The recently passed California legislation that will increase the statewide minimum wage from $10 to $15 an hour will have vastly different effects on students, the University, and the California economy.
Many students have expressed their support for the raise in the minimum wage, citing reasons as varied as increasing the extra spending money they enjoy from part-time jobs to expressing solidarity for low-income earners who struggle to pay the bills and provide for their families.
Other students, however, see the higher minimum wage as a damper on the economy, sacrificing long-term growth for short-term benefits.
Signed into law last Monday, the minimum wage bill underwent an expedited voting process through both houses of the state legislature to make it onto Gov. Jerry Brown’s desk within a week after being introduced. The remarkable speed at which the legislation went from first draft to enacted law can be attributed to a series of negotiations that took place behind the scenes, where officials worked out the bill’s many details and nuances.
Under the new law, the increase in the minimum wage will take place gradually over a period of time until 2022. On Jan. 1, 2017, it will be raised to $10.50, then to $11.00 in 2018, and then a $1.00 annual increase until it reaches $15. This incremental system gives businesses time to adapt and prepare for the increased expenses they will incur, rather than overwhelming them with a rapid push to $15.
Though Los Angeles County will certainly be affected by the statewide increase, this is not the first time the city has considered similar measures. In fact, last year, the L.A. County Board of Supervisors voted to increase the minimum wage incrementally to $15 by 2020. Thus, the city itself, as well as unincorporated areas within L.A. County, will experience similar wage hikes as the rest of the state but at a faster pace.
Matthew Kahn, a visiting professor of economics and spatial sciences at USC, said that companies may begin to hire more experienced or efficient workers as a result of the legislation to make up for larger costs.
“Economic theory predicts that a firm hires a worker if the extra revenue the worker generates per hour is greater than the extra cost she is paid,” Kahn said in an email to the Daily Trojan. “If workers are now paid $15 per hour, then firms will be less likely to hire ‘marginal’ workers. For example, if a worker is expected to generate $12 in revenue per hour — a firm would have hired her before the minimum wage of $15 was enacted but now will not do so.”
Kahn also said that the gradual increase will give businesses a better chance of adapting to the new policy.
Many students saw the need for a higher minimum wage in California and expressed their support for the recent reforms.
“I think it’s a good thing,” said David Rosenfield, a first-year law student. “It’s going to take a few years for [the minimum wage] to get up to $15 an hour, but with what the minimum wage is now, someone working one job can’t live here in Southern California … They have to work multiple jobs.”
Students are also in favor of the wage increase because of the increase income students will receive as part of the part-time employment, such as Natalie Galdanez, a sophomore majoring in theater who also works as a receptionist.
“[Raising the minimum wage] will definitely give me more living money,” Galdanez said. “Since the cost of living is so high in Los Angeles, the $15 minimum wage will be a big boost to workers who live here.”
Andy Navarro, a StaffPro security employee at USC, says that the wage hike will likely increase the leisure time workers like him experience, since workers won’t have to work for as long.
“Most people would benefit from [the increase],” Navarro said. “I see people working hard hours here, working overtime sometimes seven days a week and doing double shifts every other day. So for them, it would be a benefit, because they wouldn’t have to work as many hours.”
Opponents of the bill, however, fear that the bill will increase costs for businesses by too much, and that many will resort to laying off employees in favor of more efficiency and automation.
The prices of everyday goods may also rise in tandem with the incremental wage increases because of higher overhead costs, and as a result, low-income workers will not be able to enjoy the greater purchasing power they were promised.
“There’s going to be a lot fewer employees in the coming years,” said Pratik Patel, a freshman majoring in business administration.
Patel also said that businesses simply cannot keep up with the rising labor costs, and something will eventually have to give.
Max Gonzalez, a freshman majoring in business of cinematic arts, said that since USC employs many local residents as staff members, the local community will likely suffer as a result of potential job losses in the future.
“Most of the employees that work here are from the surrounding community, and [USC] is what they live off of,” Gonzalez said. “It’s going to hurt people more than it’s going to help.”
Though there is the possibility that USC will be forced to cut jobs as a result of the increase in the minimum wage, some students are hopeful that the University will be able to adapt well to the changes and prevent job losses.
“I think, for large employers, the effect will be a lot less than on small employers in the sense that they will just have to make changes to the pay structure from the bottom all the way to the top,” Rosenfield said. “But I think larger employers will be able to accommodate that more easily.”
Kahn also thought that larger employers, such as USC, will be in a better position to deal with the wage increases than a small business.
“USC is not a for-profit firm,” Kahn said. “Our job is to teach students, to create great research and to be a vibrant community neighbor. This ‘triple bottom line’ means that USC will be better able to adapt to the minimum wage than a small business. If USC must pay workers a higher wage and if these workers live close to USC, then the general community gains extra purchasing power from the higher minimum wage. I do not believe that USC would significantly reduce its workforce due to the higher minimum wage.”
The University is currently in the process of analyzing the effects of the minimum wage increase, according to Associate Senior Vice President of Auxiliary Services Daniel Stimmler.
Though the economy as a whole may not be subjected to large changes, Kahn said that certain groups of people and industries may bear the brunt of the legislation’s burden.
“The macroeconomy will barely be affected,” Kahn said. “Prices of some service sector goods will rise, some low-skill workers will receive a wage increase, while other low-skill workers will have more trouble finding work.”
Though he acknowledges potential problems with small businesses and other concerns with sectors of the workforce, Rosenfield is optimistic that the new legislation will prove to benefit California in the years to come.
“In the United States, the income gap is a pretty big issue. If you go to other countries, such as Australia or any of the Scandinavian countries, the individuals who work for minimum wage enjoy a higher standard of living than in the U.S.,” Rosenfield said. “I think it’s a good step in the right direction.”