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Businesses and some economists believe the move will end up costing jobs, but its supporters say it’s a matter of fairness after years of stagnant wages for the middle class. One possible result: more efforts to replace workers with machines, wherever possible.
Gov. Jerry Brown is expected to sign legislation today that will raise California’s minimum wage to $15 a hour in phases during the next years.
Sharon Gaitan, whose family has owned and operated The Mexico Cafe in San Bernardino since 1951, is trying hard not to think about that fact.
“I really don’t know what’s going to happen,” said Gaitan, who is in charge of day-to-day operations at the restaurant at 892 E. Highland Ave. “Is it going put us out of business? No, but it’s going to have an impact. We just got hit with Obamacare, which was bad enough. Now we have to deal with this.”
The restaurant, located near St. Bernardine Medical Center, employs about 50 people, all of whom are needed to keep the business operating at a high level, Gaitan said.
But the new law, which puts California at the forefront of efforts to raise minimum wage laws throughout the United States, might ultimately force Gaitan to have to cut back her workforce, something she says she doesn’t want to do.
Unlike some Inland Empire restaurants, The Mexico Cafe – which has been at its present location since 1974 – doesn’t attract many tourist, a demographic that tends to spend more money. Its clientele is mostly local residents and people who have been eating there for years, and they are usually not as adventurous when buying a meal.
Because of that, Gaitan is especially concerned about having to deal with a higher minimum wage, even one that is phased in over six years and that doesn’t apply to small businesses immediately.
“Fifteen dollars an hour is a lot of money,” she said. “At this point, I don’t know where it’s going to come from.”
Gaitan is not alone.
Business interests up and down the state have criticized the increase – which amounts to a 50 percent jump in the minimum wage between now and 2022 – for being too excessive, especially for small businesses.
They argue that California, which they maintain already overburdens companies with too much regulation and taxes that are too high, will become an even more difficult place to do business when its minimum wage reaches $15 an hour.
Under the plan, which passed the state Senate and Assembly Thursday with solid majorities, the state’s minimum wage will increase from $10 an hour – the highest in the country – to $10.50 an hour next Jan. 1. It will go to $11 a hour on the first day of 2018, then increase $1 a hour annually through 2022.
Businesses with 25 employees or less will have an extra year to comply with the new guidelines, which include a mechanism for delaying the increase should a severe economic downturn happen.
Once it reaches $15 a hour, California’s minimum wage would be adjusted every year for inflation starting in 2024.
Only two Democrats, Assembly members Adam Gray of Merced and Tom Daly of Anaheim, voted against the minimum wage hike. No Republican in either the Assembly or the Senate voted in its favor.
Once in place, the minimum wage hike will raise the pay of an estimated 5.6 million workers statewide. Whether it ends up costing the state jobs – especially entry-level positions – in significant numbers remains to be seen.
“It’s not going to kill the state’s economy,” said Chris Thornberg, director of the Center for Economic Forecasting at the UC Riverside School of Business Administration and Founding Partner of Beacon Economics LLC in Los Angeles. “It’s not going to be off-the-charts destructive, but it’s going to have an impact on jobs.”
Like a lot of economists, Thornberg is skeptical of a higher minimum wage requirements because he believes they often eliminate entry level jobs and other positions at the lower end of the pay scale, specifically jobs that are available to people without much education.
“Raising the minimum wage is supposed to help the middle class, but a lot of times it doesn’t do that,” Thornberg said. “It ends up adding to the pay of people who are already making good wages, which means it helps people who don’t need it.”
Beyond that standard critique, Thornberg believes there’s a serious flaw in Brown’s approach to raising the minimum wage: it doesn’t take into account that some places in California are a lot more expensive to live than other places
“It’s hard for me to believe that they’re going to have one minimum wage for the entire state,” Thornberg said. “It doesn’t make any sense, because the cost of living varies so greatly depending on what part of the state you’re in.
“Fifteen dollars an hour might work in San Francisco or Orange County, but it’s not going to work in Fresno.”
Inland Empire economist John Husing, also a skeptic of minimum wage laws and a harsh critic of the California legislature, nevertheless praised the lawmakers for phasing in the wage hike rather than forcing businesses to deal with it all at once.
“It’s going to happen over a six-year period, which makes a lot more sense than what Los Angeles is doing,” Husing said in reference to that city’s $15-an-hour minimum wage hike going into effect between this year and 2020. “Four years is too fast.”
The state’s minimum wage hike could hurt the Inland Empire more than other parts of the state because it has more small businesses than most regions, but it could also accelerate a trend statewide that has been happening for several years: a move toward more automation, especially in retail, according to Husing.
“Applebee’s has been doing that for awhile, in some of its restaurants,” Husing said. “They don’t have waiters or waitresses, they have iPads on their tables and you place your order with that. That trend is going to happen regardless, but I could see the [higher] minimum wage speeding up the process.”
