California’s Minimum Wage Increase Is Totally Reasonable

Just a few days after California’ minimum wage initiative officially qualified for to go before voters, lawmakers in the Golden States announced that they’d skip the fight at the ballot box fight and instead, start working on a plan to increase the minimum wage to $15 over the next six years. Naturally, immediately, opponents began telling their tall tails about how the decision would definitely lead to a loss of jobs, because of course, that’s exactly what’s happened before!

Which is not true; if raising the minimum wage necessarily resulted in job loss, Washington State’s border towns, like Spokane, would be lined with empty storefronts—but of course, that hasn’t happened. And, statistically, it won’t.

But I was curious about California’s increase, specifically, because unlike its neighbor to the north, California will only be phasing in their increase, but won’t be staggering them by the size of the city or county, or by cost of living. The entire state will be seeing an increase of a dollar each year between 2019 and 2022. Which sounds like a lot, but is it, really?

From the Los Angeles Times:

The NFIB called the California deal “reckless” and observed, that “small businesses in California are still struggling to cope with the 25% minimum wage hike over just the past two years.” This is a huge exaggeration: California’s minimum wage increased to $10 this year after being raised to $9 on July 1, 2014, and to $8 on Jan. 1, 2008; the proper math would place the increase at 25% over eight years, or 11.1% over the last year and a half.

An increase of 25% over eight years might even still sound steep to a small business owner watching their bottom line, and heaven knows opponents of the minimum wage love to call any and all increase “an experiment,” but just how much is a typical minimum wage increase—and, historically, how does California’s plan factor in?

Often, when we talk about the minimum wage, we talk about the dollar amount of the increase—50 cents here, $1 there—without calculating what percent increase that represents. But it’s important to not just consider at how much it’s gone up in cents, but what percent that is of the existing minimum wage.

california minimum wage

Hello, yes, I do things quite professionally.

For example, historically, the minimum wage has gone up by 20 cents more than once. But when wages were lower (say, when the wage went up from $1.40 to $1.60 between 1967 and 1968), the change was about 14%. It also went up 20 cents between 1975 and 1976, but by that time, that same 20 cents represented just a 9.5% increase.

Since 1938, the minimum wage has been increased just 22 times, though within cities and states, it’s moved quite a bit more. The last federal minimum wage increase was between 2008 and 2009, when the wage was raised  from $6.55 to $7.25, or an increase of about 10.68%. That puts California’s increase of about 11% over the course of a year right in line with the existing data.

Looking back even farther, we can see a few key pieces of data:

  • The highest increase ever was in 1950 when the minimum wage was raised from 40 cents to 75 cents, or about 87.5%
  • The lowest increase ever was in 1975 when the minimum wage was raised from $2.00 to $2.10, or about 5%
  • The average minimum wage increase is 17.48%

As you can see, California’s last few minimum wage increases, then, aren’t that divergent from previous instances of wages going up. And, looking forward, we can see that the proposed plan isn’t that wild, either. In fact, it’s pretty conservative. Here’s the plan as proposed by Governor Jerry Brown:

  • 2017: $10.00 to $10.50 = 5% increase
  • 2018: $10.50 to $11.00 = 4.6% increase
  • 2019: $11.00 to $12.00 = 9.09% increase
  • 2020: $12.00 to $13.00 = 8.33%
  • 2021: $13.00 to $14.00 = 7.69%
  • 2022: $14.00 to $15.00 = 7.14%

Going up a full dollar a year—and four whole dollars over four years—seems like a lot, because $4 over four years sounds high. But as a percentage of the total wage a worker is making, that $1 each year is actually relatively in line with other cost increases, like rents (which go up between 2.5% and 5% each year, depending on where you live), food (which increases year over year by more than a percent), and health care costs (an annual increase of 3% was so low that it was notable).

The idea of a dollar increase sounds like a lot—a whole dollar!—until you compare it to the historical minimum wage increases, and the fact that a dollar is buying less and less. At present, minimum wage workers haven’t seen a raise, nationally, since 2009.

In that time, the cost of living has increased substantially; if the federal minimum wage had caught up with that alone, it’d be over $8.00—but that’s only an increase of just about 10%. Within the existing framework of minimum wage increases, a federal increase to $10.10 over three to four years would be completely in line. In fact, even an increase to $12 over six years would be perfectly reasonable, given the data available for what’s historically been done.

Raising the minimum wage a modest amount over time has yet to prove catastrophic for the total economy, nor has it been directly linked to unemployment among teens, people of color, or any of the other groups that opponents like to point to as potentially hurt. What it has done, though, and what it will continue to do, is to increase the earning power of regular folks in a substantial and tangible way.

Hanna Brooks Olsen

Comments are closed.