Opinion: California is raising the minimum wage

Mark Harmsworth of the Washington Policy Center says Washington only needs to look to California as an example of what happens when politicians pass laws that destroy jobs and increase the cost of living.

Mark Harmsworth says Washington does not need to follow California’s lead on the minimum wage

Mark Harmsworth
Washington Policy Center

California Governor Gavin Newsom recently signed Senate Bill 525 (SB 525) into California state law setting the minimum wage for health care workers at $25 per hour.

The new law requires, for any covered health care facility employer with 10,000 or more full-time employees to pay a minimum wage of $25 per hour starting June 1, 2026.

Last month, a similar bill was signed raising the minimum wage for fast food workers to $20.

Both bills perpetuate the false assumption that minimum wage jobs are supposed to be full-time, living wage jobs. Only 1.3 % of the population earns the federal minimum wage according to the US Bureau of Statistics.

The effects of increasing the minimum wage in California will be similar to the minimum wage increase initiative in the city of Bellingham. Voters in Bellingham will be asked to approve an $1 hike in the minimum wage this November over the state minimum wage ($15.74), followed by an additional $1 in 2025. Passage of the initiative will put Bellingham as one of the highest minimum wages in Washington.

Following in the footsteps of the cities of Seattle, SeaTac and now California, the increase will destroy jobs, reduce available work hours, and will cause further inflation.

Businesses relocate away from areas that have high minimum wages, creating longer commutes for workers that chose to stay with the employer or elimination of the jobs completely.

Washington only needs to look to California as an example of what happens when politicians pass laws that destroy jobs and increase the cost of living. The Center Square is reporting nearly $1 million people left the sunshine state in 2022 looking for cheaper housing and more affordable living.

Part of the reason the cost of living is so high in California and Washington is driven by the cost of a high minimum wage on products and services. Increasing the minimum wage gives a short-term boost to an employee’s paycheck, but the additional cost is eventually passed through as higher prices on products and services.

Nowhere is the harm imposed by a high minimum wage demonstrated more clearly than in Seattle, where the city council has aggressively increased the minimum wage over the last few years. The rash of restaurant closures and lost jobs can be attributed, in many cases, directly to the additional fiscal cost the minimum wage increases have caused.

A recent study by the University of Washington has shown that Seattle’s $15 minimum wage “did little to offset widening inequality”. This conclusion matches the research done across the United States and work that the Washington Policy Center has done over the last decade on the effect of artificially high, government set, minimum wage policies.

Passage of the Bellingham initiative and the recent changes in law in California will put both at a disadvantage with neighboring cities and states who will have a more competitive business environment for local businesses.

The obvious result of a high minimum wage is the pressure it puts on small business owners trying to make payroll. For many service industries such as restaurants, retail or hospitality, profit margins can be as low as 3%. Increasing minimum wage mandates wipe out that profit and can put a business into negative fiscal territory. Business owners are often forced to cut their operational costs. In other words, they are forced to lay off workers or reduce their hours.

As the University of Washington study concludes, “local minimum wage laws are not likely to substantially reduce earnings inequality”, it is obvious that government controls on wages, such as minimum wage and hazard pay have no long-term effects on workers overall income. The results of a high artificial minimum wage are exactly the opposite of the proponents desired result. High minimum wages reduce income and destroy jobs for those lower wage earners.

The good news is, all of this can be fixed with a change in policy and an undoing of the regressive taxes and policies that are currently in place. Washington is a beautiful place to live, our government should be working to make it affordable and attractive to business to want to be here.

Washington does not need to follow California’s lead on the minimum wage.

Mark Harmsworth is the director of the Small Business Center at the Washington Policy Center.