On Sept. 25, Gov. Jerry Brown signed Assembly Bill 10, which raises the minimum hourly wage in California to $10. This bill is an example of good-intentioned legislation that will cause more harm than good.
Those who supported this bill think it will make a huge difference by helping millions of Californians provide for their families. This mentality completely misses the point of what a minimum-wage job is supposed to be and fails to consider the cascading effect it will have on California's job market.
There was a time when minimum-wage jobs were entry-level positions. Young workers, students and recent graduates took these jobs to learn a skill, gain experience and work toward better employment.
The fact that today many low-skilled workers are "stuck" at minimum wage does not reflect on the wages those jobs pay. Instead, it points to the bigger problem: the exodus of high-paying skilled jobs from California as a result of the increasing cost of doing business in our state.
As high-paying jobs leave California, the percentage of minimum-wage jobs in the state increases. Those working in minimum-wage jobs are stuck because there are fewer opportunities to advance, and the higher cost of doing business means that companies cannot afford to pay more.
Artificially inflating the minimum wage causes many problems. Many companies will be forced to increase their prices to offset the new, higher cost of labor.
As prices increase, the buying power of the new, higher wage will decrease. In the end, there will be no net change — except perhaps for those making slightly more than minimum wage who will see their purchasing power decrease over the next few years.
Companies that can't offset their higher labor costs by increasing prices will be forced to lay people off. Unemployment will increase and the remaining workers will have heavier workloads. In the short term, their "raise" will give them greater purchasing power, but as prices equalize, they will end up doing more work for less pay, and there will be one less entry-level job for a Californian in need.
The higher minimum wage will eliminate job opportunities for high school students. Without these opportunities, many students are unable to learn some of the most basic skills necessary to succeed over the course of their careers. As a result, the unemployment rate for high school students, which is the highest it has ever been, will continue to rise.
However, despite the passage of this bill, things are surprisingly looking better in Sacramento. This year, the California Chamber of Commerce identified 38 job-killer bills. This was the only one that passed.
Last year, the Legislature passed six job-killer bills. While this bill, which passed only at the last minute with significant arm-twisting, is a major obstacle on our road to recovery, I'm hopeful that Sacramento's overall improvement with respect to business issues is a sign that the majority party is ready to start working on solutions that will help improve California's business climate.