Gov. Arnold Schwarzenegger (R-Calif.) is feeling unpopular. His approval ratings have plummeted dramatically since four ballot measures he endorsed in the November special election went down to flaming electoral defeat. Since his election in 2003, his favorable rating has dropped below 40 percent.
So Schwarzenegger has decided to do what all liberal Republicans do when the going gets tough: cave to liberal causes. To begin the new year, members of the Schwarzenegger administration announced that the governor would endorse the legislature's proposal to raise the minimum wage in the state of California from $6.75 per hour to $7.75 per hour.
Conservatives have long known that Schwarzenegger is a social liberal. But if there were one issue upon which Schwarzenegger could peg his Republican self-identification, it was his fiscal conservatism. Schwarzenegger has long touted his love for the laissez-faire philosophy of Milton Friedman and Adam Smith. In a Sept. 24, 2003, editorial in The Wall Street Journal, Schwarzenegger explained that if elected, he would push for "removing, one by one, the innumerable impediments to growth -- excessive taxes, regulations and deficit-spending."
Perhaps that strong fiscal libertarianism was meant only for show. Schwarzenegger's aides insist that the governor does not "prescribe political calculations to a public policy evaluation. … This governor does what he believes is in the best interest of the people of California and the economy of California." But it is hard to believe that the same governor who has twice vetoed proposed increases in the minimum wage has been convinced by all available evidence of his own error.
Every reputable economic study demonstrates that raising the minimum wage leads to job loss. The reason is very simple: Businesses only have a certain amount of money they are willing to spend on jobs. If the wages for each job are increased by law (and not by the business' own cost-benefit analysis), fewer jobs will be available. The current minimum wage in the state of California is $6.75 per hour ($1.50 above the federal minimum wage). If a business can afford 30 employees at $6.75 per hour, it can afford only 26 employees at the increased minimum wage. Four people will have lost their jobs. If you are a business owner, do you do business in California, where the minimum wage is $7.75, or Nevada, where it is $5.15 per hour? Or how about Arizona, which has no state minimum-wage law at all, meaning that those businesses not covered federally under the Fair Labor Standards Act may pay whatever wages are agreed upon by the contracting parties?