Why did California’s minimum wage increase fail?

Californians, who have historically supported efforts to raise the minimum wage, were unmoved this time.

After two weeks of post-election uncertainty, Proposition 32, an initiative to raise the state’s minimum wage to $18 an hour, was narrowly defeated.

The rejection was “a sad sign of the times in a state like California,” said John Kabateck, director of the National Federation of Independent Business, which urged voters to vote no. “It certainly sends a message that Californians of all political stripes are tired of high costs and high uncertainty on Main Street.”

Proposition 32 was declared defeated after a narrow margin, with 49.2% voting “yes.” The Associated Press called the race Tuesday evening.

The result was the latest sign of a positive change in the reliable blue-collar scene, which has seen many surprising results since the 5th election. Voters overwhelmingly supported a ballot measure to reverse a decade of progressive criminal justice reform, and reject a campaign that would have banned mandatory prison operations.

Opponents and economists say that by rejecting the proposed minimum wage increase, voters have shown they are afraid of businesses raising prices to cover additional labor costs. The prospect of paying more for consumer goods was especially unappealing after years of high inflation, which led to a persistent feeling among many people that they were in a precarious financial position.

“Controversies about the minimum wage are always emotional,” said Till von Wachter, an economics professor at UCLA. “The economic crisis is at its peak right now, and that could lead to the minimum wage being rejected.”

Voters were split on the proposal, which would have raised the minimum wage to $17 an hour immediately for large employers and then to $18 an hour starting in January. Small employers with 25 or fewer employees would have to do the same but at a lower rate: $17 an hour next year and $18 an hour in 2026.

The program has received support from counties including Los Angeles, Santa Barbara and all nine that make up the San Francisco Bay Area. High-income counties were more likely to vote yes, according to a Times review of voter results, although Orange and San Diego counties voted no.

California already has one of the lowest wages in the country, behind only the District of Columbia and Washington. The state minimum wage has doubled since 2010, with the most recent increase to $16 from $15.50 in January.

Many cities – including Los Angeles, West Hollywood, Santa Monica and Pasadena – have much lower rates. Meanwhile the federal minimum wage has remained at $7.25 for 15 years.

Therefore, voters may feel that further wage increases are unnecessary, said Chris Thornberg, an economist who founded Beacon Economics, a research and consulting firm in Los Angeles. The result was part of a reflection of the shift to the right across the country, he said, and a sense of “righteousness.”

“As you continue to raise the minimum wage, people have no sympathy,” he said. “California society is at that point where you think this is wrong for all of us.”

In practice, the effects of raising the minimum wage on inflation and unemployment are complex and highly contested.

Supporters of Proposition 32 argue that raising the minimum wage stimulates the economy, improves the quality of life of low-wage workers and reduces employee turnover. They say a new standard was needed to deal with the state’s high costs.

The campaign estimates that more than two million California workers stood to benefit from the measure, which was spearheaded by a billionaire investor and anti-poverty activist. Joe Sanberg.

“The fight for higher wages and economic dignity for millions of California workers doesn’t end here — we will continue until every California worker earns enough to live and thrive,” Sanberg said in a statement Tuesday evening. “Even though today’s result was not what we expected, we are optimistic about the work that is yet to be done.”

Opponents say the measure is bad for consumers – and for workers. They were concerned that companies would pass on additional labor costs to customers through higher product prices, and would try to save money by laying off workers, reducing labor hours and replacing workers with automation.

“It was a very easy call to vote for,” said Bill Bender, 70, a restaurant consultant from San José. “It’s too big, too fast for the industry to absorb.”

California had the latest real-world study in raising the minimum wage to consider, which may have influenced voter decision-making: In April, the state’s fast-food workers saw their wages jump to at least $20 an hour, an increase established by Assembly Bill 1228.

Many cashiers, line cooks and preppers, waiters and baristas saw a 25% raise overnight as a result of the new law, which applies to California fast-food workers employed by any chain with more than 60 locations nationwide, and includes company-owned locations. and franchised.

Even before it started, fast food giants including Chipotle, McDonald’s, Starbucks, Jack in the Box and Shake Shack warned that they planned to raise menu prices as a result, leaving customers to eat the cost.

“Fast food customers are very frustrated with the price increases they’re seeing,” said Jot Condie, president and CEO of the California Restaurant Assn., which opposed Proposition 32. “They were just connecting the dots and saying, ‘This $18 an hour minimum wage is going to raise prices for everyone.’ “

McDonald’s in Azusa. The company warned it would raise prices after California’s fast-food minimum wage hike went into effect in April.

(Robert Gauthier / Los Angeles Times)

Michaela Mendelsohn operates six El Pollo Loco locations in Los Angeles and Ventura counties. He believes that raising the minimum wage in the state would lead to higher prices, but he said he supports Proposition 32 because it would narrow the gap between what he and other fast food providers have to pay their workers and what they don’t. -food companies pay.

Since the state’s increase to $20 an hour for fast-food workers, Mendelsohn said sales at his six stores are down 5% to 8% from last year and he has cut hours by 8% to 10%.

David Neumark, a UC Irvine economist and national expert on the minimum wage and its economic consequences, said he was surprised by the outcome and that it was difficult to pinpoint a single factor in the measure’s defeat.

His research over the years has shown that there is an economic trade-off in raising the minimum wage: Some low-wage workers benefit from the increase, but all jobs decline as employers cut back due to higher costs, harming financial well-being. the working poor and those with few skills.

While it’s a widely accepted belief that raising the minimum wage can lead to job losses, UCLA’s von Wachter said that’s not always the case.

“The argument that higher wages lead to a decrease in jobs does not have a lot of evidence,” he said. “Instead, in cases where employers have market power, minimum wages can increase employment.”

California voters are heavily Democratic and a higher minimum wage often aligns with left-leaning values, but voters on both sides of the aisle did not conform to general party trends when it came to Proposition 32.

Randy Jeffs, an Irvine Republican, said he did not vote for a presidential candidate last week. But he voted yes on Proposition 32 after calculating that a top-paid worker would still make $37,440 a year on a full-time, 40-hour-a-week schedule.

“If prices go up a little bit to pay $18 an hour, so be it,” said Jeffs, 70. “If wealth is to be spread, what better way than those willing to learn.” [and] job?”

But in the end, the majority of voters decided “enough is enough,” Condie said.

“State voters continue to support so-called progressive policies,” he said, “but they draw the line when it affects their cost of living or quality of life.”