California’s $15 minimum wage may reduce demand for workers

California’s $15 minimum wage may reduce demand for workers

California and New York lawmakers recently approved measures to increase workers' minimum hourly wages to $15 an hour over the next few years. Los Angeles Mayor Eric Garcetti and New York Gov. Andrew Cuomo hailed the measures, saying the wage hikes will help lift millions of workers out of poverty. But, many experts don't believe so.

Many economists argue that just increasing poor workers' basic salaries can't lift them out of poverty. It is instead the supply and demand law that rules the situation.

An increase in a product's price generally lowers demand for it and vice versa. Taking this law into consideration, increasing the price of labor will reduce the demand for workers, which could worsen the situation.

In December last year, UC Irvine economist David Neumark reviewed minimum wage studies for the S.F. Federal Reserve Bank, and reached a conclusion that existing minimum wages have reduced the number of jobs nationwide by up to 200,000 from what they would otherwise have been.

Neumark also found that if wages were simply increased to $10.10 an hour, without any changes in the number of jobs or hours, just 18 per cent of the total income increases would go to workers living in poverty.

In California, the minimum wage for workers is scheduled to rise to $10.50 an hour next year, $11 an hour in 2018, and subsequently by $1per year until its reaches $15 per hour by 2022.