California’s $15 Minimum Wage Could Backfire and Cost the State 400,000 Jobs

A newly released longitudinal study on the effects of the rising minimum wage in California reveals it negatively affects low-income workers.

“[A]pproximately 400,000 jobs would be lost” by 2022 “as a consequence” of California gradually imposing the first statewide $15 minimum wage, according to a study from the Employment Policies Institute, a conservative nonprofit research organization. “This estimate is conservative, as it measures the impact of California’s state minimum wage but does not account for job loss in counties that had insufficient data.”

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The law will disproportionately harm the very people that lawmakers claim they want to help the most: low-skilled workers. “[N]early half of the observed job loss occurs in food service and retail industries,” the study concludes.

The study uses the California experience between 1994 and 2016 as a means to gauge the effects of the upcoming minimum wage increase signed into law in April 2016.

Unlike other studies on the effects of minimum wage law, the institute’s study focuses entirely on California’s labor market, consisting of both urban and rural areas.

The law of demand says that all other factors being held constant, an increase in price will accompany a decrease in demand. Simply put, if the price of a good increases, and your income remains the same, you can now afford less of it.

The data shows the law holds true for employers in the market for labor resources:

The economists’ preferred model shows that past minimum wage increases in California have caused a measurable decrease in employment among affected employees. Specifically, they find that a 10% increase in the minimum wage would cause a nearly five-percent reduction in employment in an industry where one-half of workers earn wages close to the minimum.

The study admits the effects of the minimum wage law in a real-time economy — one that is in a boom or a bust — can be disputed.

“What is not in dispute, based on this study, is that California’s rising minimum wage has depressed employment opportunities in the most heavily-impacted industries,” the study concludes.

In summary, lawmakers should judge policies not based on their intent but by their results, or risk hurting a lot of people based on what sounds good as opposed to what works.

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One thought on “California’s $15 Minimum Wage Could Backfire and Cost the State 400,000 Jobs

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