With California’s minimum wage increase to $16, experts wonder how much it will benefit the people it aims to help. Especially with many companies such as Target already paying workers above the minimum wage. 

Peter Rupert, a UC Santa Barbara professor of economics and director of the Economic Forecast Project, told Noozhawk that companies could hire fewer employees and schedule employees with fewer hours. 

“These are the people who need the money,” Rupert said. “And the last thing I want to see are firms cutting jobs of those people who are just at the minimum wage.”

At the start of the year the state minimum wage went from $15.50 an hour to $16 an hour, and there are more changes to come. In April, the minimum wage for fast food workers that work at a chain with 60 or more locations across the country will receive $20 an hour minimum wage, leaving many small restaurants wondering how they’ll compete for employees. 

This wage increase, as well has the fact that health care workers could make up to $23 an hour starting in June, will mean pay increases for 900,000 Californians, according to CalMatters.

For local restaurant owner Carlos Luna of Los Agaves, hiring in Santa Barbara is already difficult. 

“There’s too many restaurants and hotels in the area,” Luna told Noozhawk. “It’s kind of difficult to find qualified employees for the restaurants.”

When the fast food minimum wage goes to $20 an hour, Luna said it’s a big concern on how it will impact hiring and maintaining employees for his restaurants.

“If employees are going to be making $20 an hour it’s going to be harder to retain any employees because we definitely will not be able to support $20 an hour wages for every employee in the kitchens,” Luna said. 

Already Luna said the wage increase to $16 an hour could affect how many new employees they are able to hire this year. 

“It’s hurting the bottom number,” Luna said. “I think it’s going to make it a little more difficult to retain people because I know some places will be paying more than the minimum wage, even to the tipped employees.”

Rupert told Noozhawk that the pay raise could also impact fast food workers themselves as more places will lean toward automated food service. At many Mcdonald’s restaurants across the country, including the Goleta location on Marketplace Drive, customers can already go inside and order food at a large screen instead of with a cashier. 

While $16 is a higher minimum wage then most states in the U.S., the yearly salary for people working 40 hours a week would be $33,280. If a worker makes $20 an hour and works 40 hours a week, their yearly salary is about $40,000. Both are considered very low income in Santa Barbara County.

Last year the Santa Barbara Foundation published a report on housing affordability and found that the average renter in Santa Barbara county would need to make $47 an hour to be able to afford the average monthly rent.

Local Job Market Trends for 2024

Rupert also told Noozhawk that the local job market will likely see a continued growth in the hospitality and leisure industries but will slow down from 2023. 

“I think parts of leisure and hospitality are maybe still going to grow but not as fast as they could have without the minimum wage increase,” Rupert said. “I think that’s gonna hurt that sector a little bit.”

Additionally, goods producing and infrastructure industries could see growth this year due to recent legislation.

“I think it’s been a little bit stagnant, but I would look and think about manufacturing, goods producing, because we have some of these infrastructure bills from the feds that are going to promote some of that,” Rupert said.  

Last year Governor Gavin Newsom signed an infrastructure bill to streamline projects that help build a clean electric build, ensure clean drinking water, and modernize transportation.

One industry that Rupert said has been struggling since the pandemic and he believes will continue to struggle is the financial industry. 

“I don’t know if that’s coming back. That’s been a tough one,” Rupert said. “I’m not optimistic about that industry, to be honest.”

Rupert said that the financial industry had been struggling since the 2008 recession during which the industry saw a significant decrease in employment. It had been improving right before the pandemic but then employment dipped again, according to Rupert.

One reason for this is that many companies in the financial sector have merged with each other and then limit job redundancies.

“I think people are able to get many of these services globally rather than locally,” Rupert said. “There’s probably a lot of reasons there.”

Low Unemployment Numbers

Rupert noted that many industries are struggling to fill positions and there are more job openings than unemployed people.

Santa Barbara County’s unemployment rate is lower than the state rate, and was 3.9% as of November.

On Jan. 5 the U.S. Bureau of Labor Statistics reported that employment increased by 216,000 in December while the unemployment rate remained at 3.7%. They reported that government, health care, construction and social assistance saw an increase in employment while warehousing and transportation lost jobs.

Additionally the U.S. Chamber of Commerce reported on Jan. 9 that there are not enough workers to fill the number of job openings.

Rupert said this could be caused by companies looking for specific skill sets and workers being more picky in the type of job, working conditions, and pay that they get. 

“We’re seeing a big turnaround from history, where usually there’s more unemployed people than  jobs,” Rupert told Noozhawk. “I think some of that again, is going to work itself out.”

This isn’t the end of wage increases. In November, Californians will vote on if they want to raise the minimum wage to $18 an hour. If passed, the minimum wage would immediately go to $17 an hour and then $18 an hour in January of 2025.