fees” on businesses as the California financially challenged will continue to disproportionally pick up the costs “camouflaged” at businesses.

    Throwing money as a band aid to cover the rising costs for everyone buys votes for reelection and perpetuates the out-migration of our citizens, but does not heal the wound of why the costs are rising.

    Reply this comment
  5. Bill G.
    Bill G. 21 April, 2016, 08:39

    Getting full-time workers off of food stamps, WIC, Medicaid and Section 8 housing is the real point of having a realistic minimum wage. Workers have no traction in this economy thanks to our non-existent immigration policies. Flooding California with low-skill/no-skill foreign workers has gutted the base wage structure, and businesses small to large have reaped the benefit of having the taxpayers subsidize their operations via rock bottom wages. I don’t like government dictating wages any more than you do, but I don’t think my taxes should subsidize your business operation. Chamber of Commerce can no longer have it both ways: you demand an open border, great, we demand your workers not be subsidized with welfare!

    Reply this comment
    • Dyspeptic
      Dyspeptic 21 April, 2016, 15:17

      I’m somewhat sympathetic with your point but ultimately you can’t fix one government created problem with another government created problem. The real solution is to cut back on the massive, unsustainable, debt funded expansion of the welfare state that has taken place in the last 15 years under both Republican and Democrat administrations in the District of Criminals.

      Although a responsible political solution to unrestricted immigration and cradle to grave welfare policies is unlikely in the short term, economic realities will force it on us in the longer term. When that happens it will get truly ugly as the takers find out that there aren’t enough makers to pay for the freebies. Government money printing won’t solve that problem and neither will higher taxes.

      In the mean time though, I don’t think it’s constructive to support a really bad policy just because the Chamber of Crony Capitalists takes it in the shorts. Although that is a nice bonus 🙂

      Reply this comment
  6. bob
    bob 21 April, 2016, 10:57

    Frankly fast food robots have been little more than conjecture and curiosities up until this past year. But the key to boosting this robot industry is to boost the minimum wage.

    What’s the key to replacing politicians with robots?

    Reply this comment
  7. josil
    josil 21 April, 2016, 17:35

    Even apart from the effect of Robotics, the hike in the MW would reduce jobs and hours. Just look at labor economics from the perspective of a small business. The major advantage of MW increases is political…and Democrat.

    Reply this comment
  8. Hal
    Hal 21 April, 2016, 17:37

    Today in California 55% of UC students (from low income families, families that make less than $80K per year) pay no tuition or fees. 300,000 CSU students pay no tuition or fees; 350,000 Community College students receive fee waivers annually. The middle class is being killed by all the “free” education we pay for.

    Reply this comment
  9. Richard Rider
    Richard Rider 21 April, 2016, 17:59

    Democrats see a high minimum wage as a win-win strategy. And they are right — for Democrats.

    The people in these minimum wage jobs will be grateful to the Democrat Party. Those who lose jobs, have their hours reduced, or simply can’t get that starter job won’t connect the dots, and will be dependent on government largess (a.k.a. Democrats) for welfare.

    Either way, they will reliably vote Democrat. It’s a great strategy — as long as you don’t care about the working class, the poor and minorities. Collateral damage, I suppose.

    But wait . . . I thought that it was the Democrats who “cared.” Never mind.

    Reply this comment
  10. SkippingDog
    SkippingDog 21 April, 2016, 18:46

    “In my Inaugural I laid down the simple proposition that nobody is going to starve in this country. It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.” FDR, 1933

    Reply this comment
  11. SkippingDog
    SkippingDog 21 April, 2016, 18:49

    “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if Labor had not first existed. Labor is superior to capital, and deserves much the higher consideration”
    —Abraham Lincoln

    When did Republicans abandon Lincoln?

    Reply this comment
  12. SkippingDog
    SkippingDog 21 April, 2016, 18:53

    There will continue to be a decline in jobs due to automation. Even formerly well-trained jobs like accountancy and the law are being replaced. At some point in the very near future, our real discussion will focus on a basic guaranteed income, just as Nixon proposed back in 1969.

