Search This Blog

Thursday, March 31, 2016

Inequality and the Minimum Wage

California's political leaders are taking a big gamble with other people’s lives with their $15-minimum-wage proposal. Millions of workers could benefit, but many others would be left behind.

The potential damage to California businesses is obvious — making low-margin and labor-intensive companies unprofitable, knocking down start-ups and established firms, lowering California’s national and global competitiveness, and discouraging investment. But everything is at risk for workers on the margin who cannot compete for $15-an-hour jobs at this point in their lives.

The main argument for increasing the minimum wage is to make work pay more and cut poverty. However, even with a high minimum wage and a strong safety net, California already has the worst poverty rate in the country.
And a $15 minimum wage would not address the main drivers of persistent poverty in this state — the high costs of housing and energy, and unequal access to quality education. A higher minimum wage will worsen the costs and not resolve the inequality.