California Minimum Wage Should be increased to 13 Dollars
Raising the minimum wage has become a heated topic in many states that think that the current federal minimum wage level is inadequate to match with the current rate of inflation in the country. California is not the only state that is pushing for minimum wage increase. Some states have already endorsed the minimum wage standards, which are slightly higher than the federal requirement. Many business executives have supported the raising of minimum wage, as it would contribute to high standards of living and low turnover in organizations. Critics to minimum wage often cite job losses and economic downfall, but raising minimum wage has been proved to create more jobs, and improved economy. The solution for minimum wage is a pivotal topic discussed by many Californians, and raising it to $13 per hour will be a major boost to citizens as well as the state’s economy.
Background of Raising Minimum Wage
The talk about raising the minimum wage in several states has been ongoing. The struggle to contain numerous occurrences of recess in the US has made the policy makers to think of ways to assist the less fortunate to cope with the rising inflation. In 1938, Congress introduced the federal minimum wage by implementing the Fair Labor Standards Act (FLSA), whereby states as well as local government entities were given the power to devise their own minimum wages, which was above the federal level (“Raising the Minimum Wage,” 2014). This act made minimum wage rates to differ among states, as some states opted to set their wage rates above the federal level. By 2012, less than 5% of employees who were paid hourly in the US received the federal minimum wage.
California has the largest economy compared to the other states that constitute the US, with agriculture as its largest industry. However, employers are reluctant to increase the minimum wage, as they target huge profits from real estates and trade. A comparison of the distribution of wage in California after an approval by the State Assembly’s Labor and Employment Commission to raise minimum wage in 1988 illustrated that only 5% of employees benefited from the rise (Card, 2015). In 2013, Jerry Brown, California Governor, signed into law Assembly Bill 10 (AB10) to raise California’s minimum wage from $8 to $9 by July 2014, and later to $10 by January 2016 (Allegretto, Reich & West, 2014). However, some policy makers criticized the bill by claiming that the increase was insufficient, particularly to the lowest-paid workers in California. They supported an increase of between $10 and $15, which would represent above the state’s median wage
In 2014, the federal government maintained that non-tipped employees should receive a minimum wage of $7.25 per hour while tipped employees to receive $2.13 per hour (Shilling, 2014). This increase has seen majority of states experiencing a decline in unemployment in the subsequent year. Increase in minimum wage has made employers to make harsh decision in order to maintain production costs. Some have opted to stop hiring new employees while others have reduced working hours. This practice has favored the already employed people while the unemployed continue to remain outside the job market. The less educated have suffered immensely from the consequences of raising minimum wage, as the chances of being employed become rare.
Contrary to the critic that raising minimum wage in states could lead to job losses, may states have experienced boost in demand, increased productivity among employees, as well as reduction in employees turnover. Most critics of raising minimum wage are large companies that want to maintain their profit earnings to a certain level at the expense of their workers. Several states have gone beyond the federal government’s minimum wage requirement while activists in some states have collected signatures to enable them vote for an increase in the minimum wage in the coming elections. The rise in government-mandated wage has not been an abrupt practice, but an ongoing process that incorporates grassroots organizing, as well as changing public perceptions about the poor (Dreier, 2014). Raising the minimum wage has assisted workers who have been hit by the effects of recession to have something to spend.
Although the FSLA has been in operation since 1938, California did not adhere to it until 1988. However, the federal minimum wage does not rely on the rate of inflation, which made the purchasing power remain flat for many years. Minimum wage workers have a significant effect on the total family income, thus, maintaining the existing wage level is likely to affect the breadwinners and their families (Allegretto, Reich & West, 2014). The low minimum wage has made a large number of Californians remain in poverty, as they cannot afford most basic commodities. Housing has shifted to the roof as real estate business became lucrative to individual business owners, as well as corporate firms making the low-level residents encounter difficulties in acquiring rental houses, or land for development.
The minimum wage was meant to assist the young individuals to enjoy life by earning better pay, but nowadays, even the old employees are facing the same problem, as employers are reluctant to raise wages. When the state economy is performing dismally, employers do not have the incentive to increase wages while employees who earn minimum wage have no capacity to demand an increase in wages because they fear losing their jobs to a large number of unemployed who would be eager to take their jobs with the same pay. The quality of health is influenced by individuals’ income, as attractive income ensure proper nutrition, better health, and safe homes (Krisberg, 2015). If the state government does not approve the bill to raise the minimum wage, public health will be affected by low wages.
The federal government’s minimum wage requirement has never come close to placing workers beyond the poverty line despite the rising living costs. Congress has not found any reason to increase the minimum wage on top of the federal government’s level of $7.25 per hour since 2009, which has incited activists in cities and states to push for an increase in wage level (Dreier, 2014). This has made corporate firms and foreign companies continue to get rich at the expense of poorly paid employees. The growing activism has led to several strikes by fast-food chains, such as Taco Bell and McDonalds, as workers demanded a rise of minimum wage to at least $15 an hour. Thus, raising minimum wages will minimize workers’ strike and enhance accountability in organizations.
