George Rebane

[This is the transcript of my regular KVMR commentary broadcast a bit belatedly on 1 April 2016 due to mutual scheduling problems.]

California is ready to hasten its spiral into economic destitution with its new legislation to make $15/hr the new statewide minimum wage over the next few years.  As such our state will be the first in the nation to so burden its businesses and people.  This new law will be the latest spawn of California’s socialist legislature and powerful unions led by the SEIU working together to increase union memberships and provide them the fiscal clout to re-elect co-operating politicians to architect California’s continuing decline.

According to Governor Jerry Brown, with this legislation “California is proving once again that it can get things done and help people get ahead.”  Those who get their news from the leftwing media have little idea that at $10/hr our state already imposes the highest minimum wage in the nation which along with its other business throttling laws, regulations, and ordinances continue to drive employers out of the state at an increasing rate.

Today 40% of the state’s residents are on some form of government aid.  And with vast inland regions of unemployment stubbornly above the 10% level, California already is home to the largest number of welfare recipients in the country.   The Sacramento politicians know they are walking a fiscal tightrope by placing this additional cost burden on employers that will not do anything to help people get ahead.  A moment’s thought raises the question, if $15 is good, why stop there?  Why not raise it to $30, $40, or even $50/hr?

But given special interest momentum and voter ignorance, this economy stifling bill will become law in spite of analyses by the state’s Department of Finance, university academics, and other institutions that correctly predict the loss of more jobs – 700,000 by some estimates – more companies leaving, and finally the reduction of state tax revenues to further increase the state’s debt burden.  Evidence that such initiatives kill jobs is abundant, as shown by recent data from Seattle’s similar moves which reduced its job growth for low-end workers to 1.4% as compared to Washington’s 6.9% overall employment growth.

Here, the hardest hit will be the Central Valley workers in places like Fresno and Merced where unemployment already is 10.5% and 12.6%.  More people will be laid off as businesses, especially manufacturers, attempt to cut costs, move out of state, or simply shut down.  Every such government wage increase mandate has motivated another surge to adopt new worker replacement technologies.  The governor’s latest attempt at “economic justice” promises to increase unemployment benefit payouts and government wages by over $3B by 2019 as our minimum wage ratchets toward $15/hr.

Not enough people know we have a growing systemic unemployment problem with tens of millions of workers without marketable skills.  MIT professors Erik Brynjolfsson and Andrew McAffee, authors and experts on technology’s impact on jobs, tell us that “most of the technologies we’re currently developing replace or obsolesce far more employment opportunities than they create.”  In short, today technological progress eliminates jobs and leaves average workers worse off than they were before.  And in every case where government mandates increasing the cost of low-skilled labor, the result is greater income inequality across our country’s workforce as employers seek alternatives to hiring people. (more here, here, and here)

So in this election year while Republicans attack each other with gusto, Democrats are doing their best to destroy the fundamental underpinnings of our economy spouting homilies that liken communism to capitalism while advising the uninformed to just ‘choose what works’.

My name is Rebane, and I also expand on this and related themes on Rebane’s Ruminations where the transcript of this commentary is posted with relevant links, and where such issues are debated extensively.  However my views are not necessarily shared by KVMR.  Thank you for listening.

[update]  The 1apr16 Union reports – Assemblyman Brian Dahle, R-Bieber, today voted against a massive minimum-wage increase that one major media outlet described as making California “a guinea pig in a bold economics experiment. … Following on a 25 percent increase in the state minimum wage in just the past two years, the plan — negotiated behind closed doors, announced Monday and rushed through the Legislature in just three days — will raise the minimum hourly pay from $10 to $15 over the next several years. (paywalled here)

To underline the points made here, today the Labor Department included the following little vignette in its report on the nation's overall economy – "a broad measure of unemployment that includes Americans stuck in part-time jobs or too discouraged to look for work rose slightly to 9.8% from 9.7% in February, when it reached its lowest level since 2008."