Economic Effects of Minimum Wage Laws

Beacon has published a new analysis that, for the first time, links a recent surge in youth unemployment in California to the state’s minimum wage hikes. The report finds that California’s recent, and peculiar, leap in unemployment is almost exclusively a young person problem, with 90% of the newly unemployed being under the age of 35 and the hardest hit group being teenagers. The study is the first deep investigation into this data and concludes that the wage floor in the state has been raised to a ‘tipping point’ where the effects are becoming clearly evident. The analysis is able to refute other possible reasons for the state’s unemployment jump, narrowing in on the mandated wage hikes. The study also suggests that the consequences for youth are long term in nature and that the most vulnerable youth, including those from minority communities, suffer the most severe consequences. Given that the state’s minimum wage is set to automatically increase with inflation, and given the November ballot measure to raise the base wage even further, this has become a progressively critical issue for California’s economy and population. View the full analysis here: https://lnkd.in/griV5DMi

What happens when a historically undervalued caregiving role receives a significant bump in pay? A recent increase in the minimum wage for home health workers in Nevada resulted in turnover falling from 50% to nearly zero and more job growth as agencies were better able to recruit and fill jobs. Home health aides are essential in supporting society's most vulnerable populations. Yet, they face a stark dichotomy: their work is physically demanding, emotionally taxing, and indispensable, yet they remain among the lowest-paid workers in the labor market, with an annual median wage of about $33,000. Turnover rates of 50% in the first year are typical in this profession as workers leave due to injury - home health aides have some of the highest occupational injury rates - or in search of better pay and working conditions. The trend is unsustainable, especially considering that this job is expected to be one of the fastest-growing in the US over the next decade due to an aging population. On January 1, 2024, the Nevada legislature enacted a $16 minimum wage for home health workers in the state. The impact was immediate and pronounced. In the four months following the new minimum wage, agencies reported that turnover fell from 50% to nearly zero, and home health agencies were able to grow their staff more quickly. #homehealth #minimumwage #compensation #hiringtrends #bls #jobsreport #turnover #labormarket #caregiving

The minimum wage debate has raged for years, but fascinating new paper out by Vitor Melo and coauthors around the unintended consequences for job search among employed workers, and more. Research on the effects of minimum wage increases in job search models has primarily focused on unemployed job seekers, predicting that a higher minimum wage would encourage greater job search activity and potentially lead to higher employment by incentivizing firms to open more vacancies. However, recent evidence highlights the importance of on-the-job search, which constitutes the majority of search activity for low-skilled occupations. If minimum wage hikes reduce job search among currently employed workers, the overall effect on job search could be negative, which would challenge the expectation that higher minimum wages increase employment. Using novel data from a major U.S. job search platform covering January 2021 to September 2023, researchers analyzed the effects of unscheduled minimum wage increases in Nebraska and Hawaii. A difference-in-differences approach comparing changes in job search in these states with those where the minimum wage remained unchanged revealed that higher minimum wages did not increase job search. Instead, minimum wage increases were associated with *significant declines in the number of job seekers for low-skilled occupations.* More direct studies of job search intensity have found little evidence of sustained increases in search effort. While some research suggests that workers may initially increase their job search following a minimum wage hike, these effects appear short-lived and do not necessarily translate into higher employment. These new data from online job applications also offer a more precise measure of search behavior. In Hawaii, an 18.8% increase in the minimum wage led to an 11% decline in job search for retail and cleaning occupations and a 13.2% decline for food-related occupations over the following 17 months. Similarly, in Nebraska, a 16.7% minimum wage hike caused a 9.4% decline in job search for retail and cleaning jobs and an 8.7% decline for food-related jobs over the following 11 months. These findings remain consistent across various analytical approaches. The results challenge a fundamental assumption in search and matching models—that higher minimum wages induce more job search. If workers are less likely to look for new opportunities, the expected mechanism through which minimum wage hikes might increase employment is weakened. #LaborEconomics #MinimumWage #JobSearch #Employment #Wages #LaborMarket #Economics #PolicyAnalysis #WorkforceDynamics

When it comes to #production costs, especially #labor, minimum wage proponents tend to focus on #hourly wage. However, they forget that businesses view labor as a component of total revenue rather than hourly. When California implemented fast food wage hike, it ignored business realities in that hourly wage is just one component of total labor costs. In other words, businesses can cope by doing the following: 1. Reduce total labor hours. 2. Increase revenue per labor hour. To do that, reducing labor hours means exactly just that: workers work fewer hours at a higher wage. However, simply cutting hours can quickly compromise customer service. Thus, when all excess labor hours have been eliminated, business next identify all potential substitutions to tasks currently assigned to labor. Simple tasks such as taking orders can thus be assigned to kiosks, which is the classic #capital-labor #substitution effect. After businesses exhaust all potential substitution options and there are still substantial increases to labor expenses, the next option would be to explore potential #automation options, which spurs #technology #innovations. As new innovations come online, this not only allows businesses to cope with higher hourly labor expenses but also potentially eliminate jobs even in areas where no wage hike takes place. One more potential negative: businesses are going to eliminate labor-intensive menu items in favor of those can be automated. In the meantime, businesses can still raise prices if their products or services are compelling. If not, they'd simply assess whether it's realistic to continue to operate. In all of these cases, the outcomes are: 1. Reduced hours. 2. Fewer jobs (especially due to shutdowns). 3. Higher prices. 4. Fewer consumer choices. Hence, in this particular instance, the true minimum hourly wage will always be $0. Consumers will inevitably be worse off. https://lnkd.in/gWsrqXVc

