$15 state minimum wage could help some but cost others their jobs

A political deal to raise California’s minimum wage to a nation-leading $15 an hour could help some workers cope with the state’s crushing cost of living but also deprive other low-wage earners of jobs altogether, economists said Monday as Gov. Jerry Brown and other leaders touted what would be a landmark agreement.

California’s economy is larger than those of most countries, with a wide diversity of earners. While newly minted millionaires gentrify neighborhoods in the San Francisco Bay Area, some Central Valley field hands lack access to clean water. A jump from the current $10 an hour spread over six years would affect millions of workers.

“It’s going to definitely change things,” said Kevin McCarthy, owner of Kevin’s Bikes on Olive Avenue in Merced.

McCarthy, who employs five full-time employees over the current minimum wage, said he will either have to raise prices on his products and services, or cut back on staff during non-peak hours to sustain his business.

“I’m not quite sure how I feel about it,” McCarthy said, adding that he wants to see people make more money, but the increase may not help people in the long run if prices also go up.

Rafael Gutierrez, a 53-year-old farmworker, said the increase would let him treat his family to weekend dinners out and a short vacation to Disneyland from his home in Fresno County.

His last job picking peaches and grapes paid $11 an hour. His girlfriend makes $14 an hour at Target. Though their region is far from California's costliest, “Right now, we’re just making it,” Gutierrez said. “Life is expensive.”

And then there are employers such as Chuck Herrin, owner of Sunrise Farm Labor, which provides roughly 2,500 workers each year in the San Joaquin Valley. Herrin predicted that farmers would hire 10 percent fewer workers, because of the higher cost of business.

“It’s going to be devastating,” said Herrin of the impacts on field workers and their dependent relatives.

On Monday, Brown touted the deal his administration struck with legislative and labor leaders as potentially historic, calling it a matter of economic justice. Under the proposal, which the Legislature would still have to approve, the minimum wage would rise gradually, reaching $15 by 2022.

“The shock won’t be as bad,” McCarthy said about the stepped increase.

That hike would create the nation’s highest statewide minimum wage.

Income inequality has emerged as a top issue nationally, with President Barack Obama proposing an increase in the federal minimum wage and Democratic presidential candidate Bernie Sanders pushing a $15-per-hour standard.

About 4 million workers in California earn wages in the $10 to $15 range, according to calculations by Jeffrey Clemens, an economics professor at the University of California, San Diego.

“The key question is what fraction of these workers will be lifted to the new minimum and what fraction will lose their jobs,” Clemens wrote in an email.

Economists, including Clemens, said in interviews that projecting what would happen in California is tough because the proposed increase was significantly larger than those in the past and may have unintended consequences.

One leading economist on minimum wage issues said an increase from $10 to $15 would reduce employment among the least-skilled workers by at least 5 to 10 percent. But the impact on employment might be even bigger because employers would have to absorb significantly higher costs.

“I would go so far as to call this reckless,” said David Neumark, an economics professor at the University of California, Irvine.

Neumark noted that the effects would vary by geography: In high-wage counties such as San Francisco and Santa Clara, about 22 percent of workers would get a raise, while in places such as Fresno and Merced counties, about half the workers would.

This story was originally published March 28, 2016 at 6:53 PM with the headline "$15 state minimum wage could help some but cost others their jobs."