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The fallacy of minimum wage & rising the tide
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Forty-six years ago I was flipping burgers at the Squirrel Cage in Lincoln. I was making $1.65 an hour. It was California’s minimum wage at the time. The United States Department of Labor placed the median hourly pay in California in 1972 at $4.50. That reflected a difference of 2.72 times between median and minimum hourly wages. 

Today, fast food workers start at $10 an hour — the current minimum wage. The 2015 Department of Labor stats put the median hourly pay in California at $19.15 an hour. There is a difference of 1.95 times between median and minimum hourly wages.

So who gets hurt the most by minimum wage hikes? The upper working class and the lower middle incomes class — two groups of wage earners squeezed by increasing prices caused by minimum wage hikes combined with fairly stagnant wages. Add in the fact they have a higher tax bite than minimum wage workers and you can see while politicians are tripping over each other to pat themselves on the back for raising the tide of minimum wage workers they have created a situation that means the upper working class and lower middle income class will eventually take on more water.

It gets worse. The net result of all of this will be the same as it has been in the past — the elimination of a number of minimum wage jobs. It is already happening in food service with tablets for customers to place their own orders and in retail with self-check-out. Now that minimum wage will go from $10 to $15 there is a big incentive to further automate.

Those businesses and organizations that can’t shed jobs through automation will be forced to reduce services which mean cutting back hours and even trimming jobs. Organizations such as Give Every Child a Chance have more than 80 percent of its annual budget going to compensation and benefits. With nearly 200 workers at or above minimum wage, that means a 50 percent increase in pay and benefits for GECAC to absorb. If revenue doesn’t increase they will have only one choice — cut positions.

And don’t think other areas of the economy are immune from increased automation, increased workload and pay stagnation due to minimum wage doubling by 2022.

Manteca Unified currently sets aside 74.36 percent of its budget for employee pay and compensation. Due to a state mandate for school districts to increase contributions to public employee retirement plans to cover a $74 billion deficit, it will increase the district’s budget going toward compensation statewide and benefits to 82.76 percent by 2020.

To keep all spending for K-12 education at the current level if that mandate were in place today would cost more than $4 billion annually. And as the minimum wage goes forward it will also increase other pay levels in schools as historically pay schedules are tied into the lowest compensation by multiplying by various percentages for various steps. Schools and many public sector bargaining groups have such pay steps while the vast majority of the private sector doesn’t. Simply raise state taxes, right? Do so and you will kill the golden goose.

That leaves either wage stagnation or increased class sizes.

The point of all this is simple. Minimum wage hikes done in a vacuum given massive public employee retirement funding shortfalls, increased wage costs tied to new mandatory requirements for everything from insurance to paid family leave have severe consequences.

Minimum wage hikes — just like other salary hikes — are inflationary.

What ultimately will happen is inflation eats away at minimum wage gains just like it does non-minimum wage gains. So minimum wages are raised again, inflation eats up the gains, and the cycle repeats itself.

It’s the very definition of insanity — doing the same thing over and over again with the same results.

To make real gains there needs to be real economic growth.

It goes without saying that I now make more than minimum wage. But then again I moved on from a minimum wage job just like everyone else who is now making the California median hourly pay of $19.10.

I’ll admit back in the 1970s it was easier to do so. While I was working a minimum wage job California law allowed employers to pay for piecemeal work. For me, it was 15 cents a column inch for stories, $1 per photo published and $1 per roll of film developed I earned working for the weekly Lincoln News Messenger.

While I didn’t work fulltime flipping burgers, if I did I would have grossed $264 a month. I was able to average $350 a month for piecemeal work with the News Messenger. Eventually I was a stringer for the Roseville Press-Tribune and Sacramento Bee. The contacts I was making allowed me to start shooting weddings. I ended up eventually shooting 124 weddings in addition to family portraits in environmental settings. All of that led to a full-time job with a newspaper.

A teen or young adult would be hard pressed today to be able to find legal piecemeal work at businesses under state scrutiny.

The bottom line is obvious. A rising tide that doesn’t retreat from a temporary high tide back to low tide is a course where an individual breaks free of the ocean of government dependency and toils beyond the edge of the economic continent.