Key Actors in Minimum Wage
In California, the issue of raising minimum wage incorporates numerous actors who are likely to be affected either positively or negatively. Citizens are the main actors in this endeavor, as they are affected directly by any change in minimum wages. Legislatures and local government have a role to ensure that a rise in minimum wage does not discourage investment or create unemployment. Policy makers in California have to guarantee citizens they will maintain their job, and the state will benefit from economic growth resulting from raising the minimum wage.
Businesses have an interest on issues concerning rise in minimum wage because it would mean low profits, high income tax, and low productivity. Small businesses would feel the effect because they do not enjoy economy of scale as large businesses. Interest groups, such as activists, trade unionists, social groups, and economists, are concerned with raising minimum wage to enhance individual and community welfare. Such groups are advocating for an increase in minimum wages to cushion the poor people from the rising inflation. A higher minimum wage benefits union workers by minimizing competition from lower-skilled employees. For instance, increasing minimum wage to $13 where the union wage is $39 means that employers will surrender three hours of low-skilled employee for every hour of a union employee.
The US Department of Labor is apprehensive about an increase in minimum wage, as the low-level workers are incessantly asking for an increase of their wages to meet the rising inflation. Although the department is aware of the consequences of raising the minimum wage, it has admitted that Congress has taken long time to make any adjustment. The department supports the increase of minimum wage to enhance customer service, increase job opportunities, reduce turnover, and increase productivity.
Why Minimum Wage should be Raised
California’s minimum wage should be raised to increase per capita. When wages are increase, low-earners would have enough money to spend on basic needs such as food, housing, clothes, and transport. Such spending would enhance business growth through increased sales and create more profit to business people in the cities, as well as in the countryside. More jobs are likely to emerge through the multiplier effect. Many Americans believe that the working population should not be living in poverty.
Raising California’s minimum wage will increase social welfare and security in the state. Low-level workers will be motivated to join community groups, health insurance, and other income generating groups, which can assist in boosting their lifestyles. Higher wages will enable low-level workers to save for their retirement, as well as medical expenses.
Increasing minimum wage in California will assist those in the poverty zone to rise to a new lifestyle. Increasing the minimum wage may hurt the low-wage workers, but it will substitute such effect by increasing the demand for them. When individuals and firms opt to increase minimum wage of their employees, they contribute towards changing their lifestyles. In addition, raising minimum wages reduces the gap between workers earning high wages and workers who earn low wages, thus, minimizing income inequality. Most companies are earning exorbitant revenues, as they rely on the federal level requirement for minimum wage. Thus, increasing minimum wage will balance their earnings with making their employees’ lives better.
Why Minimum Wage should not be Raised
Much of the discussion concerning the increase in minimum wage revolves around the possibility of job losses. Small business owners are fervently opposing raising the minimum wage because they would be coerced to cut back on working hours or lay off employees to sustain their labor costs. Such businesses encounter a harsh competitive market, which often drive their profits to the bottom level to remain in operation (“Raising the Minimum Wage,” 2014). Raising minimum wage will have a negative effect on small businesses that do not employ many people, as their economy of scale, which can absorb the added costs, does not apply to their operations. They believe that jobs are likely to be lost while their productivity will also decline due to inadequate workers.
Raising minimum wage to $13 in California will create monopoly, as few companies will remain in the market, thus increasing the demand of some products and services. Monopoly only benefits few individuals at the expense of the masses. An increase in the minimum wage will lead to inflation in California, as consumers will have more to spend while business owners will utilize the opportunity to increase prices due to high demand of commodities.
California residents are likely to become jobless if the proposal to increase the minimum wage up to $13 is accepted by the state government. This is because small firms will incur high production costs and opt to exit the market, leaving many people without jobs. The National Federation of Independent Business (NFIB) has already projected a decline in California’s economy by $5.7 billion by the end of 2023 if the minimum wage would be raised to $10 by 2016 (“Raising the Minimum Wage,” 2014). Minimum wage earners who are employed by large corporate firms are also likely to be affected; as such, corporate firms encounter pressure from their shareholders to minimize their production costs.
The rising wage inequality in California has led to inequality in family incomes for the last few decades, despite the existence of federal minimum wage policy. Low minimum wages usually become problematic because they are set too far below the state’s median wage, thus, California should stop adhering to the federal minimum wage, as it does not correspond to the cost of living. California government should call the stakeholders who are concerned with raising the minimum wage in order to reach on the appropriate level where everyone will be satisfied. The best policy that the state government should adopt is the one that ties wages to inflation.
