California is projected to have a $15 statewide minimum wage by 2022. Economists project this will lead to a loss of 400,000 jobs, according to a report from the Employment Policies Institute.
Currently, the federal minimum wage is $7.25. California’s is $10.50, which is one of the highest minimum wages in the United States. California’s intent to raise it to $15 by 2022 will create the largest gap between a state minimum wage and the federal wage in U.S. history.
“One might argue that a higher minimum wage is justified in California because of its relatively high cost of living compared to the typical state,” the report says. “On the other hand, one might be concerned about whether the higher minimum wage in California causes job loss for low skilled workers, and whether the effects differ in the cities where the cost of living and wages are relatively high as compared to rural areas or less expensive cities.”
California has consistently raised the minimum wage since 2001, even higher than what was mandated by federal law. The study finds that this increase has led to a decline in employment.
“Past minimum wage increases in California have caused a measurable decrease in employment among affected employees,” the report states. “Specifically, they find that a 10 percent increase in the minimum wage would cause a nearly 5 percent reduction in employment in an industry where one-half of workers earn wages close to the minimum.”
In response to a $15 minimum wage, the study says there would be a 4.1 percent decline in employment and roughly half of the job losses would occur in the retail trade and food services sector.
“The job loss is not spread evenly,” the report says. “While the most populated counties of California are expected to incur the largest employment loss in terms of the number of workers, the smaller counties generally experience a larger percentage point loss in employment due to the lower wages and the greater number of workers that would be affected by the minimum wage hike.
“California has positioned itself as a ‘leader’ on new mandates, but this so-called leadership comes at a cost for small businesses and the people they employ,” said Michael Saltsman, managing director at the Employment Policies Institute. “This study furthers the economic consensus that California’s $15 minimum wage will have real consequences for the people it’s trying to help.”