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Here Are Potential Winners, And Losers, From California’s Minimum Wage Hikes

Here Are Potential Winners, And Losers, From California’s Minimum Wage Hikes

California’s new minimum wage requirements are being hailed by supporters who say workers must earn a “living wage,” but others fear the pay hikes will fuel layoffs, higher prices and more automation as businesses scramble to offset increased costs.

One thing is certain: No matter what side of the fence you’re on, there will be winners and losers. Here are a few of the biggest from both sides:


Fast-food workers, cashiers, parking lot attendants, security guards and others who are earning the state’s current minimum wage of $10 an hour are all getting raises.

Come 2017, their pay will rise to $10.50 and hour. The following year it will jump to $11 an hour, and it will keep on rising until it hits $15 an hour in 2022. All told, that’s a 50 percent increase.

But this comes with a caveat.

Economist Christopher Thornberg, a founding partner with Beacon Economics in Los Angeles, said minimum-wage workers with little experience will actually be at risk when the tiered pay hikes begin kicking in.

“The real effect will be felt by low-income workers,” he said. “Employers will start hiring more seniors and get rid of entry-level people. They’re going to say, ‘If I have to pay more money, I want experienced people.’ They just won’t hire someone without experience.”

Still, experts say low-paid workers who prove themselves and add value to a company could likely remain on board.


California’s biggest employers of minimum-wage workers will soon be facing increased costs. And those costs will have to be absorbed through higher prices, reduced employee hours, layoffs or automation. (Learn about Mexico's 48 hours work week and low-cost wages).

Bob Machuca, a senior regional manager with the Los Angeles County Economic Development Corp., said the apparel industry will definitely take a hit.

“A lot of small apparel shops that do manufacturing — the cut-and-sew companies that might employ five workers on the low side or about 20 on the high side — may cut back on hiring,” he said. “They may also lay off some workers.”

Economist Robert Kleinhenz, executive director of research for Beacon Economics, said some apparel businesses that employ minimum-wage employees will likely look to move out of state where worker costs aren’t as high. And that could damage the unique synergy of Southern California’s apparel industry.

“One of the benefits of doing business here in Southern California is that you can have the design as well as the fabrication of garments going on close together,” he said. “That allows companies to move fast and bring things to market more quickly.”

Yossi Kviatkovsky, owner of The Rack, a Woodland Hills restaurant/sports bar that employs 46 workers, said restaurants will be forced to boost their prices when the minimum wage begins rising.

“This will have a devastating effect for restaurants and it will be reflected in the future prices of food,” he said.


Thousands of employees who currently earn slightly more than California’s minimum wage could also see a boost in pay. Workers who are now earning $11 or $12 an hour are likely to expect a pay raise when they see others below them getting pay increases.

And business owners will be obliged to give it to them.

“They will expect to get increases as well, and justifiably so,” said Paul Little, president and CEO of the Pasadena Chamber of Commerce. “This goes beyond the minimum wage. If you are making $12 an hour now, you’ll expect to make more than that. It’s called wage compression.”

The Center for Labor Research and Education at UC Berkeley looked into how many minimum-wage workers would be bumped up and how many others would get raises, too, and came up with the following totals: 1.9 million in Los Angeles County, 605,000 in Orange County, 339,000 in Riverside County and 331,000 in San Bernardino County.

Statewide, an estimated 5.6 million workers who either make minimum wage or more will see their pay rise as a result of the new law.


A study published in July 2008 in the Journal of Labor Research additionally reveals that minimum-wage hikes have a negative impact on job seekers. According to the study, a 10 percent increase in the minimum wage is associated with a 1 percent decline in retail trade employment and usual weekly hours worked.

David Neumark, a UC Irvine professor, agreed that some job losses will occur.

“I think the research evidence is overwhelming that a higher minimum wage causes some job loss for low-skilled workers,” he said via email. “I can say that it is very hard to find evidence that a higher minimum wage reduces poverty or spending on social programs, so it’s hard to make an argument for clear gains for those with lower incomes.”

Landlords also will benefit because the wage increases will enable more people to afford apartments, although a minimum-wage worker would likely have to be part of a two-income household in order to afford many apartments in Southern California.

SOURCE: Pasadena Star-News
By: Kevin Smith, San Gabriel Valley Tribune

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