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Wednesday, January 18, 2017

The Unanticipated Consequences of Minimum Wage Hikes

A reported 21 states from Maine to California will increase their state minimum wage this year. It will mean bigger paychecks for some workers—and no paychecks for others.
Already, restaurants are laying off workers. Others are raising prices.
Neither outcome should come as a surprise. Both are among the entirely predictable "unintended" consequences of minimum-wage laws.

To offset their higher labor costs, some San Diego restaurants, for example, already have raised menu prices or added a surcharge of 3 percent to 5 percent on meals.
Natalie Kitroeff reports at The Los Angeles Times:
When the minimum wage in California rose to $10.50 an hour Jan. 1, more than a million people got a raise. But for an untold number of families across the state, that pay bump could price them out of child care.
This year, for the first time, two parents working full time at minimum-wage jobs, with one child, will be considered too well off to qualify for state subsidies for day care and preschool. It’s been 10 years since the state set the threshold for who is poor enough to get the benefit, which is pegged to 2005 income levels.
“It’s an unintended consequence that was never part of the plan,” says Rich Winefield, the former executive director of Bananas, a day-care and preschool referral agency in Oakland. “It’s unbelievable that we have policy that creates this.”
In August, the state Senate Appropriations Committee held back a bill that would have updated the criteria for child-care subsidies to use the current state median income because of concerns that it would be too expensive. The Department of Finance estimated that raising the threshold would lead to costs “in the low tens of millions.”