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CA Legislators Urged to Consider Consequences of Wage Hikes

Today, the Employment Policies Institute (EPI) urged legislators to consider the unintended consequences of a proposal to increase California's minimum wage and index it to inflation.

Assemblyman Luis Alejo (D-Salinas) has reintroduced legislation that would increase California's minimum wage from $8.00 an hour to $8.50 an hour in January 2013 and index the wage to inflation thereafter. The bill - formerly AB 10 but being revived as AB 196 which skirts the 30-day waiting rule on newly introduced legislation - is being heard today at 1:30pm in the Assembly Labor and Employment Committee.

"This legislation wasn't a good idea last year and it isn't a good idea this year," said Michael Saltsman, research fellow at the Employment Policies Institute. "There's no evidence to suggest it will help California's economy, but plenty to show that it will put more people out of work."

For instance, new research from economists at Miami University and Trinity University looked at the impact of this specific proposal on California's tipped employees (like waiters, waitresses, or bartenders). This legislation would put further pressure on businesses already facing narrow profit margins, resulting in the loss of more than 6,000 full-time equivalent tipped jobs.

In addition to job loss, there is no evidence to support Assemblyman Alejo's claim that such an increase will stimulate the economy. Recent research from West Point shows that past increases in the minimum wage have had no positive effect on economic growth-and have actually had a negative impact in certain industries with a large concentration of lower-wage employees.

Saltsman concluded: "Especially In a state where the unemployment rate is still above 10 percent, policymakers should be focusing on job creation instead of policies that will leave more Californians out of work."