As the new state legislative session begins, yet another attempt to raise the minimum wage has been proposed.
Currently, the state minimum wage is $8.25 – the fourth highest in the nation. Under Assembly Bill 10 by Assemblymember Luis Alejo (D-Salinas), the state minimum wage jumps to $8.75 in 2015 and then $9.25 in 2016. Within two years, California becomes the state with the highest minimum wage.
And there’s more. In addition to the prescribed increases, the bill calls for additional increases every year thereafter in relation to inflation.
Perhaps the most disturbing provision is that the new method of minimum wage calculation under AB 10 specifically does not account for deflation. This means that regardless of economic conditions—such as a recession—the minimum wage would remain at boom highs.
For a small business employing as few as 10 hourly, full time employees, these increases will cost $10,400 in 2015, an additional $10,400 in 2016 and will continue to rise according to inflation every year thereafter. Even worse, this estimate does not account for demands from exempt employees for comparable salary increases.
While the stated intent of the legislation is to increase consumer spending, the bill fails to account for its detrimental impact on the national and global competitiveness of California businesses.
Hundreds of businesses across California have closed their doors since the Great Recession began, and thousands of small business owners are struggling to make payroll. In order to stay afloat, many small businesses will be forced to reduce the hours of their employees or eliminate positions completely. This will undoubtedly leave some high performing workers out in the cold.
AB 10 would solidify California’s reputation as unfriendly to business. In these tough economic times, employers in California simply cannot afford another increase to the minimum wage, let alone a spike every year with no relief even in a down economy. Business owners considering a move out of the state would have yet another incentive to leave.
To return California to its days of trendsetting innovation and entrepreneurial spirit, VICA urges its members to contact their state representatives and ask them to stop AB 10.
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