California's Off -Ramp From Reason

Governor Brown signed the law increasing California's minimum wage yesterday. Brown admits that the law will be an economic disaster for workers. "Economically, minimum wages may not make sense," he said.

"Morally and socially and politically, they (minimum wages) make every sense," Brown said. The nerve of someone who has never had to make payroll, lecturing others about morality!

They just don't make "economic sense", noted. If they did, lawmakers wouldn't have put an "off-ramp" to the annual wage increase. In the event of certain recessionary conditions, future governors can pause the increase in the minimum wage. Using the term "off-ramp" gives the clause a California feel, cause we have lots of freeways.

Putting in a recession "stop" order is effectively admitting that a minimum wage increase itself has a recessionary effect on the job market. If the recession is deep enough, will the governor have the power to lower the minimum wage? If we go into another Great Depression with 25% unemployment, will the governor be willing to abolish the minimum wage?

When your new law is celebrated by avowed socialist Bernie Sanders, maybe it's not a productive approach. Sanders said that he was proud that we "will be increasing the minimum wage to a living wage of $15 an hour."

"A living wage" is the slogan. To keep up with inflation, they say, the minimum wage should be much higher. However, inflation can be caused by wage increases just as easily as raw materials price increases. Some of us are old enough to remember Nixon's wage and price controls, which was thought to be a reasonable approach to high inflation.

Surely those who work for the minimum will be happy today. But for how long? If your job primarily involves touching money and doing transactions, you will need to find another line of work very soon. Cashiers are going to be replaced by apps.

If you work at a call center or in customer service, your job will be taken over by IBM Watson, if it hasn't already been outsourced to India.

If you assemble things in a factory, you might want to start thinking about night school or university extension. Your career path may come down to a choice between learning how to program the machine that will take your job, or taking a job that a machine can't do. Like plumbing.

If you have any job where your wages will go up because of this new law, you should invest all your new-found wealth in robotics companies.

The labor market will find an equilibrium no matter the disruption. Creative destruction is the natural selection process of free markets. It's just too bad that the only ones with an off-ramp are the politicians.