I just had to laugh.
California Gov. Jerry Brown signaled last week that he is opposed to a bill by state Senator Mark Leno, D-San Francisco, that would increase in the state's minimum wage from the planned $11 an hour on Jan. 1, 2016 to $13 per hour on Jan. 1, 2017. Leno's bill also calls for, starting in 2019, the minimum wage to be increase with inflation.
Why did our Democratic governor, who has always supported minimum wage hikes in the past, decide not to this time?
It's not because he cares about businesses taking a hit.
It isn't because he cares about us consumers paying higher costs in goods and services.
It's because, as boss of the state, he knows it will drive up state expenses and the organization can't afford it.
Kristin Shelton, a program budget manager in Brown's Department of Finance, said that besides a hit to the general fund, a wage hike would also "have a negative impact on California's economy, though losses from higher production costs to businesses would be partially offset from additional spending by minimum wage workers."
Does Brown suddenly have the revelation as an "employer" that a minimum wage is detrimental to an operation? The state realizes that a $1 per hour wage hike translates to the state paying out $400 million more for state-paid in-home health care workers, and some seasonal state park help.
Do you see the hypocrisy? When Brown's own budget gets hit, he opposes minimum wage increases. But in the past he hasn't cared about how minimum-wages have hit hard-working small businesses and me and you.
For years fiscal conservatives have been decrying the practice of artificially raising the cost of labor while others have said that government has no right to dictate what private business should pay workers.
Proponents of the minimum wage - often those who moan about income inequality in America - think boosting wages is helpful to those on the bottom. They claim there is more money for them to spend and that helps the economy.
So not true.
Honestly, all of us want more pay. But it's simple economics: If you force a business to pay for more in wages than the market determines, there are consequences.
Minimum wage increases force business owners and managers to make painful decisions.
Do they let go of worker? Yes, many do. Don't believe me? See how many self-checkout machines are at Home Depot on Hatch Road. Many grocery stores like Raley's have them too.
The nonpartisan Congressional Budget Office expects 500,000 jobs to be lost if the federal minimum wage is increased to $10.10 an hour (up from the current $7.25 per hour.)
Do they make up for it with reduced employee benefits? Absolutely. After Seattle, Wash., raised the minimum wage to $15 an hour, some hotel cleaning staff lost their 401(k)s, health insurance, paid holidays and vacation. Employers have been forced to stop providing other benefits, such as free food, parking and the chance to earn overtime pay and free food.
Do businesses raise the cost of products and services? It's a given.
Higher prices, of course, hurt sales and lead to reduced employee hours. In San Francisco, Chipotle has ratcheted up prices "in part to offset higher labor costs," according to spokesman Chris Arnold. "California, and San Francisco in particular, has a high cost of doing business," said Arnold. Because rental costs are "about double the Chipotle average as a percentage of sales," Arnold said that wage hikes can take a super-sized impact on profit margins.
Is the business forced to take a hit to its bottom line? They may have no way to avoid it. There is a limit to what businesses can charge their customers and there's a fine line between retaining business and making less profit or losing customers altogether. You might have to withhold raises to non-minimum wage employees, like managers. You might cut your advertising budget and make fewer sales.
What if you wanted to realize a dream of owning your own business? Let's say you want to improve downtown Ceres by opening up a Fourth Street Subs & Salads. You go into it knowing that it's tough to build a profitable restaurant. You must secure a lease or buy a building, take out a building permit, remove or add walls and flooring and counters, buy the equipment, tables and chairs, buy food supplies, hire workers, advertise, pay the electric and gas bill, pay an endless amount of taxes to the federal, state and local governments, buy insurance, etc. Let's not forget you have to pay assessments into the Downtown Revitalization Area Board. You are hit up for donations one after the after. As sole proprietor, you work your butt off over many long hours. On top of this, you deal with theft, sometimes from young employees who "hook up" their friends and family for free sandwiches, or people who steal bottles of Odwalla or Coke out of the cooler. It's a constant fight to make some of those minimum-wage workers show up for work or not call in sick on a whim. The state comes along and tells you that you must pay those same workers more, even though their labor is worth much less.
Little wonder why 60 percent of all restaurants go belly up within three years of starting up.
It's a fact that restaurants employ about half of the nation's minimum-wage employees and only have an average profit margin of 2.4 percent. So for every $100 that comes into the cash register, the business keeps $2.40 profit. That's a lot of work for little payoff. To prevent more of your $2.40 being whittled away by higher wage costs, you raise menu prices, cut costs, or layoff workers.
