Economic Justice or Economic Devastation: What Does the Proposed Minimum Wage Hike to $15 an Hour Mean to Your Business?
Most California business owners are aware that the minimum hourly wage rose to $10 per hour for all industries on January 1, 2016. However, many of the same business owners are only beginning to recognize that this wage hike may be just the beginning of what appears to be a dedicated and continuing effort to raise the minimum wage to $15 per hour throughout the state, without exception.
While some cities, like San Francisco and Los Angeles, have started the process to raise the minimum wage well beyond the state law minimums, what will happen to our economy if Governor Jerry Brown signs the recently passed minimum wage bill into law (which seems to be just a formality)? Governor Brown recently voiced his support for the bill’s measures, opining that the recent agreement between legislators and labor unions constitutes “economic justice”. However, are we certain the real result will not be economic devastation, especially in rural areas of the state?
Ruben Gonzales, senior advisor of the Los Angeles Chamber of Commerce, iterated what many business owners are thinking, “Everyone wants higher wages for folks, but if you can only raise prices so much…you’re going to be forced to cut hours, cut employees, change your business model and [perhaps] automate.
Many companies will likely explore strategies to mitigate the impact of the steep increases in the minimum wage, but these strategies also carry certain legal risks. One firm that is helping small businesses navigate the changes is the Gehres Law Group, P.C. “Our clients range from restaurant owners, to IT professionals, real estate investors, medical providers, talent agencies, and a host of other industries, many of whom will experience serious economic stress due to these increases in the minimum wage,” said President and CEO of Gehres Law Group, Tina Gehres. “Labor-intensive businesses will bear the brunt of this legislation and those who can’t automate or change their business model will be forced to find ways to adjust to this legislation by making changes to their work force. Advising companies in this process, and frankly helping them avoid bankruptcy, will be a significant portion of our practice in the coming years, I believe,” Gehres added.
“Businesses operating in rural areas are especially vulnerable, where overall wages are typically lower and consumers have less disposable income after paying for necessities like rent, transportation and utilities,” Gehres continued. “For those businesses, these increases may very well spell economic disaster.” While the bill gives small businesses with fewer than 26 employees an additional year to comply with the stepped-up wage requirements, many feel that compromise is far from adequate to help struggling businesses. As Gehres points out, “without a flat out exemption or lower wage minimum for start-ups and businesses with 15 or fewer employees, the likelihood of more vacant commercial space, and rising unemployment in these areas is very real. Is it really fair to argue for economic justice in urban areas while turning a blind eye to economic devastation in rural areas?” Gehres argued.
Update: As anticipated, Governor Jerry Brown signed the bill into law this morning, April 4, 2016.
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 California Assem. Bill 10, 2013, ch. 351, 2013 Cal. Stat. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB10
 Dillon, Liam, and Patrick McGreevy. “Legislature Approves Minimum Wage Increase, Sending Historic Measure to Gov. Jerry Brown.” Los Angeles Times 31 Mar. 2016, http://www.latimes.com/politics/la-pol-sac-minimum-wage-vote-20160331-story.html
 Myers, John. “Gov. Brown Hails Deal to Raise Minimum Wage to $15 as ‘matter of Economic Justice'” Los Angeles Times 28 Mar. 2016, http://www.latimes.com/politics/la-pol-sac-jerry-brown-minimum-wage-deal-20160328-story.html