California’s Legislature last week voted overwhelmingly to automate most of the Golden State’s fast-food restaurants, supermarkets, and mid-sized retail chains by 2022. No, that wasn’t the stated intent of Senate Bill 3, which sailed through the Assembly and Senate on mostly party-line votes and after little debate. But that will be the likely effect of the law, which is supposed to phase in a $15 hourly minimum wage starting in January.
Governor Jerry Brown signed the bill in Los Angeles on Monday, one week to the day after unveiling the wage proposal at a Sacramento press event where he was surrounded by the Democratic elected leaders and labor union bosses who helped put it together. “I’m hoping that what happens in California will not stay in California, but spread all across the country,” Brown said. “It’s a matter of economic justice. It makes sense.” Assemblyman Sebastian Ridley-Thomas, a Los Angeles Democrat, echoed Brown during Thursday’s floor debate. “This is an argument about economic justice,” he said. “Justice is not something that can be negotiated or compromised.”
As it happens, the bill was the product of several months of extensive negotiation and compromise, almost all behind the scenes and without a word of input from California’s many industry lobbying groups, or from the leadership of the state’s largely irrelevant Republican Party. The law’s most immediate practical effect will be to end a pair of union-backed initiative drives that appeared headed for November’s general election ballot. The Service Employees International Union had been agitating for a measure that not only would have imposed the $15 minimum wage sooner, but would have done so without regard to the state’s fiscal outlook or economic circumstances. Brown, ever the cautious progressive, thought the union’s proposal went too far, too fast.
Under Brown’s plan, California’s hourly minimum wage would increase to $10.50 in 2017 for businesses with 26 or more employees, followed by $11 in 2018, and another dollar each year, arriving at the magic $15 in 2022. After that, the law would let the wage continue to rise with inflation. Smaller businesses would have an extra year to implement the annual raises. Brown insisted on a provision allowing the governor temporarily to suspend the wage hikes in the event of an economic downturn or a large state budget deficit. But the legislation provides a limited window for action: the governor must make his decision in September; the wage hike takes effect the following January. And, the truth is, these emergency provisions are almost always for show. AB32 — California’s ill-named Global Warming Solutions Act of 2006 — included a similar escape hatch, which neither then-governor Arnold Schwarzenegger nor Brown ever considered using during the recession, or during any one of the state’s multibillion-dollar budget crises. They opted instead for budget gimmickry and tax increases. One result? California’s high-skill, high-wage manufacturing sector has never recovered. In February, it experienced its worst contraction since 2009.
Advocates, including the labor-backed Fight for $15 Coalition and Senate president pro tem Kevin de León, say the raise will benefit as many as 6.5 million workers, or upward of 43 percent of the state’s workforce. Mainly, though, the $15 minimum wage will be a boon for California’s public-sector unions. The state Department of Finance estimates that the wage hike will cost taxpayers at least $3.6 billion a year by 2023, owing to a raise (and new benefits) for in-home health-care workers. But the cost likely will be even higher than that, as many public employees—teachers, most notably—must contractually be paid at least double the minimum wage or receive overtime pay.
Businesses have the most to lose. “I think very few business people will lobby against this bill, because then they will just be cutting their own throat,” Brown said at his press conference the other day. And he was right—the business lobby didn’t put up much of a fight, and its reasonable objections were scoffed at. California is a diverse state. What might appear economically feasible along the wealthier coast may not be such a good idea in some of the poorer inland areas, which have never quite come back from the recession.
Will a $15 per-hour wage really help workers in San Francisco? As the city began phasing in its own $15 minimum wage law last year, locals were shocked to discover the law of unintended consequences. Business owners who supported the city’s ordinance have found themselves raising prices, cutting hours, or in a few notable cases, shutting down altogether. “If you can only raise prices so much,” one political consultant with the Los Angeles Area Chamber of Commerce told the L.A. Times this week, “you’re going to be forced to cut hours, cut employees, change your business model and frankly, automate.”
That — and maybe relocate your corporate headquarters to Tennessee while you’re at it. Last month, Andy Puzder, chief executive officer of CKE Restaurants (owners of the Carl’s Jr. and Hardee’s fast-food chains), announced that the company would leave Santa Barbara for the more accommodating tax and regulatory climes of Nashville. But Puzder’s greater sin, at least judging from the scorn and ridicule he garnered online, was his unapologetic view of how best to boost his company’s bottom line in the years ahead: robots all the way down. “They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case,” he told Business Insider. If labor is the biggest expense on the ledger, then that’s the likeliest target for cuts. “With government driving up the cost of labor, it’s driving down the number of jobs,” Puzder said. “You’re going to see automation not just in airports and grocery stores, but in restaurants.”
In fact, Puzder wasn’t saying anything particularly new or novel. Automation is coming, no matter what. Fast-food kiosks are commonplace in Europe, where labor costs are even more prohibitively expensive than here, with McDonald’s leading the way. But it isn’t just the corporate monoliths that are embracing automation. Smart start-ups are making automation hip. Puzder was overjoyed with Eatsa, a new restaurant chain with locations in Los Angeles and San Francisco that is almost completely automated. Customers order from a screen in the front of the restaurant. A small crew in the kitchen assembles the meals in the back. “The entire process requires zero human interaction between customers and workers.”
Brown may be right that California will lead the way for the rest of the nation. But progress isn’t a $15 per-hour minimum wage. It’s an automat in San Francisco.
Automation will be one of the consequences, although advancement in technology can be good.
The real critical consequence, and that has already occurred, is the fact that these “entry” level jobs, originally intended for teenagers have disappeared, becoming “family support” employment by the uneducated immigrants, legal and illegal. Those entry level jobs were a training ground for teenagers to learn the work ethic a difficult trait to teach after the age of 12, let alone after the graduate from college or technical schools. Employers will also replace “them” in industry and business because of that difficulty and the advantages of technology.
So, instead of “income producers” we will become “income consumers” in the service industry or government employment. And, shortly the money will run out and we will resort to socialism and then the bread lines of communism.
Welcome to your new world….
Perfect explanation retirexlr8r. Too bad the liberal buffoons can’t read or understand it. As goes Detroit, so goes Kalifornia.
These $15.00 an hour fools just priced a majority of themselves out of a job. They think it is just $5.00 more per hour, they do not understand taxes, insurance and other liabilities that are based off a PERCENTAGE of payroll, they do not understand credit card fees, they do not understand, period! This is not just an increase in wages. I am looking forward to the kiosks at the fast food restaurants. I can’t count the number of times I have had to repeat my order because the window person cannot get it right. If I make a mistake it is on me, the technology is there is it is getting very inexpensive.
It is not just a matter of giving those people that are making minimum wage an $8 an hour raise. If you have 10 employees 2 are making 7.50 2 are making 9.00 2 are making 12.00 2 are making 15.00 and 2 are making 20.00 . You have to give all 10 that $8 an hour raise. For a small company that would be $80 more an hour $640 per day or 3200 per week. Not easy to come up with