Adam C. Gray and Vito Chiesa: California minimum-wage hike is too much, too soon – and it’s forever

The California Legislature voted to enact a $15 per hour minimum wage for our state. The governor signed the legislation earlier this week.

This wage hike is indexed to inflation to automatically increase when prices rise. Yes, it has a political offramp if the economy collapses. But how likely is it that the governor – any governor – would cut the wages of the poorest Californians in a downturn?

Alan Krueger, the former chairman of President Barack Obama’s Council of Economic Advisers, considers the nationwide push for a $15 minimum wage too risky. While certain cities and high-wage states might be able to sustain it, most will not.

Even employee associations recognize regional disparity in wages, with some contracts calling for tiered salaries depending on the region. If such disparities are not recognized, it is unlikely the Valley will even gain ground, let alone parity, with other parts of California.

If the $15 per hour is appropriate for the Valley, the standard in the Bay Area and Silicon Valley should be even higher – perhaps as much as $21 per hour or even $22.

It is already legal for cities in California to adopt higher minimum-wage laws. San Francisco and Los Angeles have enacted local $15 minimum wages, believing their economies can sustain it.

The Valley, however, has not benefited from the boom fueled by the high-tech sector. We suffer double-digit unemployment rates year after year. Our economy is not diverse. Our agricultural producers compete with growers from overseas and South America.

Farmworkers in those nations won’t see the kind of wages paid in California, meaning farmworkers in California will see fewer jobs.

California has not financed, and local government is not wealthy enough to build, the infrastructure necessary to either improve our economic diversity or ease the commute to higher paying jobs outside our Valley.

Worse, almost every major state initiative regarding water, clean air, education and health ignores the challenges confronting our area. In looking to claim more of our water, the state acknowledges our region will take an economic hit – it just refuses, so far, to say how much.

This minimum-wage law is no different.

The greatest cost of this increase will be borne by small businesses – restaurants, retailers, construction firms and farms, along with young people looking for work. Unemployment insurance, disability and federal, state and local taxes are all tied to the base wage level and will increase as well.

The state itself will have to increase its spending by at least $4 billion annually by 2021 just to meet its own minimum-wage increases. It essentially eliminates the state surplus and money needed for vital additional services.

Some parts of California can possibly benefit from such a minimum-wage increase. They should be permitted to do so. Others should be allowed to see if a lesser increase works well for their residents.

Areas like our own, which have been largely excluded from the economic recovery, neither need nor deserve to be placed in a “one-size-fits-all” straitjacket designed to serve California’s wealthiest areas.

The cost-of-living indexing provision will punish us even when we have no local economic improvement, since it would be determined by improvements in economies elsewhere in California, like Silicon Valley.

This is bad law. It is a major setback for our economy. It is biased against our area. We will not see long-term economic growth here until the state stops enacting “one-size-fits-all” mandates.

This story was originally published April 7, 2016 at 11:00 PM with the headline "Adam C. Gray and Vito Chiesa: California minimum-wage hike is too much, too soon – and it’s forever."