Be Careful What You Support

Investor’s Business Daily is reporting that a week after California Gov. Jerry Brown signed the state’s $15 minimum wage boost into law, UC Berkeley Chancellor Nicholas Dirks sent a memo to employees announcing that 500 jobs were getting cut.

The article reports:

Those workers might want to have a chat with the folks at UC Berkeley’s Center for Labor Research, who just days before Brown signed the wage-hike bill released a study touting the minimum wage as a boon to low-income household breadwinners.

After that report came out, Ken Jacobs, chairman of the UC Berkeley center, told the Los Angeles Times, “This is a very big deal for low-wage workers in California, for their families and for their children.”

It is a big deal, as well, to those soon to be out of work UC Berkeley workers.

But why is anyone surprised about jobs cuts following a wage hike? It’s one of the most basic laws of economics. Any high school kid taking Econ 101 can explain it:  If you raise the price of something, demand goes down.

Keep in mind, too, that a $15 minimum wage is more than twice the federal minimum wage today. And it would set the wage floor higher than it’s ever been. On an inflation-adjusted basis, the minimum wage peaked in 1968 at just over $10 an hour.

In a strong economy, raising the minimum wage might not be as much of a problem, but in an economy that is not rapidly expanding, companies simply do not have a large enough profit margin to handle the increase in the cost of employees. The demand for an increase in the minimum wage also overlooks the fact that most of the people who hold minimum-wage jobs are people who are just entering the work force. It is in that entry-level job that new employees learn basic skills–such as showing up on time, following directions, being responsible, etc. Those minimum-wage jobs give young people the skills they need to move on to higher-paying jobs. Increasing the minimum wage to the point where there will be less minimum-wage jobs accomplishes nothing positive. Unfortunately, it has become a Democratic policy talking point, and because of that, more young people who support this idea will lose their jobs if they succeed in increasing the minimum wage.