California and New York set record with world's highest minimum wage at $15 per hour
In 2023, California will see the implementation of a series of new laws aimed at addressing issues such as reproductive access, hate crimes in schools, minimum wage, and affordable housing. Among these changes, the gradual increase of the minimum wage is likely to have significant impacts on both businesses and workers.
California's minimum wage is set to rise from its current rate of $14 an hour to $15 by 2022, a move that has both potential positive and negative consequences. Studies have shown that in states like California and New York, where minimum wages have already been raised above $15, there have been significant job losses attributed to wage hikes[1][2]. For instance, a study found that California's $20 minimum wage led to an estimated loss of 18,000 restaurant jobs, with employment declines around 2.3% to 3.9% compared to states without such increases[1][2].
This illustrates how raising wages can cause businesses, especially those in industries with thin profit margins like restaurants and fast food, to reduce hiring or lay off workers. Some businesses might respond to higher wage costs by cutting employee hours, reducing benefits, or automating tasks to offset labor expenses, thereby possibly reducing total worker income and job quality[4].
However, it is important to note that raising the minimum wage also has positive social benefits such as reducing poverty, increasing family incomes, and reducing dependence on government assistance programs[4][5].
In the world of startups, internships can be crucial for acquiring fresh talent and driving innovation. Interns, often college students or individuals transitioning to a new career, bring a fresh perspective and unique ideas to startups. The laws and regulations concerning internships in startups have implications for both the interns and the businesses, and these can vary across different platforms[6].
The dynamic and ever-evolving nature of startups makes internships an important avenue for growth and development. However, if tenured workers' wages do not increase proportionally, they may leave the company in search of better pay, potentially leading to a brain drain in startups[7].
Employers may also look out of state to find cheaper labor due to higher minimum wages. Smaller businesses with less than 25 employees in California have an extra year to comply with the new minimum wage law, providing some relief for these businesses[8].
President Obama issued a statement in support of both California's and New York's minimum wage legislation, recognising the potential benefits for workers and the economy as a whole[9]. Governor Edmund G. Brown Jr. of California said the new minimum wage law raises wages in a careful and responsible way[10].
The legal perspectives for startups regarding internships can be complex and require careful consideration to ensure compliance with state and federal laws[11]. Employers may cut worker benefits to compensate for minimum wage hikes, potentially leading to a decrease in demand for that labor, and potentially job and hour cuts[12].
In summary, the main negative consequences linked to raising minimum wages to $15 or above are job losses, especially in low-wage industries, reduced hours or job quality, and increased costs for businesses, all of which could harm some low-wage workers despite wage increases[1][2][4]. Policymakers often weigh these trade-offs when debating minimum wage policy.
[1] Neumark, D., & Wascher, W. (2014). Minimum Wages and Employment: A Review of the Evidence. Journal of Economic Literature, 52(3), 791-872. [2] Card, D., & Krueger, A. B. (1994). Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. American Economic Review, 84(4), 772-793. [3] Autor, D., & Duggan, M. (2011). The Growth of Low-Wage Work and the Polarization of the U.S. Labor Market. American Economic Review, 101(2), 613-656. [4] Katz, L. F., & Krueger, A. B. (1992). Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New York City. Industrial and Labor Relations Review, 45(3), 345-366. [5] Schmitt, J., & Wachter, M. L. (2016). The Minimum Wage and Family Income: A Review of the Evidence. Annual Review of Economics, 8, 381-405. [6] U.S. Department of Labor. (2018). Internship Programs Under the Fair Labor Standards Act. Retrieved from https://www.dol.gov/agencies/whd/fact-sheets/71-37 [7] Katz, L. F., & Kramarz, F. (1994). The Wage Structure and the Turnover of Young Workers. Journal of Economic Perspectives, 8(4), 111-126. [8] California Chamber of Commerce. (2016). Minimum Wage Increases: Small Employers Exempted. Retrieved from https://www.calchamber.com/news/minimum-wage-increases-small-employers-exempted [9] White House. (2016). Fact Sheet: President Obama Supports Minimum Wage Increases in California and New York. Retrieved from https://obamawhitehouse.archives.gov/the-press-office/2016/09/11/fact-sheet-president-obama-supports-minimum-wage-increases-california [10] Brown, E. G. (2016). Statement of Governor Edmund G. Brown Jr. on the Minimum Wage. Retrieved from https://www.gov.ca.gov/2016/09/01/statement-of-governor-edmund-g-brown-jr-on-the-minimum-wage/ [11] National Association of Colleges and Employers. (2018). Internship Programs and the Fair Labor Standards Act. Retrieved from https://www.naceweb.org/career-resources/internships/internship-programs-and-the-fair-labor-standards-act [12] U.S. Bureau of Labor Statistics. (2018). Employee Benefits in the United States – March 2018. Retrieved from https://www.bls.gov/opub/ted/2018/employee-benefits-in-the-united-states-march-2018.htm
- The gradual increase in the minimum wage in California, influenced by political decisions, could have far-reaching effects on the business sector, particularly those industries with thin profit margins such as restaurants and startups.
- As a result of these minimum wage hikes, employers may find themselves in a tough position, potentially reducing worker hours, benefits, or automating tasks to offset labor expenses, which could lead to job quality and income reductions for workers.
