In an industry with razor thin margins, any law affecting costs is cause for alarm. California’s growing reputation as an unfriendly business state is underscored by proposals for new burdensome regulations and laws each year, which the CRA opposes aggressively.

Minimum Wage Hikes

Seemingly each year, state lawmakers draft legislation to raise the minimum wage, despite the fact that California continues to lag behind the rest of the nation in recovering from the recession, as well as suffering from chronic budget deficits and a staggering unemployment rate. Even well-intentioned efforts to raise the minimum wage could wreak havoc on the state’s fragile economic state, and restaurants’ slim profit margin makes them particularly vulnerable. In a time of such economic turmoil, it’s critically important that lawmakers do no harm for the sake of employers and employees alike.

Restaurant Industry’s Unique Position

Minimum wage increases often have a perverse effect on the restaurant industry, as the wage increase typically benefits those who are already the top-paid individuals in the restaurant: the tipped servers. Minimum wage increases rarely affect the hardworking non-tipped employees who are already often paid greater than minimum wage, but are still on the lower end of the pay scale. Also, the added cost from a mandatory wage increase for employees earning the most reduces, or eliminates entirely, an operator’s ability to also provide a wage increase to other hourly workers.

Indexing’s Devastating Consequences

Proposals such as 2012’s AB 1439 (Alejo) that link the minimum wage to indexing would put the rate on auto-pilot, a concept that would be disastrous for California. By tying increases in the minimum wage to a single economic factor, in this case inflation, and ignoring other factors such as the strength of the job market, indexing will inevitably result in increases in the minimum wage at times when the economy is ill suited to absorb new cost pressures.

Background

• California’s minimum wage was increased to $7.50 per hour in 2007 and $8 per hour in 2008.
• According to the Employment Policy Institute, 85 percent of the most credible studies released over the last 20 years have concluded that increases in the minimum wage cause job loss.
• California continues to grapple with staggering unemployment rate of nearly 11 percent and a dire budget deficit.

Policy Priority

Prevent any minimum wage bill that includes a tie to indexing from becoming law. The industry is better off if lawmakers consider minimum wage proposals periodically than putting the wage on an automatic upward elevator.