Minimum wage increase divides businesses, citizens

By Robert Clinton, Sports Editor

California workers can expect a gradual increase in earnings over the coming years after Gov. Jerry Brown signed a bill raising the state minimum wage to $15 on April 4 in Los Angeles.

In March 2016 California lawmakers and union representatives proposed legislation named the Fair Wage Act of 2016.

The act would raise the statewide minimum wage in gradual increments culminating in a $15 per hour plateau in 2022.

The act was certified by the state and was decided on by voters during the election process this November.

“This is about economic justice,” Brown said to supporters and union members following the signing at the Ronald Reagan State Building in Los Angeles. “It’s about people. It’s about creating a little balance in a system that becomes everyday more unbalanced.”

Following the signing, California’s minimum wage increased from $9 to $10 per hour on Jan. 1, 2016. This will increase to $11 in 2017 and $1 per year until the $15 per hour wage in 2022.

Following that, the wage adjusts with rate of inflation based on the previous year’s statistics using the California Consumer Price Index for Urban Wage Earners and Clerical workers.

It also contains “governmental discretion” which allows the state to halt the annual increases in event of an economic disaster.

Senate Bill 3’s path through the Legislature traveled along party lines, with every democratic member giving a yes vote, and the only votes against coming from republican lawmakers.

Both chambers of the California Legislature have been controlled by democrats since 1959, minus a pair of two year stints, 69-71 and 94-96. The state Senate, which has 40 members, voted 23 yes to 15 no, with two members abstaining or absent.

The state Assembly voted equally lopsided for the bill with 48 yes votes and 26 no votes.

SB3 came to fruition following two competing proposals put forth by the Service Employees International Union-United Healthcare Workers (SEIU-UHW) and the California council of the Service Employees International Union (SEIU).

The (SEIU-UHW) negotiated clauses similar to the incremental increases in the bill the governor signed, while the (SEIU) state council version also proposed increasing the allowable number of employee sick days to six, doubling the three Californians are already afforded.

Following the signing of SB3, both initiatives were withdrawn as potential ballot proposals.

“The initiative put on the ballot by (SEIU-UHW) gave a real thrust and without that we probably wouldn’t be here today,” Gov. Brown said.

With a total of 2.2 million people earning minimum wage across the state the initiative will have an immediate effect on daily life.

The pros

Increases in worker productivity have outpaced wage growth since 1968. Today’s wages, adjusted to current worker productivity, would be $21.72 according to a 2012 report by the Center for Economic Policy and Research.

American financier, and former self-professed corporate raider, Asher Edelman best laid out the case for raising the minimum wage in an appearance on CNBC’s “Fast Money”.

He explained the pay increase with respect to velocity of money, a financial term that measures the amount of money that consumers reinvest into the economy after receiving a paycheck.

As wages fail to keep up with American productivity, and profits returning to the top 1 percent, top earners only spend 5 or 10 percent of what they earn. When the lower end of the spectrum receives their pay, nearly 100 to 110 percent is injected back into the economy.

Over the past 30 years a transfer of wealth to the top, coupled with a shrinking consumer base, results in a shrinking velocity of money.

According to a report by the Bureau of Labor statistics, the largest difference between the rich and poor is not the amount they spend, it is how much they save.

For every dollar low income people spend for food, roughly $.12 is saved. Among the top earners, for every $1 spent nearly $3.07 is saved, keeping vital funds out of the economy.

The cons

“We can’t have a situation where our labor is so much expensive than other countries that we can no longer compete,” Republican presidential candidate Donald Trump said.

Opponents to the wage increase point to the San Francisco restaurant industry, which took a hit while adjusting to the city’s wage increase to $15 in November of 2014. There were restaurants that cited increased labor costs as the reason behind some of the closures.

Michael Saltsman, research director at the Employment Policies Institute said, “Abbot’s Cellar, once one of the city’s top 100 restaurants, closed its doors earlier this year (2014) and cited the minimum wage hike as the determining factor.”

A 2014 Congressional Budget Office report showed a wage increase could result in the loss of 500,000 jobs, however that same report also found that higher wages might move 900,000 people above the poverty line.

The argument that raising the minimum wage is not an effective way to address poverty echoes down the line that divides the issue.

Pew Research Center polling suggests 73 percent of Americans are for an increase in wages while 24 percent of people oppose it.