It’s been less than a month since California passed legislation to hike the minimum wage to $15 and disastrous impacts are already being felt. Between companies leaving the state, employees being laid off and workers getting replaced by robotic automation, it’s clear that the economic consequences of this move will only serve to hurt workers and the private sector.” -Jeremy Adler, Communications Director, America Rising Squared
Ever since California Governor Jerry Brown signed legislation designed to increase the state’s minimum wage, businesses and employers have had to take drastic measures, including cutting staff and making plans to exit the state.
KPCC in Sacramento reported that California Composites, based out of Santa Fe Springs, has decided to leave this state and move the company to Texas solely because of the minimum wage issue.
“This is the last thing I want to do, but I don’t see that I have a choice,” said Fred Donnelly, president of California Composites, which makes parts for commercial airplanes.
Donnelly, who has lived in California for almost seven decades, said he is moving is company out of California because of its “dysfunctional” worker’s compensation system, excessive state and local regulations and the forthcoming $15 minimum wage.
He says his employees make on average a little less than $15 an hour now – so he would have to give them all a big raise. He said he can’t afford to do that because his company is locked into long-term contracts with customers where the price is already set.
Unfortunately, the jobs lost from California Composites leaving the state is just one of the negative effects that has come to light since Governor Brown hiked the minimum wage. In San Diego, the owner of Five Loaves Two Fish Clothing appeared on KOGO to highlight how the higher minimum wage will crush her business.
Heather Haas, the owner of Five Loaves Two Fish Clothing, reported that she and her co-owner sister have had to stop paying themselves because of minimum wage hike that went into effect January 1. The layoffs and outsourcing may occur as the minimum wage is hiked in San Diego this year and the state-wide $15 rate is phased in.
On top of that, an Inland Empire economist said in the San Gabriel Valley Tribune that many California-based logistics firms will be forced to invest in robotic technology as opposed to hiring and paying workers.
[John] Husing said most of Southern California’s warehouse employees who earn minimum wage are working part time. But the newly approved pay hikes that will boost the state’s current minimum wage of $10 per hour to $15 per hour by 2022 will still place financial pressures on logistics companies.
And they’ll be looking for ways to increase efficiency while reducing costs.
“It will increase the introduction of robotic technology with these companies,” he said. “That’s the conveyor belts and things that pack boxes and move them down the belt. That sort of thing is going to increase, and it’s already been increasing.”
This minimum wage increase is less than a month old and the fact that businesses are already planning to leave the state and cuts jobs shows just how disastrous it will be for workers. If states want to create jobs, boost the economy and allow the private sector to expand, what’s happening in California shows that raising the minimum wage is not the way to do it.