Raising the minimum wage offsets the cost of living in CA, but with drawbacks

from Dan WaltersCalMatters

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There are three constant aspects of economic life in California today.

No. 1, Californians face the highest cost of living in the nation. That’s 11 percent higher than the national average, according to the feds Bureau of Economic Analysisincluding rents 53% higher than average and utilities 63% higher. That’s why California has too the highest poverty rate in the nation.

No. 2, the high cost of living, especially for housing, is the most important factor in the migration of Californians to other states. This has resulted in a net loss of 900,000 people since 2015, according to Public Policy Institute of California.

No. 3, California’s unemployment rate, currently 5.3% of the workforceis among the highest of any state for the past half-decade, with more than a million unemployed workers. it rising to 10.1% when expanded to discouraged jobseekers and those working part-time but they want full employment. This alternative measure is also the highest in the country.

The response to these economic conditions by the state’s mostly Democratic politicians was a mix of major policy changes, one-time or short-term cash handouts, and micromanagement wages.

Gov. Gavin Newsom and the Legislature, for example, have passed dozens of laws and administrative directives aimed at making it easier to build new housing, especially for low- and moderate-income families, and, in theory, moderate housing costs.

However, the actual pace of new housing construction of any kind has held at about 100,000 units per year. of Newsom recent projects for the state budget only marginal gainsto about 115,000 units by 2030.

When budget revenue allows — or at least appears to allow — the state has allocated funds to directly help Californians stuck in poverty, such as income tax credit or even cash distributions.

Increasingly, state and local officials are responding to the ever-increasing cost of living by raising minimum wages.

A new report from the Virginia-based Employment Policy Institute reveals that California is the most active state in setting new and higher wages for certain economic sectors. There are 8 of the 10 largest local minimum wage increases in the country taking effect in July.

When California, after much political angst, enacted a $20 minimum wage for fast-food workers three years ago and created an oversight agency employment conditions in this industry, this has sparked debate an impact that still rages.

Proponents have produced studies that claim to show that higher wages have had little or no negative effect on employment and consumer prices. Critics have countered with studies that say $20 wages have forced fast-food operators to raise prices and cut staff.

Newsom and the Legislature also set higher wages for employees in the health care industry. Local city and county governments enacted new wage levels for certain economic segments, such as the hotel industry in Los Angeles and amusement parks in San Diego.

The Los Angeles City Council set a $30 minimum wage for hotel and airport workers on the theory that travelers from elsewhere would pick up the costs, but last month deferred implementation until after the 2028 Olympics. In return, the business community overturned a ballot measure to eliminate the city’s gross receipts tax, a major source of city revenue.

The tactic of raising minimum wages to offset the rising cost of living shows no signs of abating. Currently, for example, the Service Employees International Union is sponsoring legislation that Senate Bill 1203which would increase training requirements for private security guards, but also give the state Industrial Welfare Commission the power to set new and possibly higher minimum wages for such security guards.

This could be an economic round robin. Higher wages can lead to higher consumer spending, which increases pressure for higher wages and pushes those caught in the middle trying to survive to lower-cost states.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.