September 30 2013

California Wage Hike Is Not Only Bad Policy, It’s Also Unjust

Christina Villegas

Calling it a “moral responsibility,” California Governor Jerry Brown signed an incremental minimum wage hike last Wednesday, which will raise the state’s current $8.00 per hour wage to $10.00 by January 2016. 

By imposing the highest hourly rate in the nation on the already struggling Golden State, Governor Brown ignores a mountain of data showing that minimum wage laws disproportionately harm the very individuals they are designed to assist.  In a recent Policy Focus, Carrie Lukas cites extensive research showing that minimum wage laws increase the cost of employment, resulting in fewer entry level jobs.

Furthermore, while California lawmakers frequently emphasize the importance of protecting and promoting small businesses, they seem to care little about the burden wage hikes place on those with a minimal profit margin.  Following the wage increase, many small businesses will be forced to close their doors, reduce employment, or raise prices.  For example, my mother, who runs a small Montessori preschool in Southern California, has sadly realized that, in order to survive the wage hike, her school will either have to lay off low-skill aides or raise tuition on families already struggling financially to send their children to the school. 

Thus, although Governor Brown, members of the California legislature, and liberal elites credit themselves for taking the moral high ground, their exercise in “compassion” will inevitably lead to fewer working hours, more layoffs, and higher prices for those who can least afford them.

Moreover – despite lofty claims that mandating higher wages is a moral obligation – political attempts to force wages upward are, by their nature, fundamentally unjust because they allow politicians, rather than individuals, to determine the value of labor.

Minimum wage increases are based on the premise that employers who don’t provide a “decent living” are necessarily exploitive in nature.  This assumption not only ignores evidence that a large percentage of minimum wage workers are teenagers or young adults who are supplementing other family income, but it also overlooks the fact that low-wage employees are often seeking to establish credibility or gain experience, which provide a value far greater than their nominal take home pay. 

As Thomas Sowell recently pointed out, “There is nothing mysterious about the fact that most people start off in entry level jobs that pay much less than they will earn after they get some work experience.”  Consequently, when low-skilled and inexperienced workers – a large percentage of whom are teenagers or minorities – are priced out of jobs through minimum wage laws they lose not only the compensation for their current work, but also the opportunity to gain valuable experience that will allow them to demand higher wages in the future.   

In short, forcing wages upward by political mandate effectively restricts the freedom of individuals to sell their labor on mutually acceptable terms and to prepare themselves for more lucrative work.

While it would certainly be nice if politicians could magically make everyone financially well off – in reality, mandated wage hikes not only drive low-skill workers out of jobs, but they also deprive these workers of the opportunity to gain skills, experience, and connections necessary to climb the ladder of success.  

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