$15 Minimum Wage: The Straw That Will Break California’s Back

Strict gun laws, asinine and superfluous regulations, a second-rate education system, domineering labor unions, unpayable public debts, rotting infrastructure, and mind-boggling housing costs. Which state are you thinking of right now? Is it California? I bet it’s California.

Over the years the People’s Republic of Kalifornia has developed quite the reputation for oppressive rules, dysfunction, and unsustainability; both financially and environmentally. Financially speaking the state has been on the precipice for some time. In recent years several of their cities have declared bankruptcy, and overall the state has one of the highest debt per capita ratios in America. It’s a big effing mess with no clear solutions in sight. There really isn’t any way that California, the biggest economic powerhouse in America, can sustain its current course.

California can however, hasten its demise with crackpot left-wing policies that are sure to ruin their economy, like raising the minimum wage.

A deal to raise California’s minimum wage to $15 an hour by 2022 was reached Monday by Gov. Jerry Brown and state legislators, making the nation’s largest state the first to lift base earnings to that level and propelling a campaign to lift the pay floor nationally.

The increase will boost the wages of about 6.5 million California residents, or 43% of the state’s workforce, who earn less than $15, according to worker group Fight for $15. The proposal had been headed to a statewide referendum. It’s now expected to be approved by the state assembly.

Will it raise the wages of 43% of the workforce, or kill that workforce? I’m betting on the latter. This will be the highest statewide minimum wage in the country. Seattle raised its minimum wage to $15 recently, as did Oregon, but in those cases the wage increases were focused on urban areas. And that’s one reason why California’s minimum wage increase is going to be so disastrous for the state’s economy. It’s going to be $15 an hour everywhere.

Wealthy West Coast cities can absorb the costs of higher wages (for the most part), but California’s policy is going to disproportionately affect its poor, rural, inland counties, of which there are many. These are regions that are just like any other rural part of America. They’re dominated by small businesses and mom and pop shops. Goods and labor are cheap because they have to be. Profit margins are already thin for everyone, and will be completely wiped out by this policy.

In any case though, the cities aren’t going to fare much better. It’s just that the rural areas are going to feel the heat first. In the long run it’s going to destroy jobs and raise costs all over the state, and contribute to countless other failed policies that California is reeling from.

The question is, will this policy add so much weight to Californa’s pre-existing problems, that it will be the straw that breaks the camel’s back? Forbes seems to thinks so. They recently made a compelling comparison to what California is planning to do, and what the unfortunate Greeks have already done.

Greece’s minimum wage zoomed from slightly below 600 euros in 2000 to close to 900 euros by 2011, according to Eurostat. That’s a 50% hike, exceeding the minimum wage hikes of Greece’s closest peers, Spain and Portugal, according to the same source.

Labor unions demanded these wage hikes, protesting in the streets and on picket lines. And politicians turned them into law.

That’s how labor compensation turned into an entitlement.

Unable to pay the higher wages, some Greek corporations downsized their operations or closed their doors altogether. Others moved to neighboring Balkan countries, where the minimum wage in Bulgaria is one-fourth of those of Greece.

A third group of Greek corporations — those with pricing power– hiked prices, shifting the burden to consumers.

A fourth group of corporations became welfare agencies, maintaining their labor force by counting on direct or indirect government subsidies to stay in business.

It was a situation where the government was financially propping up both average citizens and big business, and it was just too expensive. When the debt crisis came, this entitlement system imploded. Greece’s high minimum wage indirectly helped bring that country to its knees (among other reasons of course). It’s precisely what happens to all socialist systems, and Commiefornia will be no exception. Once this law is in place, California will be on the Greek path, which there is no escape from.