Gov. Brown Caved Too Easily to Labor on Minimum Wage Increase

Initially, it looked like Governor Jerry Brown (D) was going to drive a much harder bargain with the public sector labor unions, but in the end he gave in too easily by granting concessions that would primarily benefit his legacy but not the State of California, California businesses and California taxpayers.

I know the polling data was supposed to be positive on the measure but Gov. Brown should have stuck to his guns on some of his initial criticism.  Most significantly, a uniform $15 per hour floor for all of California does not make sense, given the huge regional differences in the cost of living, prices and economic growth.  Any economist, apart from someone like Robert Reich who is clearly captured by the “labor-left,” would agree that this makes sense from an economic perspective.  The wage should likely be higher in the Bay Area, parts of Los Angeles, and significantly lower in the central valley where local economies continue to stagnate.  This is perhaps also an argument for a lower statewide floor, and then the regional option to rise above that floor–existing law.

Apparently, Gov. Brown initially said he would not support a proposal that does not account for these regional differences but labor refused to concede any changes and Gov. Brown ultimately caved–rather quickly I might add.  The unions failure to acknowledge these regional considerations results from a “hard-headedness” and a refusal of members to accept reasonable changes when it comes to the consideration of responsible public policy.

Another major fiscal consideration for the measure was a California Department of Finance analysis that found an earlier version of the proposal would increase costs to state agencies by $1 billion in 2016 and $3.4 billion in 2017.  “The Department of Finance is opposed to this bill because it results in significant, unbudgeted costs to the General Fund…Further, Finance notes the net impact of an increased minimum wage on California’s economy and state budget is likely to be negative,” stated a representative at a previous hearing on the issue, according to a LA Times Report.

Given that the State of California is $400 billion in debt, where is the money going to come from to pay for these increased state costs?   Two words: California taxpayers.

Labor apparently overcame this point of opposition by delaying the increases a year or two until the Governor leaves office.  This may be good for the Governor but it’s not good for California businesses and California taxpayers who will still be on the hook for the full impact of the measure in the very near future.

The Governor also initially said he was concerned that the measure would put a lot of low-wage workers out of a job, which is more likely in the economically distressed areas of the state. The unions aren’t likely concerned about this because most of their focus for the measure is their members who work for public agencies or non-profits that get significant public funds. These workers are not as vulnerable to layoffs due to increased costs, but is bad for everyone else.

At the very least, the Governor should have stuck to his principles and forced the unions to go to the ballot to give California voters a say on the measure and business a chance to present their arguments or compromise positions.  California businesses were not even invited to the bargaining table on the minimum wage increase, despite the fact that they are the ones primarily effected.  That shows a disrespect to the California business community and a failure to try to at least get the policy as right as possible.

About the Author: David Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change