In September 2013, Gov. Jerry Brown signed legislation that will raise the minimum wage from $8 per hour to $9 per hour by this July and again to $10 per hour by January 2016. San Diego City Council President Todd Gloria was given the OK to devise a proposal for raising the minimum wage to place in front of the City Council with the idea to place it on the November ballot.
So what are the facts and what are the underlying impacts a proposal like this would have on business in the region?
According to a report from the Center on Policy Initiatives, more than 300,000 households in San Diego County do not make enough to cover basic expenses. This represents 37.8 percent of all homes in the county. According to the report, one individual would need to make $13.09 per hour just to make ends meet in San Diego, while two wage earners would need to make $15.93 to $20.06 per hour combined.
Advocates for a minimum wage increase, speak to the effect that raising the minimum wage would equate to more local investment. Notwithstanding the increase in discretionary income throughout the region, the increase to the minimum wage would have real impacts to businesses and jobs.
It is important to acknowledge that the impacts to business are as diverse as to the families. Not every business will be impacted as greatly as others. For example, the impacts a hotel or motel owner would realize, from an increase to wages would be far greater than the impact on a law firm or other operation, where the wages paid to employees already exceed the suggested minimum wage increase.
Many businesses will be forced to raise the wages of those employees who make more than the minimum wage in order to comply. By not giving other employees a raise, employers are inadvertently creating an atmosphere of favoritism or low morale, should they choose not to raise all employee salaries.
Raising the minimum wage will not close the gap between higher-paying jobs and the lower-paying jobs. Because of other regulatory requirements, higher wages will not automatically equate to wage parity. Additionally, the minimum wage has always operated as the wage earning floor for employees. These wages are paid to those entry-level jobs and employees with little or no experience. As employees gain experience and skills, it is expected that they would earn more, thus allowing room for new jobs.
Raising the minimum wage does not take into consideration the impact of all increases to wages and fees that have been passed on to businesses over the years. When the minimum wage is increased, so are other costs associated to a company’s bottom line, such as worker’s compensation rates. This effect and the impact of the loss of federal unemployment insurance credits and new legislation, such as the Affordable Care Act, all combine to have a significant impact on any business’s bottom line.
Any increase in the minimum wage will likely result in loss of jobs and higher costs, and some businesses will simply not be able to afford to carry as many employees. The costs associated with raising the minimum wage will likely be borne by the consumer and businesses. Businesses will be forced to cut labor costs and increase costs of their products and services. Hourly employees will likely see their hours cut to account for the impact to their employers. Continued investment in automation will also cut into the job market by eliminating the need to have lower-skilled employees. Raising the minimum wage for these jobs may in fact accelerate the decision to invest in automation technology.
The San Diego North Chamber of Commerce asks legislators to be mindful of the many impacts a decision carries. If we as a city unilaterally raise our minimum wage, we will continue to put our community at a competitive disadvantage.
Debra Rosen is president and CEO of the San Diego North Chamber of Commerce.