California Gov. Jerry Brown. Photo by Kimberly White/Getty Images for Fortune
The “Fight for 15” movement got its biggest win yet on Thursday as the California legislature passed a bill to phase in a statewide $15-per-hour minimum wage over the next six years. Gov. Jerry Brown is expected to sign the legislation.
There’s a lively debate among economists about the economic impact of minimum wage hikes. Higher minimum wages provide raises to some workers, but some economists argue that they also prompt substantial job losses. Other economists dispute this, saying there’s little or no effect on employment and that businesses compensate for higher costs through reduced turnover, improved productivity at work, lower compensation for better-paid workers, and price increases.
So who is right? When I set out to interview economists about the effects of California’s minimum wage hike, I was expecting some strong disagreements. Instead, I found a broad consensus: California’s hike is so large — and would result in a minimum wage so high — that no one really knows what will happen. None of the three economists I interviewed was willing to make a prediction about how the new law would affect employment in California.
“It would be foolhardy to believe you could project what’s going to happen with any degree of confidence,” said Jeff Clemens, an economist at the University of California San Diego whose research has found that higher minimum wages have caused job losses in the past. That sentiment was echoed by Arindrajit Dube, whose research has suggested that minimum wage hikes do not cause significant job losses.
Of course, that in itself is a reason to be concerned, since California lawmakers are taking a risk with the livelihood of millions of low-wage California workers. But advocates of the California proposal argue that it’s a risk worth taking.