The state government is the appropriate body to carry out the policy because it has the capacity to carry out such duty without exhibiting prejudice. The state government should adhere to the principles of utilitarianism, where all that matters is to increase individuals’ happiness while minimizing their sufferings. According to Perry (2012), utilitarianism focuses on what makes an individual’s life good, and proceed to attain this goal for everyone by ensuring that they encounter minimum suffering. To the consumer, utilitarianism means getting the most without incurring much cost, assuming that the government exists to promote the greatest pleasure for all citizens.
The government should implement measures that would limit radical increase of pricing of various commodities. In addition, it should create adequate resources for food production to maintain a reasonable price of food where many people, particularly from the middle and lower-levels, can afford. The number of people receiving minimum wage is reducing gradually, thus, implementing food subsidies will help the low-level workers to afford good lifestyle. In order to relieve poor people from high rents, the government should secure more land to construct houses that would be affordable to the low-level residents.
Pros of the Policy Recommendation
Every policy has its benefits and limitations. Raising the minimum wage to match the inflation will assist in fighting poverty, as low-level workers will have enough money to pay for their basic needs, in addition to achieving high levels of education. Higher wages not only benefit individual workers, but also the entire economy through increased consumer spending. The minimum wage forms the base under which other wages are calculated; hence, raising the minimum wage will increase overall spending and, consequently, expand the state economy.
When the wages of low-level workers are raised, they are given the capacity to access commodities with relative ease. Higher minimum wages will enable low-level individuals to access better housing, access to better health facilities, road networks, and other public amenities. Allowing low-level workers to access basic amenities enhances their independence and minimizes their dependence from the government, or other charitable organizations.
Most poor people in California live in settlements where security is not guaranteed. Joining social welfare groups such as Social Security, health insurance, or even community services, is quite difficult to them, as they do not have the means to sustain them. Thus, raising minimum wage would enable low-level workers to enjoy welfare services, in addition to settling in neighborhoods where they are assured of their security.
Cons of the Policy Recommendation
The push for the increase in minimum wage to match with the current rate of inflation is likely to affect the state economy, as the unexpected inflation will only benefit large companies that respond through raising prices without raising wages until the government’s action. The government may opt to allocate its resources depending on the level of purchases, thus, resulting to unequal provision of resources.
California economy is likely to experience a slump in the long run due to uncertainty that occurs during inflation. The state has long-term plans, where tax and revenue collections are anticipated depending on the current trend. Thus, commitment to a certain level of revenue income can be frustrated by unexpected inflation, which results to low spending among the consumers. Besides, investments are likely to fall due to uncertainty, which consequently results to low tax revenue from businesses.
Inflation that results from an increase in minimum wage is harmful to small businesses. Small businesses cannot cushion themselves from uncertainties brought by inflation. This leaves only the large corporations that are owned by the affluent, to compete in the commodity and service market. Large firms are capable of taking risk, as they are protected by economy of scale.
The solution for minimum wage has become a fundamental topic to be discussed by the Californian government, as increasing the minimum wage to $13 per hour will enhance the lives of California residents, as well as the state’s economy. Although California can boast of having the largest economy among all the states in the US, its current minimum wage level has been blamed for exacerbating poverty. Increasing wages is the only way that the state government can accommodate the rising inflation, as the low-level workers will be affected when the government opts to stick to the current level of wages. The best policy that California government can adopt should focus on matching minimum wage with the rate of inflation, and enhance the capacity for food production to cushion poor people from the rapid rise in food prices. Involving all stakeholders in deciding the appropriate level of minimum wage is critical for a utilitarian state.
Allegretto, S. A., Reich, M., & West, R. (2014). Ten Dollars or Thirteen Dollars? Comparing the Effects of State Minimum Wage Increases in California. Institute for Research on Labor and Employment University of California, Berkeley, Policy Brief. Retrieved on 15 May 2015 from http://www.irle.berkeley.edu/cwed/briefs/2014-02.pdf
Card, D. (2015). Do Minimum Wages Reduce Employment? A Case Study of California, 1987-89. Industrial & Labor Relations Review, 46(1), 1-17. Retrieved on 15 May 2015 from http://ilr.sagepub.com/content/46/1/38.full.pdf+html
Dreier, P. (2014). The Battle over the Minimum Wage, City by City. New Labor Forum (Sage Publications Inc.), 23(3), 85-88. doi: 10.1177/1095796014542615
Krisberg, K. (2015). Raising minimum wage good for public health, not just wallets: Advocates call for federal increase. The Nation’s Health, American Public Health Association. Retrieved on 15 May 2015 from http://thenationshealth.aphapublications.org/content/45/2/1.1.full
Perry, J. (2014). God, the good, and utilitarianism: Perspectives on Peter Singer. New York, NY: Cambridge University Press.
Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers (2014). American Legislative Exchange Council, the State Factor. Retrieved on 15 May 2015 from http://www.alec.org/wp-content/uploads/Raising_Minimum_wage.pdf
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