California Dreaming

California has already passed a minimum wage which is on its way to $15/hour. Whether that is fair, reasonable or good policy is something for another discussion. Since it is imposed equally on every business, its effect of creating or destroying jobs is arguable and can be deferred to another discussion. It cannot be denied, however, that it raises the cost of doing business in this state.

Now the state has completed the first stage of trying to pass universal health care which will be funded by a 15% payroll tax. It is not stated whether the burden of that tax will be borne by employers or workers, but let’s think about a 15% payroll tax in conjunction with the increase in the minimum wage.

If the tax is to be paid by employees… Well, the state just partially reversed the increase in the minimum wage, driving it back down to $12.75. Granted, that will be offset to some degree for some employees who will no longer have to buy health insurance, but at the lower end it will be a big blow for those who are currently on Medicaid.

If it is to be paid by employers it will be partially offset, but only partially and only for some employers, by not having to purchase employee health insurance, but for many it is an added expense in its entirety. And that after having just absorbed an increase in payroll expense due to the increase in the minimum wage.

The fast food industry will be destroyed. Will anyone pay $12 for a fast food hamburger? Some would say that's no loss, but what happened to this being a country with free choice?

And California claims that it does not deserve its reputation as a state which is unfriendly to business.