California’s $15 minimum wage increase will benefit some workers who keep their jobs, but it will have the unintended effect of squeezing non-profit organizations, making their work more difficult.
The new regulations mean that non-profit organizations have higher costs, but cannot guarantee increased funding. For groups who aim to operate outside market pressure and provide necessary services, the minimum wage increase has made their goals more difficult to achieve.
“We cannot simply raise the cost of our services – since they are free – to meet this gap,” Roy Alexander, chief executive officer of the Sacramento Children’s Home, wrote for The Sacramento Bee.
The Sacramento Children’s Home has been affected by the state minimum wage and new federal rules that raised the threshold for overtime pay. Businesses can stomach the added labor costs by firing workers or raising prices, thus sharing costs with customers. For non-profits, higher labor costs threaten a reduction in offered services.
“In order to get by we are more dependent on corporate and community support to sustain our programs. Without the support from businesses and individuals in our region, the need for additional government funding would be even more drastic,” Alexander wrote.
The SCH depends on government funding and grants to cover operations, but as one hand of the government gives, the other takes away. Ripple effects of regulations are far-reaching.
Alexander himself doesn’t oppose the minimum wage increase. His argument is one that policymakers need to be aware of the seen effects and the unseen consequences. The minimum wage has become a lightning rod of populist economic policy, a quick fix to aid the working poor.
The minimum wage, however, doesn’t help everyone in the working poor, or the poor at large. Higher labor costs make a business less competitive. For those working on thin profit margins, the new wage laws can ruin them. It’s a general problem with any economic regulation. The benefit must be weighed in isolation for its seen and unseen effects, but it also has a cumulative effect. When one regulation turns into a thousand, those unseen effects become greater.
