April 25, 2016
The new 35% jump in the minimum wage enacted by the state puts California on a track to become the highest in the nation. At least one respected economist believes the impact won’t be as dire as many predict, due to what he calls “labor substitution.”
Los Angeles-based Beacon Economics’ Christopher Thornberg says the increase will cause a “small” overall net decline in employment, putting a damper on California’s economic growth, but it probably won’t have any worse impact than the effects of the mounting housing shortage.
The burden of a $15 per hour minimum wage by 2022 will likely be shifted onto the lower end of the earning spectrum, and “do more harm than good to the very people the state is trying to, in theory, help.” Firms will adapt by raising prices and changing labor policies, or relocating out of California. Companies will use fewer and, on average, more skilled workers, typically cutting the most hours and positions among the least productive staff.