The bottom line from a reported minimum wage agreement in California? No one knows how it’ll be affected.
The Los Angeles Times reported Saturday that lawmakers and labor unions have reached an agreement to lift the wage floor in the Golden State from $10 to $15 an hour. L.A. and San Francisco are among several municipalities to have approved increases to that level already, but no state has made a similar move.
That’s unsurprising. The $15-an-hour figure — which California would hit by 2022, per details of the agreement — has been a largely symbolic number pushed by labor interests and pure-blue cities, not legislators. The minimum wage Washington Democrats support for a national standard is $12 an hour. Even Oregon, which approved a bold measure last month, sorted its rate hikes into tiers, subjecting rural counties to a lower wage floor than the more economically active Portland area.
And Portland tops out at $14.75 per hour.
Los Angeles and San Diego, just the same as Modesto and Fresno, would be subject to the $15-an-hour standard, according to the Times’s reporting of California’s “statewide” plan. That could present certain employers particular challenges, and the overall expectations for the wage increase are indeterminate — largely because there’s no precedent for it.
Take an evaluation of a proposal to boost Los Angeles’s minimum wage to $15.25 per hour by 2019. The brief from the University of California, Berkeley observed this (emphasis mine):
If such a policy is difficult to forecast at the local level, imagine how more complex it becomes for an entire state, which includes an even broader range of economic variables. For example, standards of living certainly vary neighborhood by neighborhood in a city, but the effect is multiplied across each neighborhood of each city in one of the world’s 10 largest economies. A person making $50,000 in Bakersfield would need to make more than $80,000 in San Francisco to maintain a similar standard of living, for instance.
“$15 an hour may work in places like San Francisco or Los Angeles, but it could have very different economic effects in some of the very rural areas in the state,” Third Way’s Gabe Horwitz said in The Wall Street Journal.
That applies from a labor perspective as well as a consumer one. Take the less educated, young and chronically unemployed, for whom job opportunities might shrink further in a $15-an-hour minimum wage environment. Then there’s the risk that retailers hike their prices as a way to compensate for paying workers a higher minimum wage, which would harm poor customers the most.
The common thread: While a minimum wage hike is obviously intended to help the lowest-income individuals, it’s those same people who could be hit hardest by such a large minimum wage jump.
This sort of contradiction, risk and uncertainty are prone to increase, themselves, as the minimum wage goes ever higher. Speaking about national policy, President Obama’s former top economist, Princeton Professor Alan Krueger, conceded that “$15 an hour is beyond international experience, and could well be counterproductive.” (Krueger did not respond to an inquiry for his opinion of the California proposal by the time of publication.)
What would happen in California is anyone’s guess. And for once, that phrase is meant literally.
