In March, Governor Jerry Brown signed a new minimum wage law for California, effectively raising it to $15/hour by 2022. As with most legislation, the wording is vague and calculating, and it’s often difficult to figure out what any of it really means. For example, minimum wage will be rising incrementally in California, 50 cents in January 2017, 50 cents in January 2018, followed by $1 annually to 2022. This law is as complicated as it is relevant; the cost of the college lifestyle pushes many students to get part time jobs, myself included. To simplify your life, here’s the pros and cons of the new minimum wage, and how each will affect you.
Pros: You get more money, so does everyone else!
-Minimum Wage will reach $15/hour by 2022 for employers with more than 25 employees and 2023 for employers with less than 25 employees
What this means for you: Keep in mind that, again, this is incremental. That $15 sounds dreamy, but you won’t feel any effect until January 1st, 2017, and at that it will only be 50 extra cents per hour (or $20 per full time workweek).
-It doesn’t just affect minimum wage workers
What this means for you: So maybe in the next few years you’ll be graduating and getting a job that pays above minimum wage. Why would this law affect you? Think about wages as an elevator, and $10 (the current minimum wage) is the ground floor. When this law goes into action, the elevator floor rises, as do the rest of the wages– all the way to the top. When the new price “floor” (hooray for economics jokes!) rises, higher incomes will rise as well. Furthermore, many incomes, especially government jobs, are tied to minimum wage, so their wage rate increases just as minimum wage does.
-More money in the economy
What this means for you: Stay with me here. In this Wall Street Journal article, studies show that those families most affected by the increase in minimum wage are also enrolled in at least one or more public programs (like social welfare or Supplemental Nutrition Assistance Program). The study concluded that with a higher minimum wage, many families will be removed from these programs, and the money previously used to support them would be reinvested into the economy. This might not directly relate to you, but it would positively impact this wonderful country we inhabit!
Cons: someone has to pay the bill.
-Layoffs and cutbacks
What this means for you: California legislators predict that the main ways companies, especially small businesses, will cope with this higher labor cost is to layoff employees, cutback on hours, or just close altogether. While you may be making more money in the short term, you will have less job security in the long term.
-It’ll raise the cost of living
What this means for you: The thing is, it’s more expensive to live here than in say, Fresno. Minimum wage will go up, but so will cost of living. And as any cantankerous professor or recent grad will tell you, it’s hard to live in SLO when you don’t make that much money. An approach other governments and states have tried is geographically-based minimum wages, based on the cost of living in that city or area. Californians in cities where the cost of living is high would see this as the best option to benefit those most hurt by the low minimum wage.
-It will hurt those with the lowest skill and least experience: To deal with these higher labor costs, companies will seek to hire and keep only the most skilled and experienced workers
What this means for you: It’s what you’d expect for a big corporate job, but now that expectation could trickle down to every level and make the job market even more selective. This effect could potentially increase unemployment and discourage those who are unemployed from looking for a job.
-Guac will cost even extra: Well, maybe. Apologies if that scared you.
What this means for you: Another theory is that the increased cost of labor will be passed along to consumers in the form of parallel increases in the cost of goods. While you’ll be making more, you might also be paying more for your common purchases.
Although there are many opponents, this law is necessary to keep up with inflation and to give all workers a living wage. While we won’t feel the effects of the change for a few years, it will be interesting to see how companies in California react, and if it sets a precedent in other states.