Inflation, by most measures, is slowing down across the 50 states.
It could soon be a different story in California.
The Nov. 5 ballot contains Proposition 32.
Here’s the legislative analyst’s official (LAO) ballot summary of what will happen if it passes:
“State and local government costs could increase or decrease. This change likely would not exceed the high hundreds of millions of dollars annually.”
“State and local tax revenue revenues likely would decrease. This revenue loss likely would not exceed a few hundred million dollars annually.”
The LAO did not make any projections of the impact passage of Proposition 32 would have on California’s private sector.
Clearly, based on the impacts on government, the private sector will take a hit in the billions.
And it is highly likely to cost lots of jobs and make life hell for those living on Social Security and little else.
So what does Proposition 32 do?
It raises the minimum wage currently at $16 an hour by 12.5 percent.
It takes it up $17 an hour immediately for employers with 26 or more workers and then to $18 an hour on Jan. 1, 2025.
As for those with 25 or less employees, it goes to $17 and hour on Jan. 1, 2025 and then $18 and hour on Jan. 1, 2026.
Experts anticipate current law will increase minimum wage to $16.50 an hour on Jan. 1, 2025.
There is also a push on to increase fast food minimum wage 70 cents an hour to $20.70.
The state’s new fast food council — with a majority of labor representatives — is meeting this week.
The Service Employees International Union has vowed to push for the full 3.5 percent the council is allowed in any given year to increase the fast food minimum wage in California.
Fast food workers just four months ago got a $4 an hour raise or 25 percent pay increase.
Keep in mind the minimum wage in California on Jan. 1, 2016 was $10 an hour.
It took almost 8 years to gain 12.5 percent to reach the $10 mark.
It took six years under the last minimum wage law adopted to go from $10 to $15 an hour on Jan. 1, 2022 for a 50 percent jump.
Now, most employers will be facing a 12.5 percent jump in just a year to $18.
If you believe this will not inflict major economic damage to a large number of people, then you also probably believe peace will rule the planet after the Nov. 5 balloting is completed.
It should be noted the law that took the current minimum wage from $10 to $15 has bumped it up to $16 because it is indexed to inflation.
That was designed to be a long-term fix when it came to minimum wage jobs keeping pace with inflation.
Proposition 32 raises the floor $2 in one fell swoop and then allows the existing law’s inflation adjustment to take back over.
And let’s not forget select health care workers will get a $25 minimum wage on Oct. 15 providing state revenue increases by 3 percent or more than projected in the first quarter of the 2024-2025 fiscal year that ends Sept. 30.
The wage hike as approved by the legislature was supposed to go into effect June 1.
But the same legislature balked at making over budget cuts to make that happen when they were piecing together a strategy to deal with a $73 billion deficit of their own making.
The reason they held the health care worker wage hike in abeyance had to do with the fact the state not only pays lot of health care workers directly but they also cover MediCal costs.
Medical providers would take a big hit.
And in doing so, without an increase from the state, there would be less health care providers willing to take MediCal patients.
That’s because they would be taking a financial bloodbath from having the state impose significant employee costs while not increasing their reimbursement for services.
There has always been winners and losers when minimum wages laws are increased.
Some see gains.
Some lose their jobs.
Others without the ability to move on to better paying jobs, or lacking the skills sets to do so, discover their bottom line takes a hit.
They get hours cut.
In reality, if their employer is able to ride the wave of raising costs that go way behind direct labor expenses — insurance, rent, energy, and such — they often find hours being restored.
The real danger of Proposition 32 with its abbreviated implementation in relation to the dollar amount of the minimum wage increase is a significant cut in the hours of those stuck in place.
And the time frame they may see hours restored will be much longer.
Labor is the No. 1 cost of doing business in almost all quarters of the economy.
It is why the LAO official summary warns of hundreds of million in increase costs or local and state government if it passes.
Not only are a fair number of government employees at or near the minimum wage, but better paid workers often have bargaining agreements that established direct ties between minimum wage and the bottom of their negotiated salary schedules.
When minimum wage goes up, it pushes pay upward all the way to the last rung on the pay scale ladder.
As for the loss of revenue for government, the LAO summary pulls no punches although it may not have used blunt enough English.
The reason the LAO projects less government revenue in the range of “a few hundred million” of dollars annually is because there will be less taxes coming in as a result of hiking minimum wage from $16 to $18 an hour.
The only way for that to happen is for more businesses than usual to go out of business as a direct result of the 12.5 percent wage hike in one year.
That means more people losing their jobs.
The irony is indexing minimum wage to inflation basically ended the argument that inflation eats away at all gains in minimum wage.
That isn’t the case now in California, assuming one hasn’t lost their job or had hours cut as the minimum wage went from $10 to $15 and then up annually on the basis of inflation to where it now stands at $16 and is likely to be readjusted to $16.50 when next year rolls around.
This is new territory.
And it likely won’t end well for a lot of Californians.