On Sept. 25, 2013, Gov. Brown had no qualms about signing into law the raising of the California minimum wage by 25 percent, from $8 to $10 an hour by Jan. 1, 2016. The action made the state's minimum wage the highest in the nation, something the California business climate could ill afford. In doing so, Brown said it addressed the growing gap between rich and poor. In inking the bill nearly two years ago, Brown said, "The social fabric is being ripped apart ... today we sew that fabric just a little tighter together."
I have my own ideas about why society is unraveling and it has to do with the lessening influence of faith and abandonment of moral standards.
Brown said the 2013 law put more than $2 million into the pockets of more than a million workers. So great, the state sticks a gun to the head of business, extorts more money for low-skilled labor, and forces the rest of us to pay for it in higher costs of Subway sandwiches. I call that income redistribution, a welfare Ponzi scheme.
Brown, of course, was foolish to sign that 2013 minimum-wage bill. Economists at Cornell and American University studied the states that raised their minimum wages and found zero evidence that minimum-wage hikes reduced poverty.
Democrats - always pandering to young voters - often call for equal outcomes regardless of effort and support such hikes. As a result, they have indoctrinated young people to think that they can have it all without working for it. There is no need to get a better education for a better paying job if the government will force more pay for less skilled work.
I'm troubled by lawmakers like state Assemblywoman Lorena Gonzalez, D-San Diego, who framed her minimum-wage bill affecting pro ball cheerleaders as a matter of "human rights." "Everyone who works hard to provide a great game day experience deserves the same basic level of dignity and respect on the job, starting with simply being paid for their work," she said.
I thought human rights dealt with equal opportunities, not necessarily equal outcomes.
The truth is, not all jobs are equal nor is the pay. The higher-skilled persons, like lawyers and doctors and movie stars and pro athletes, get paid the big bucks. Not people who didn't attain such skills.
Gonzalez seems to be forgetting that employees are not forced to work for anyone and have the ability to seek better pay elsewhere.
Likewise, the uneducated, unskilled worker at the bottom rung of the chain can go back to school or develop skills elsewhere so they can earn a better wage on their own merit. It's a no-brainer why a sewing machine operator makes an average of $28,800 while a nuclear plant operator makes $92,200 per year on average.
There is also the question of fairness. Leno wants the minimum wage in California to rise to $13 per hour on Jan. 1, 2017. That's about $26,000 per year for full time work. Contrast that with a salaried person who earns $20 an hour after working 30 years on the job. So the pay of the hamburger flipper and a secretary are getting closer and closer since the pay of many salaried employees stays stagnant.
I recently came into possession of a stunning collectible - a 1920s autographed quote of future President Herbert Hoover. His words should ring true today but don't: "America's ideal is not only that all men shall be equal before the law, but that we create a system where every individual shall have an equal opportunity to attain that position in the community to which his character, ability and ambition entitle him. If we are to finally succeed, this ideal must dominate every act of our public institutions and of our government."
Do you think we've strayed from that ideal? Hoover felt ambition and skill were what entitled someone to do better. Sadly, many Americans feel they are entitled to something for nothing.
Not surprising, Hoover is remembered unfairly for his laissez-faire approach to the Depression that occurred in 1929. Along came FDR in 1933 who introduced massive socialist programs - such as the minimum wage - that we are still paying for today. The country hasn't been the same. Government burgeoned and took more control and created our nanny state.
Ask yourself why California is not doing well. It's because businesses are leaving. The state, with its regulations and taxes, remains hostile to business. When they leave, we suffer the consequences. Household median income in California has plunged from $67,351 in 2007 to $60,190 in 2013 - a drop of $7,161, or 10.6 percent! In Texas, which has done well to steal away California businesses because of lower taxes and less regulation, household median income didn't see those kinds of fluctuations. The recession did not hit Texas as hard. Don't believe me? Median income was $51,901 in 2006 and now it is $51,704.
California's household income has dropped 2.38 percent in the past three years.
In Minnesota, they went up 2.45 percent.
Wyoming, where fracking is occurring, went up 2.76 percent.
Alaska is up 4.7 percent.
Maybe, just maybe, Brown is starting to see the light. But I doubt it. He once admitted that he didn't know what he was doing in his first two terms as governor. He admitted to a TV reporter in 1992 that he "lied" to voters when he said he had a plan for California. "You say you're going to lower taxes, you're going to put people to work, you're going to improve the schools, you're going to stop crime. Crime is up, schools are worse, taxes are higher, I mean, be real."
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