In my last post I relayed my thoughts on the CA legislatures efforts to eliminate an important tool used by many employers (consumer credit report information) in hiring competent employees while protecting their assets and the personal information of their customers. There is another piece of legislation moving its way through the legislature that, if passed, will significantly increase the cost of doing business in CA at the worst possible time.
AB 10 (Alejo), proposes to increase the CA minimum wage by fifty-cents to $8.50/hour in January 2012, and then automatically index annual increases based on the inflation rate. A minimum wage increase to $8.50 an hour would make California's minimum wage the second highest in the nation.
There are several reasons to oppose this increased burden on employers. First, as many businesses struggle to simply survive in the midst of a serious recession, increasing their employee costs will not help to spur job growth, and let's face it, job growth is the only real way to dig out of this economic hole.
Now before anyone gets started on the "you're just protecting greedy business owners" bandwagon, let me remind you that the vast majority of employers in this country are small businesses with fewer than 100 employees. Those business owners are not getting rich in this economy. Most of them are struggling to survive, struggling to pay their bills and taxes, and struggling to meet payroll every two weeks so they don't have to lay anybody (else) off. Raising the minimum wage will not help them do that.
It's important to remember that an increase in minimum wage does not only increase the cost of hourly employees' wages, but salaried employees' compensation as well. In order for employees to qualify as 'exempt' under any of the six exemptions in CA labor laws, they must meet a salary based test. In other words, they must earn at least two-times the minimum wage. If AB 10 is implemented, annual salaries for exempt employees would increase from a minimum of $33,280 to $35,360, and continue to increase each year based on the inflation index.
Second, it seems to me that automatically increasing employee costs annually based on inflation will not only crush job creation, but will have a spiraling effect on the economy. Increased costs will necessarily need to be passed on to consumers in the form of higher prices...increasing inflation...increasing employee costs...increasing prices...increasing inflation...increasing employee costs... You get the idea.
Interesting point...this automatic adjustment moves only one-way, UP! There is no provision in the law for decreasing minimum wage during times of deflation. In other words it locks-in the higher wages when prices (and presumably profits) decline. That's simply bad economic policy.
We must always keep in mind what sets CA apart from the rest of the country when we talk about job creation, the good, the bad and the ugly. We have a talented workforce, nearly perfect weather and a lovely quality of life. Good.
CA is also one of the most challenging places to do business. Higher taxes, highly restrictive regulations and a nearly bankrupt state government. Bad.
We already know its expensive to do business in CA. Continuing to increase the cost of keeping people working doesn't make any sense in a deep recession. Nor will it help us stem the tide of employers leaving the state or encourage others to come. Worse yet, it will likely stop those that are already here from creating new job opportunities. That's just ugly.