California Minimum Wage Madness

“Countries with minimum wage laws almost invariably have higher rates of unemployment than countries without minimum wage laws,” Economist Thomas Sowell explained in 2013.

“As for being ‘compassionate’ toward ‘the poor,’ this assumes that there is some enduring class of Americans who are poor in some meaningful sense, and that there is something compassionate about reducing their chances of getting a job.”

California’s minimum wage just increased to $16.50 per hour effective January 1st. The current federal minimum wage is $7.25 per hour.

However, California cities have many different minimum wages, as the chart from Paycor below shows.

In California, the minimum wage is determined by a law that links it to inflation and the cost of living. In other words,  the wage increases along with inflation so workers always earn a fair wage that can help them afford to live in the state, Paycor reports.

As John Doolittle reported Thursday at the Globe, the state’s cost of living already exceeds the national average by 38%, with housing costs nearly double the national benchmark.

As economist Steve Moore reports at Unleash Prosperity, referring to “The Wages of Stupidity,” Fourteen blue states (including DC) raised their minimum wage on January 1st.

In other words, blue states keep raising the minimum wage in order to compensate for excessively high costs of living because of Democrats’ irresponsible spending and social engineering; they think they can throw the peasants a bone from time to time, as if it will satiate being poor.

But the minimum wage is based on nothing – even in California where increases are tied to inflation.

This is what Economist Milton Friedman said about the minimum wage back in 1973:

The minimum wage destroys the best kind of training programs we’ve ever had: on-the-job training. The main way people have risen in the labor force is by getting unskilled jobs and learning things. Not merely technical skills: They learn such things as being at a job on time, spending eight hours a day at a job rather than standing around on street corners, having a certain element of responsibility, letting their employer know when they’re not going to come in. All of those traits are very important. In an attempt to repair the damage that the minimum wage has done to traditional on-the-job training, you now have a whole collection of programs designed to take up the slack. The great proliferation of governmental programs in which employers are subsidized to provide on-the-job training gives employers an incentive to hire people and then fire them in order to get other people for whom they can get more subsidies.

Moore and Unleash Prosperity get this. They offer:

We note that with the exception of Washington which had a slight gain last year, every one of the states with a $15 or more minimum wage is losing population. We also note that most of the states with a super-minimum wage rank near the bottom of job creation.

The effect of the minimum wage is to raise the take-home pay for some workers and reduce it to zero for many of the least skilled who don’t get hired. The vast majority of workers who earn minimum wage are in starter jobs and get a pay raise after one year on the job.

We’ve long advocated a teen minimum wage of $6 or $7 an hour to help get young people into the labor force. We need young people working – not doing drugs and/or playing computer games.

“The minimum wage law very cleverly is misnamed,” Economist Thomas Sowell said. “The real minimum wage is zero. That is what many inexperienced and low skilled people receive as a result of legislation that makes it illegal to pay them what they are currently worth to an employer.”

Proof of this is California’s recent $20 per hour fast food minimum wage. Since the passage of AB 1228 in September 2023 increasing the minimum wage for fast food workers to $20 per hour, California’s privately-owned fast food restaurants have lost -6,166 jobs. Over the same period the previous year, prior to passage of AB 1228 (September 2022 through June 2023), California gained 17,528 private sector fast food jobs, according to theBureau of Labor Statistics and the Employment Policies Institute, the Globe reported in December.

California’s unemployment rate is up to 5.4%. “The number of unemployed Californians was 1,045,300 in October, an increase of 13,100 over the month and up 54,500 in comparison to October 2023,” the California Unemployment Development Department reported in November. The national unemployment rate is 1.2% according to the Department of Labor.