Posted on 12/22/2005 1:08:52 PM PST by NormsRevenge
With the California State of the State Address just weeks away, Capitol whisperers have divulged that a minimum wage increase will be included in Governor Schwarzenegger’s 2006 agenda, and that a preliminary proposal has tentative backing from the leadership of both parties. This is unfortunate news for working Californians because the minimum wage negatively distorts labor markets.
The most well known distortion is the higher unemployment that results from minimum-wage laws. Setting the minimum wage above the level where employers and employees would have mutually agreed on labor services forces employers to cut back on the number of hires. This has been empirically documented in a half-century’s worth of economic research, most notably in studies on the fast-food industry. Beyond unemployment, the labor market is distorted in other, more indirect ways.
Wages are more than simple paychecks. They tell us information about worker productivity. As workers get older, they learn skills that are valuable to employers. As such, older workers are usually paid more than younger workers who have not yet developed these skills. With a minimum-wage law, younger workers, especially teenagers, are hindered from developing these skill sets because employers are less willing to pay more to train younger workers. Employers would much rather retain the older workers.
Minimum-wage laws prevent a low-skilled employee from working at the best possible job she or he could find. Faced with the specter of unemployment, many lower skilled workers will resort to “under the table” employment at lower wages, or even engage in illegal activities such as drug dealing, prostitution, or property crimes.
Minimum-wage laws also create an incentive for gender and racial discrimination in the workplace. Because the higher wages do not reflect the employees’ real worth, the employer must determine who is more “worthy” to receive the higher rate. Employers may prefer one group over another based upon preconceived assumptions.
The minimum wage also negatively affects employers’ investment decisions, which in turn influences worker productivity. With inflated wages for workers, employers in labor-intensive industries may have to cut back on non-labor expenses, including facility and technology upgrades as well as the everyday goods and services businesses need to stay afloat. Because such investment usually results in higher worker productivity, a reduction due to a minimum-wage hike equates to lesser long-term productivity gains. Naturally, this inefficiency will occur throughout the entire state, slowing GDP and employment growth.
It should be noted that there is one sector of the labor pool that gains from minimum wage laws: union members. This is not because they receive the direct wage increase—union members usually make much more than minimum wage—but through a reduction in labor competition. Because minimum wage laws make low-skilled workers more expensive, the price of union labor becomes less expensive in comparison, giving union members a competitive advantage in the workplace. Not surprisingly, unions actively support most minimum wage increases.
If the talk around Sacramento is true, then the minimum-wage fallacy continues in California. Despite the ill effects of minimum-wage laws, politicians from both parties still pander to those who believe the laws help the poor. If politicians really want to help the poor they should implement the most logical and practical arrangement: free the labor market to match willing employers and employees.
Beautiful. How liberal, Arnie! Just what we need to drive more jobs offshore and out of California.
There is a certain irony to the fact that the Dems, who claim to care most about those on the bottom rung support a minimum wage which does more to hurt those on the bottom than any other single law.
It might be interesting if they were to include a exception for those who provide health benefits, especially family benefits.
However, the socialists will undoubtly attempt to twist that into some type of single payor program, and or a union mandate.
Pathetic.
Confused by your assertion that not increasing minimum wage will drive more jobs offshore. An increase in minimum wage also causes an increase in L&I in most states. It has a double impact on employers.
Jobs move offshore because corporations cannot deliver products at a competitive market price. The labor cost to produce are excessive if manufactured in the U.S.compared to offshore workers.
Proof of this concept is the Japanese entrance into the automobile industry and the current state of GM. Yes the union people at GM are well paid, but GM cannot re-coupe the wage, health, and leave entitlements in the cost of the products. Thus the threat of bankruptcy and need for a government bailout.
Unfortunately there's also a certain irony to the fact that the 'pubs - who are supposed to believe in the market - back it.
Jobs move offshore because corporations cannot deliver products at a competitive market price.
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You really answered your own question. Many even non-labor intensive jobs are moving away, due to increased costs in taxation, regulation and labor. This is really Business 101. Increasing the COST of doing business is having a huge impact -- many companies I do business with have moved OUT OF THE STATE OF CALIFORNIA to Nevada and elsewhere and have stayed in business because they have reduced labor costs. And now California wants to throw more gasoline on the fire?
Hello??
Well, in California, where I was born, raised and still live, "Republican" is most often spelled R-I-N-O and, in "Republican" circles, Conservatives are more frequently viewed with a jaundiced eye, and even a palpable level of derision. The time has long passed when a registered Republican politician could be readily trusted to uphold truly conservative political values. Certainly there remain many truly conservative politicians in California who, for lack of any other party to call "home", call themselves "Republicans", but their numbers are on the wane. In election after election, in district after district, most California voters are forced to choose between a flaming lIberal Democrat who'll destroy the State and a spaghetti-spined RINO who hasn't the conservative principles to stop it. So, we get a Legislature chock-a-block with liberal Dems and spaghetti-spined RINOs; one gang actively eroding the State and the other gang passively looking on. Meanwhile, the few truly Conservative Republicans left, work feverishly to shore up whatever they can, but most frequently end up beating their heads against the walls.
The CAGOP isn't anywhere near the front end of this train. The governor, while promoted to his position by the CAGOP , has not shown himself to be very partisan, except during fund raising, with a minimum regard for the CAGOP.
The CAGOP is back in the passenger coach, along with the electorate, on most policies matters that the Schwarzenegger administration concocts.
Can we be at all sure that it would make any difference if they were? Can you say, with any degree of certainty, whether they'd hit the brakes or juice the throttle? I don't know that I could make that prediction.
No I couldn't.
The CAGOP is a poorly managed, disparate group of philosophies whose only common purpose appears to be to oppose the CADEM. Their current profile is fast approaching the traditional profile of the Democrat Party.
Based on their recent history, the CAGOP's public position will be predicated on the maximum political gain in the next election cycle with little or no regard to political philosophy or the financial consequences to the state.
Yep. And every conservative Republican in California knows how it feels to be homeless.
bttt
See your "adult and a child" and raise you another adult. One working adult ought to be able to support a small family on a single income. Traditional roles are far more popular than any sociopathic leftist would dare imagine, much less believe; not every woman in the world wants to bail out on her kids all day long just so the tax man will be happy in April. A great degree of our social degredation has come about as Mothers have been forced out of the house and into the workplace, and much of the economic realty that makes that happen traces back to elevated taxation and regulation of business by sticky-fingered government entities.
mininum wage increases only drive inflation. in my retail store they jacked the prices up to compensate for the increase.
most businesses will jack prices up. maybe in 10 years id see an increase to the mininum wage but in California its fair as is.
Amazing. Arnie is full of surprises. None of them good.
Once again my faith in eagles is restored.
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