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Editorial: California minimum wage increase could backfire

By   /   Friday, September 20th, 2013  /   Comments Off

Any increase in the minimum wage is likely to be met with reduced hours or increased workloads.

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Over the spirited objections of chambers of commerce and regional food and lodging organizations, the California Legislature has approved an increase to the minimum wage that will lift it to $10 per hour by 2016.

At press time, Gov. Jerry Brown was widely expected to approve the measure, which has been heralded by labor and community groups as a great victory for workers. But given the current state of California’s economy, there’s little to celebrate, especially for workers at the low end of the wage scale.

For one thing, any increase in the minimum wage is likely to be met with reduced hours or increased workloads.This is particularly true in the hospitality and food service industries, which are simultaneously seeing new IRS rules coming down the pike that would tax large tips.

Second, given the huge uncertainties surrounding the implementation of Obamacare, the timing of a roughly 20 percent hike in the minimum wage is awful. There is a risk that to offset costs of higher wages, employers will simply reduce their full-time workers’ hours to below 30 and thereby make them ineligible for employer-based benefits under the Affordable Care Act.

Finally, while raising the minimum wage is easy, the real work lies in providing better economic opportunities for workers at all pay levels. And California has shown absolutely zero interest in providing that opportunity, particularly in coastal communities.

Just one example involves Haas Automation, one of the world’s largest machine tool maker, which has been stymied in its plan to expand in Oxnard. Haas would be happy to bring 200 head-of-household jobs to the region but the state’s failure to resolve tax issues has made that difficult.

Then there are the millions of dollars of regulatory and related costs involved in building out East Area 1 in Santa Paula, where the community and landowner Limoneira Co. are in full agreement on a plan to create a community that offers the best chance of housing the Heritage Valley’s 21st century workforce.

And the dysfunctional regime of bank regulation in the state which is forcing small community banks to jump through unusually tough hoops rather than focus on helping their customers find paths to growth — and new jobs.

It would be one thing to raise the minimum wage at a time when income levels are on the rise, where workforce participation is increasing and where a step on the job ladder leads to a steady climb upward.

Unfortunately, by acting unilaterally on the minimum wage, the legislature has taken a step towards adding a labor entitlement, without a commensurate opportunity to move up. What’s needed is a vision for a more prosperous future for California that unshackles the spirit of free enterprise even as it attempts to regulate more people out of poverty.

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