Minimum Wage Rises from $8 to $10 in California

California’s legislature recently passed a bill increasing the state’s minimum wage from $8 to $10 per hour. The change will be gradual and will not happen immediately. Effective July 1, 2014 a $9 minimum wage will be set, and effective January 1, 2016, it will further increase from $9 to $10.

Arguments against Minimum Wage Increases
Many business owners argue that increasing minimum wage will result in inflated costs for consumers. As a result, whatever uptick in purchasing capacity that the workers get from additional wages will be neutralized by inflation in prices. Increased minimum wages may also lead to more unemployment among workers who are looking for low-wage jobs.

How Rising Wages May Help the Economy
On the other hand, those who favor minimum wage workers content that wage increases will not be passed to consumer in the form of higher prices, but will be taken off businesses’ profit margins (at least partially). In such case, prices will not experience the upward, inflationary pressure, while the demand for labor will not diminish due to higher wages. Higher wages will improve the purchasing capacity. As a result, small businesses will benefit from increased consumption, thus stimulating economy.

Enforcing Minimum Wage
In addition to simply increasing the minimum wage in California, it is necessary to ensure that low wage immigrant workers do not continue to be illegally underpaid. At a certain point, payment for work becomes a human rights issue. Forcing immigrants to work below the minimum wage leads to significant abuses of their rights. Therefore, improving policing and enforcement functions to forestall such abuses is as much a necessity as any economic reform.