On Thursday, the Employment Policies Institute (EPI) released a new study by Drs. David Macpherson of Trinity University and William Even of Miami University that estimated California will lose 400,000 jobs by the time the $15 minimum wage is fully phased-in by 2022.
The study examined the effects of California’s minimum wage increases over the past three decades. The economists found that each 10% increase in the state's minimum wage triggers almost 5% of jobs in California lost in industries with a larger percentage of lower-paid employees.
The full study, which can be read here, notes:
… beginning in 2001, California began a practice of increasing its minimum wage at a faster rate than mandated by federal law. In 2001, the California minimum exceeded the federal minimum by $1.10 ($6.25 versus $5.15). The gap between the California and federal minimum fluctuated since 2000 as both the state and federal minimum wages increased. As of 2017, California’s $10.50 minimum is among the highest statewide minimum in the country. Moreover, under current law, California’s will increase its minimum wage to $15.00 by 2022 while the federal minimum is scheduled to remain at $7.25. If current laws remain in effect, this will lead to the largest gap between a state and federal minimum wage in the history of the U.S.
Macpherson and Even posit that nearly half of the burden will be borne in accommodation and food services as well as retail trade. Worse yet, that estimate is conservative because the study could not measure the impact of a rising minimum wage for counties where data availability was limited.
As EPI notes, “A 2015 Federal Reserve Bank of San Francisco review of economic research found minimum wage increases have been more harmful to low wage employment than previously thought. Earlier this year, researchers at Harvard Business School and Mathematica Policy Research looked at San Francisco’s $15 minimum wage and found restaurant closures associated with the increase in labor costs.”
To see anecdotal evidence of the deleterious consequences of raising the minimum wage, see EPI’s website Facesof15.com.
Employment Policies Institute Managing Director Michael Saltsman stated:
California has positioned itself as a ‘leader’ on new mandates, but this so-called leadership comes at a cost for small businesses and the people they employ. This study furthers the economic consensus that California’s $15 minimum wage will have real consequences for the people it’s trying to help.