This commentary originally appeared in the Washington Examiner on April 11, 2016.
A bill mandating a $15 per hour minimum wage was recently signed into law by California Gov. Jerry Brown.
California's Restaurant trade association, the state's Chamber of Commerce and Republicans warned that the law would hurt business and jobs. Not to worry, countered economists at U.C. Berkeley's Labor Center, who claimed that in response to an increase in labor costs, businesses would simply become more efficient while the state would see no overall job losses.
When fully in place by 2022, the law will make California's minimum wage more than double the federal minimum wage of $7.25. After 2022, California's minimum wage would be indexed to inflation.
But there is reason to doubt the rosy $15 per hour minimum wage job projections from the Center for Labor Research and Education at U.C. Berkeley. Established in 1964 and funded by taxpayer dollars, unions, and liberal foundations, the Labor Center's mission is to train union leaders. Of the Labor Center's 50-member advisory board, 47 represent unions or union-affiliated groups or are union member professors at government-run colleges, two are community organizers and one is an attorney for labor unions. The Labor Center has no representatives from the job-creating side of the economy, leading to doubts that its economists lack an incurable bias towards organized labor.
The best response to the Labor Center economists' fantastic claim that a $15 an hour minimum wage would result in 5.6 million Californians getting higher pay with no job losses comes from Republican State Assemblyman Jay Obernolte, who noted that "the ultimate minimum wage is zero, and that's what you make if your job no longer exists."
Sen. Mark Leno, the bill's author, said "This bill will lift people out of poverty."
But Silicon Valley, politically progressive but also relentlessly profit-seeking, has other plans: Automation.
Hiking the minimum wage in the center of the high-tech universe will inevitably accelerate the drive to convert low-skill service jobs to robots. After all, machines don't call in sick, get stuck in California's notorious traffic, get injured and go on workers' comp, sue their employers or strike.
Experts estimate that almost half of American jobs are at risk of being automated, with cashiers, accountants and telemarketers at the top of the list. Fast food workers are especially vulnerable. A robotic hamburger and fries machine by Momentum Machines hit the market four years ago. They've since added other food preparation capabilities, such as salads, sandwiches and more. Low interest rates and a $15 an hour minimum wage could mean that a restaurant owner could make back his capital investment in a year or two.
Despite the rhetoric, at its core, California's drive to hike the minimum wage has little to do with average workers and everything to do with the Golden State's all-powerful government employee unions.
Nationally, the Service Employees International Union (SEIU) is known for representing lower skilled workers. But, of the SEIU's 2.1 million dues-paying members, half work for the government. In California, that translates to clout with much of the $50 million SEIU spent in the U.S. on political activities and lobbying spent in California. In fact, out of the 12 "yes" votes for the minimum wage bill in the Assembly Committee on Appropriations on March 30, the SEIU had contributed almost $100,000 out of the three-quarters of a million contributed by public employee unions—yielding a far higher return on investment than anything Wall Street could produce.
Unions represent about 59 percent of all government workers in California. Many union contracts are tied to the minimum wage — boost the minimum wage and government union workers reap a huge windfall, courtesy of the overworked California taxpayer.
Under the theory that it may keep some elderly and disabled people out of extended care facilities, California pays family members to look after their infirm relatives (though the program is rife with abuse). These workers are now unionized. According to California's Department of Finance, by 2023, boosting the minimum wage will cost the state $3.6 billion a year more, most of that to in-home healthcare workers. Putting this wage cost into perspective, the minimum wage hike would add about 3 percent to California's general fund budget.
California requires employers to pay overtime to employees unless they earn more than twice the minimum wage, today about $40,000. When the minimum wage hits $15 an hour, the secondary effects will be impressive.
California's beginning teachers earn about $40,000. By 2022, that number will go up to about $60,000 to keep pace with overtime rules. Senior teachers will see their pay go up in a chain reaction, costing local school districts several billions of dollars. California teachers are already among the highest paid in the nation and a dramatic increase in their pay may result in even larger classrooms in a state that already has among the largest student-to-teacher ratios in the nation.
The best welfare program is a job. California's $15 an hour minimum wage law will hurt small business owners, erect barriers to small business creation in California and prevent millions from being rewarded for hard work by removing the starting rungs of the economic ladder
But, of course, $15 an hour isn't about improving opportunity for the working poor — it's about government employee union clout.
Chuck DeVore is vice president of National Initiatives for the Texas Public Policy Foundation. From 2004 to 2010, Chuck DeVore represented almost 500,000 people in the California State Assembly in coastal Orange County.