Panel
2016 CA Summit - Gains and Pains: The Cost of Providing Californians a Living Wage
- California's minimum wage is projected to reach $15 per hour by 2023 with indexing beginning in 2024, a change expected to benefit approximately 5.6 million workers statewide and an additional 800,000 through local increases.
- An average individual earnings increase of roughly $3,700 is anticipated, with smaller wage increases for those near the new floor, potentially triggering indirect wage pushes for earners slightly above $15 or those projected to earn more in 2023.
- Real wage growth at the lower end is expected to rise in coming years due to the mandate and a tightening labor market, contrasting with previous growth concentrated at the top.
- Some economic displacement risks include potential job loss in the Central Valley and inland communities, substitution of technology for labor such as reduced counter staffing, and a shift toward more skilled labor replacing less skilled roles.
- Employment displacement concerns extend to lower-middle-class wage compression and potential job losses for youth and new entrants as firms replace low-skilled workers, though overall employment in California is expected to remain largely unaffected by the net balance of job gains and losses.
- Consumer price increases are projected at 0.6% overall for the state and 1.2% in Fresno over the phase-in period, with restaurant prices expected to rise 5% to 5.1% statewide and over 6% in Fresno.
- Approximately 20% of the increased labor costs are expected to be absorbed by lower worker turnover, with the remainder passed to consumers via higher prices, balanced by the positive multiplier effect of increased low-wage spending.
- Business expansion may be negatively impacted, with risks that firms will delay expansion, move back-office or logistics operations to Nevada or Arizona, or relocate entirely to avoid the wage hike and regulatory environment including CEQA.
- The travel and tourism sector faces potential marginal losses if consumers shift spending to destinations like Disney World, and agriculture may see crop substitution toward less labor-intensive options depending on the specific crop.
- Employers currently providing benefits may reduce non-wage compensation to offset higher minimum wage costs, as the current wage structure does not differentiate based on benefit costs.
- Enforcement challenges are expected to be significant for smaller cities and specific low-wage service industries regarding wage theft, though regional cooperation could mitigate enforcement costs through economies of scale.
- Long-term economic solutions emphasize career technical education, which could increase metropolitan real GDP per capita by over 17% per additional year of education, with 30% of future job openings requiring some college or an associate degree.
- Participants in career technical education programs are projected to see wages rise from approximately $38,000 to over $66,000 within five years of graduation, particularly if programs engage employers in curriculum design and create regional industry clusters.
- Regulatory consistency and planning process changes are deemed necessary to ensure the construction of affordable housing, as without them, developers may continue prioritizing high-end housing and face long approval times.
- Social benefits of the wage increase are expected to include immediate improvements in children's birth weights and infant mortality, as well as reduced parental stress leading to better educational and job prospects for children.
- The governor's previous concerns that high minimum wages would eliminate jobs for the poor are noted, alongside the argument that a statewide minimum is superior to isolated local increases for nearly 6 million workers.
- Success in education and workforce development relies on models such as paid apprenticeships to address the graying workforce in sectors like utilities, with specific programs for previously incarcerated individuals showing high placement rates in apprenticeships.
- Future economic strategy requires a multi-faceted approach including labor law reform and monetary and fiscal policy to tighten the labor market, rather than relying solely on education to solve wage issues.
- A 2021 full phase-in timeline is anticipated for the $15 wage, requiring businesses to develop strategies to adapt, while the federal government is seen as needing strong leadership to implement a national minimum wage.
- The impact on agriculture involves monitoring 400,000 primarily immigrant workers, while the phasing-in period is intended to allow observation of unanticipated impacts in human service industries and child care.
- Uncertainty remains regarding the validity of existing studies for a wage increase of this specific size and regional context, as there is a lack of counterfactual work on regional economies.
- Addressing income inequality is viewed as essential not only for equity but also to prevent political capture that could stifle broader economic growth.