Economists warned California…forcing a minimum wage hike to $15 an hour would cost jobs, and according to a new study, that’s exactly what is happening.
A study, entitled “California Dreamin’ of Higher Wages,” estimates that the state will lose approximately 400,000 jobs by 2022.
Not only are hundreds of thousands of workers going to be without jobs, the hardest hit will be lower-class workers. The ones that felt they needed to make more money, those in food service and retail industries, will now lose their jobs.
Conservatives warned that mandatory wage increases would cause massive small businesses to close up, and irreversible job loss. This happened to Mokka, a Berkeley coffee shop. The city raised its local minimum wage to $12.53 an hour. Mokka tried to respond by raising prices and introducing new menu items. The higher prices drove away customers, however, leaving total sales unchanged. Unable to absorb the higher wage costs, Mokka recently announced plans to close.
“By 2022, approximately 400,000 jobs would be lost as a consequence (of minimum wage increases). This estimate is conservative, as it measures the impact of California’s state minimum wage but does not account for job loss in counties that had insufficient data,” the study states later on.
According to economists, and common sense, the only time the minimum wage should be raised, is when an individual business declares that they can afford to do it. California refused to listen and will suffer the worst unemployment rate ever seen.
Firms will respond to the requirement to pay higher wages in three main ways; cutting jobs and hours, raising prices and moving, according to James Sherk, who is Research Fellow in Labor Economics in the Center for Data Analysis, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation.
For example, the Holiday Inn Los Angeles Gateway laid off seven of its employees in response to the first phase of Los Angeles’s minimum wage hike.
Many companies will relocate to another state or country. This outmigration has already begun. American Apparel recently laid off 500 of its workers in Los Angeles and announced plans to move its L.A. operations out of California.