    Reply this comment
  13. Ulysses Uhaul
    Ulysses Uhaul 21 April, 2016, 20:25

    Interesting posts….the low wage earner cannot buy a job like union members, so politicans do the deed for nothing? Hardly.

    The employment private contact is dead…..productivity is now unlinked from wage increases….service jobs are losers as far as productivity increases….how much faster can a person flip a burger or take out the trash.

    And every time the minimum wage goes up you rarely see any improvement of anyone’s standard of living….the bell curve precludes…..most workers are incapable of improving themselves or the lot of others they service or produce for-

    Reply this comment
  14. Annie T.
    Annie T. 21 April, 2016, 22:03

    My 97 year old Mother lives in one of those small towns. She pays her care takers and helpers $10 an hour out of her $400 social security check. This is devastating for the elderly and disabled on fixed incomes and small towns all over California.

    Reply this comment
  15. magnum
    magnum 22 April, 2016, 11:48

    This is the most relevant and on point commentary I have read in a long time! California is my home state, but I am surrounded by idiots! As you said, our state and local governments are monopolized by a corrupt party who is squeezing the life out of hard working tax payers.

    Reply this comment
  16. Richard Rider
    Richard Rider 22 April, 2016, 12:24

    Yeah, Running Dog, with FDR’s New Deal policies, he managed to extend a routine depression (we had several in the 19th century — deep but short, with quick recoveries) into the prolonged GREAT Depression.

    FINE example of “living wage” thinking. Thanks for the example.

    Reply this comment
  17. Richard Rider
    Richard Rider 22 April, 2016, 12:56

    Note the photo above — the typical stock photo that accompanies any article about the minimum wage. Actually, a more “laid back” group compared to most.

    These usually noisy protesters are too often labeled as “STRIKING fast food workers” by the gullible and conniving press. But the fact is that only a handful are actual fast food workers — let alone STRIKING fast food workers. Most are SEIU employees (some paid to protest) who work in OTHER industries.

    Toss in some college brainwashed Millennials, and then sprinkle the crowd with aged 60’s hippies who still think that their Worker’s Paradise is just one edict from realization.

    The press never reports who actually constitutes the protesting group. This omission is a combination of laziness and coziness.

    Reply this comment
  18. Queeg
    Queeg 22 April, 2016, 16:36

    Comrades

    Socialism eventually runs out of YOUR money. High minimum wages speed up the taking unless you become totally self sufficient shunning services at every turn.

    By the way….have you noticed the sharp sharp increase in prices in super markets recently?

    Reply this comment
  19. davidfromlosgatos
    davidfromlosgatos 22 April, 2016, 17:00

    I, for one, would welcome my robotic insect overlords.

    Reply this comment
  20. SkippingDog
    SkippingDog 22 April, 2016, 17:10

    As usual, Richard, you have a message that is simple, quick, and incorrect. Get out of the crackpot bubble now and then.

    http://archive.fortune.com/2009/02/10/news/economy/yang_newdeal.fortune/index.htm

    Reply this comment
  21. Bill G.
    Bill G. 23 April, 2016, 08:03

    So worker/slaves should get paid basically nothing AND their food stamps/medicaid/section 8 housing should be shut off also. Life on the PLANTATION……Might as well just go back to slave auctions…..

    Reply this comment
  22. Queeg
    Queeg 23 April, 2016, 08:51

    Comrade Billy

    It takes a two-three minutes to consume a shiny organic apple, but takes 15 minutes to minimum wage forceably extort the the apple cost….

    It’s already over. Food costs and rent have ALREADY gone up negating any perceived purchasing power for the masses.

    There are deep deep inbalances in the economy due to plutocrat and globalist chronism….not ending well.

    Reply this comment

Write a Comment

Leave a Reply



Related Articles

CalSTRS unfunded liability hits new high

The California State Teachers’ Retirement System just announced it faces $73.7 billion in long-term liabilities. Left untouched, that would spell

Elizabeth Emken: ‘It’s time to un-ring the Obamacare bell’

Note: This is the second in a series of profiles of the four major candidates for the crucial 7th Congressional

Advocates Advance New Pot Initiative

FEB. 28, 2011 By STEVE KUBBY The November 2012 presidential election affords proponents of a ballot initiative to change state