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Will a $15.50 minimum wage hurt or help the California economy?

California’s minimum wage is expected to hit $15.50 an hour in January due to inflation, Governor Gavin Newsom said Thursday.

Some business owners have argued that they are struggling with rising costs and cannot manage 50 cents more an hour. Workers’ advocates say the increase is necessary to combat rising prices. Other supporters argue that the increase is not enough.

The change – the result of a 2016 law signed by the then government. Jerry Brown — demands that any inflation growth above 7% trigger an even higher minimum wage.

The minimum wage was set to increase to $15 per hour for all employers in January 2023. Today, the minimum wage is $15 per hour for businesses with 25 or more employees and $14 per hour. hour for companies with 25 employees or less.

Q: Will a $15.50 minimum wage hurt or help the California economy?

Chris Van Gorder, Scripps Health

TO HELP: Perhaps. Higher wages contribute to higher inflation, and higher inflation leads to higher wages at times of full employment. The Fed is trying to manage this by raising interest rates to control inflation while keeping unemployment low. If the Fed is successful, raising the minimum wage should help. But, if it doesn’t, California and the rest of the country will face either a recession or runaway inflation.

Jamie Moraga, IntelliSolutions

HURT: All the extra costs that small businesses have to bear come from an already strained bottom line. Therefore, small businesses need to reduce costs in other areas (layoffs or automation) or pass on increased costs to consumers for goods and services. Small business owners are still trying to recover from the economic effects of the pandemic as well as supply chain issues, rising inflation and labor shortages. Rising labor costs could mean that some small businesses could either decide to close their doors or move to a more business-friendly state.

David Ely, San Diego State University

TO HELP: With tight labor markets and high inflation, employers will continue to feel pressure to raise wages and a number of California cities will have a minimum wage of $15.50 or higher. Therefore, increasing the state minimum wage may not have much effect. Affected workers are likely to spend their extra income. But some small businesses will cut workers’ hours if they are unable to pass on the higher expenses to customers.

Ray Major, SUNDAY

HURT: Companies are struggling to fill vacancies across all sectors, and competition has led employers to pay more than minimum wage for entry-level positions. Fast food restaurants are offering up to $20 to get started and, in turn, forcing other industries to follow suit. Businesses that can only afford to pay their employees minimum wage will soon be forced to raise wages if they want to stay in business. In today’s economy, raising the minimum wage to $15.50 won’t solve any problems.

Lynn Reaser, Point Loma Nazarene University

Do not participate this week.

Haney Hong, San Diego County Taxpayers Association.

HURT: An increase in the minimum wage rightly attacks labor exploitation, but this enemy is usually defeated. Exploitation is the exception, not the norm now. Large organizations — corporations, governments, large charities — will automate, gigify, or outsource to non-Californians. Small business owners, whose profits support their families, will simply hire less. I agree with Yuval Harari: the enemy is insignificance. This increase renders more Californians useless. More people without meaningful work to do – it will hurt.

Kelly Cunningham, San Diego Institute for Economic Research

HURT: Preventing employers from hiring inexperienced and/or unskilled workers deprives them of the ability to learn job skills and gain experience. Minimum wage laws create barriers, especially for young and poor workers to find or acquire employment, which is counterproductive to a functioning economy. Companies offer higher wages in search of competitive advantages to attract and retain workers. The market works best by striving to improve productivity while seeking efficiencies that result in a healthy and thriving economy.

Phil Blair, Manpower

TO HELP: With the millions of job openings, in all categories, in California, anyone working minimum wage or slightly above must move on to a better paying job. When the minimum wage was raised to $15 an hour, the majority of employers were already paying $18 to $20 an hour. This increase will be a non-event and is valid with inflation above 7%. States that still have their minimum wage at $7.25, the federal minimum wage, really need to pull themselves together.

Gary London, London Moeder Advisors

TO HELP: In fact, most workers are paid above the minimum wage benchmark, so its impact will be minor. Workers need higher wages to stay in California, and most employers have enough price elasticity to adjust to higher wages. There is little good that is achieved by underpaying people, especially in a market of ever-increasing costs. I wish there was an exception to the minimum wage for first jobs for teenagers, who benefit from work experience.

Alan Gin, University of San Diego

TO HELP: The tight labor market has already forced pay above the minimum wage for many companies, so fewer workers and companies will be affected by this increase. The increase was triggered due to the high level of inflation facing the state and the rest of the country. This increase will provide a boost to those at the bottom of the income scale, who are especially in need due to the sharp increase in housing prices and rents the state has seen.

Bob Rauch, RA Rauch & Associates

HURT: Minimum wage increases have been proven to hurt the most vulnerable. This seems beneficial for low-wage workers, but increases in the minimum wage do not reduce poverty and lead to fewer jobs. Instead of increasing costs for employers, legislators should focus on expanding job opportunities through pro-growth policies, thereby raising wages for all. Minimum wage increases destroy employment opportunities for teenagers and training wages are needed to encourage employers to train them.

James Hamilton, UC San Diego

TO HELP: A higher minimum wage helps some people, like minimum wage workers who will take home more money, and hurts others, like low-skilled workers who can’t find work because they cost more dear to employers that they do not contribute to income. In today’s environment, employers are scrambling for workers, so I’m less concerned about the second effect than I would be in other situations. In addition, the purchasing power of minimum wage workers has been eroded by inflation.

Austin Neudecker, Weave Growth

Do not participate this week.

Norm Miller, University of San Diego

N / A: Both. In a labor-scarce economy, minimum wage increases affect very few workers and have a direct impact on consumer prices. This can lead to circular inflationary pressures on prices, while adding pressure to automate more jobs, thereby reducing labor demand over time. It also hurts less productive interns and neophyte workers who need a lot of training before they’re even worth less than minimum wage, so it’s critical we allow exceptions for entry-level and internship positions.

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