California moved one step closer to implementing a $15 minimum wage in a deal reached over the weekend, but the move could mean trouble for the apparel industry there.
If the deal moves ahead as planned, meaning the wage rate goes from the current $10 per hour to $10.50 next year and then up incrementally to $15 by 2022, it would make California the first state to adopt a minimum wage that high—ahead of even New York, which has a higher cost of living than the Golden State. New York is, however, in talks to impose a $15 statewide minimum wage by 2021 and earlier for New York City, the beginning of 2019.
Los Angeles, San Francisco and San Diego have already agreed to increase the wage rate in the coming years, but other Californian cities have been more reluctant.
Those backing the deal say it would be a win for workers and the economy as higher incomes would hopefully lead to higher spending, thus boosting the economy.
But some are claiming quite the contrary when it comes to the wage hike’s potential effects.
An L.A. County-commissioned survey released in June titled, “Considering Minimum Wage Policy in Los Angeles County,” said the county where most of the state’s factories and textile workers reside would suffer.
“Although many workers will see wage increases, employers that currently have minimum wage employees or employees who will be impacted by future increases will likely respond to their increased labor costs using one or more of the following strategies,” the report noted.
Employers could cut back on current employment, either reducing hours or entire jobs, or they’ll cut back on future employment growth, hiring fewer workers going forward. They might also substitute lowest-skilled workers with more productive employees, which would hurt the low-wage workers hoping for the pay raise.
Prices would likely be increased, too. In fact, 96 percent of employers with minimum wage workers surveyed said price hikes were likely. Eighty-seven percent said absorbing cost increases through reduced profits would be likely.
“In the absence of widespread regional implementation,” the report noted, “These responses will be accentuated due to the fractured political boundaries of the County. Smaller firms are more likely to employ minimum wage employees and will be the most impacted while having the fewest options for managing cost increases.” Smaller firms do have one additional year beyond 2022 to get wages up the the $15 rate.
But what’s more, the increased costs of doing business could encourage automation in the long-term, leaving even more workers displaced.
Increased spending to boost the economy might not occur either, as prices for many goods will increase to accommodate the new wages, so those lower-income households for whom this wage boost is supposed to benefit, may be spending their extra money on higher priced household goods.
“This is a very big deal,” Paul K. Sonn, general counsel for the National Employment Law Project told The New York Times. “It would mean a raise for one of every three workers in the state.”