The impact of the $20 minimum wage law in California on the fast food sector has raised concerns for workers. The passing of this law has led to troubling trends, as noted by recent data from mandatory industry reports by the Bureau of Labor Statistics. Key findings from the data include: - Job Losses: Since the enactment of AB 1228 in September 2023, privately-owned fast food restaurants in California have seen a net loss of 6,166 jobs (-1.1%) up to June 2024. - Year-over-Year Comparison: In the corresponding period before the law (September 2022–June 2023), the state had added 17,528 private-sector fast food jobs (+3.1%). - National Trends: While California faced job declines, national private-sector fast food employment increased by 1.6% during the same timeframe (September 2023–June 2024). - Wider Context: The decline of -1.1% in fast food jobs surpasses California's overall private-sector employment decrease of -0.3% during this period. These stats highlight the significant hurdles that the fast food industry in California is encountering post the implementation of the $20 minimum wage law. What are your thoughts on the $20 minimum wage? https://t.co/kwR7sQ76p5

Overall, the impact of the California Fast Food Sector Minimum Wage Ordinance on non-fast food restaurants and businesses like Boomers depends on various factors, including how we respond to the changes needed to increase wages in the “new” labor market. Additionally, we must decipher whether we can effectively manage any labor cost increases in the form of increased guest prices. Further increasing inflation in the State of California to an unprecedented new level, directly due to this new Fast Food Minimum Wage Ordinance, businesses cannot just absorb this new cost by the State of California. Here are four factors that Boomers must take into consideration: 1. Competitive Pressure: Non-fast food restaurants and businesses will face increased pressure to raise wages for their employees to remain competitive in the labor market due to the Fast-Food Minimum Wage Ordinance. Thus, if fast food workers are earning higher wages, employees in other sectors will seek similar increases, especially since there are overlapping job requirements and skills needed. 2. Operating Costs: A rise in the minimum wage leads to increased operating costs for all other businesses, including non-fast food establishments. Labor is a significant cost for any business, and an increase in the minimum wage will directly impact the bottom line resulting in increased prices for guests, reducing profits for businesses, or both. 3. Strategy Changes: Businesses may need to adjust their operations in response to higher labor costs resulting in reduced operating hours, cutting back on employee benefits, increasing automation with fewer employees and finding other ways to improve efficiency. These adjustments will have implications for both employees and guests of Boomers Parks. 4. Economic Impact: There are broader economic impacts from minimum wage increases, including effects from less job creation, guest spending and economic growth. While proponents of higher wages argue that a wage increase will stimulate economic activity by putting more money in workers' pockets, opponents often raise concerns about potential job losses, reduced business investment, or closure of these businesses. Business owners do not have unlimited lines of credit or cash in surplus to pay for these types of expenses that get handed down to businesses from government departments and organizations. https://lnkd.in/eEeRPKYK

🎥 I spoke with KPIX | CBS San Francisco/Bay Area ‘s Amanda Hari on Prop 32, which would increase California’s minimum wage if passed by voters. Watch full segment here 🎥: https://lnkd.in/gX7abh3D We discussed: 1. Increased Wages Boost Consumer Spending. More disposable income to spend on goods and services supports local businesses and drives economic growth. Higher wages mean families can afford essentials like housing, groceries, healthcare, and transportation. They are also able to spend on non-essential items, such as dining out and entertainment, which further stimulates local economies. 2. Increased Wages Reduce Employee Turnover. Paying workers fair wages reduces turnover and boosts employee retention, which saves businesses money in hiring and training costs. 3. Stronger Communities Through Economic Health. When local residents are financially stable, they contribute to a healthier, more vibrant community. Increased wages help reduce poverty, improve living standards, and foster a more engaged and supportive local environment. Workers with higher wages are less reliant on government assistance programs, reducing the need for public resources and allowing communities to invest in other critical areas like education, infrastructure, and healthcare. 4. Reflects the Will of the People. When voters directly decide on issues like minimum wage, it ensures that the outcome reflects the will of the people, representing the diverse needs and experiences of the state’s population. Since the minimum wage affects a large portion of workers, voters should have a say in setting fair compensation that keeps pace with the cost of living. Given that California voters haven’t had the opportunity to vote on a minimum wage increase since 1996, it’s essential to allow them the chance to decide on such a significant issue that impacts workers and businesses across the state. Cc: California State University - East Bay #Proposition32 #Policy #Vote #YourVoteYourVoice #AmiraBarger