Remember the unforeseen secondary effects I mentioned in my posts about Los Angeles’s great experiment in improving income inequality by raising its city minimum wage from $9.60 to $15 (and indexing it to CPI)? Here’s one of them I didn’t think of:
The higher minimum wage in the city of Los Angeles may harm the very poor families it is intended to help, according to members of the child care planning committee that advises the county.
The L.A. City Council voted Tuesday to raise the minimum wage from the current $9 an hour to $10.50 on July 1, 2016 and then in annual steps up to $15 on July 1, 2020.
City leaders proposed the increase to address California’s income inequality and its high cost of living. But there may be unintended consequences for both child care providers and the low-income earners many of them serve.
Most people in the child care field agree that preschool teachers and child care workers, among the lowest paid professions, need the higher pay. However, administrators of child care centers say they don’t receive enough money per child to cover the scheduled wage increases.
Richard Cohen, who chairs the Los Angeles County Childcare Planning Committee, said child care providers citywide don’t have many options in covering the additional costs, particularly if they receive state payments to provide subsidized care for low-income families.
None of that means that movie stars or professionals, say a pathologist and a lawyer who’s a partner in a top law firm, won’t be able to afford child care. It means that a single mom who earns $25 an hour ($50,000 a year) won’t be able to afford child care. It will no longer make financial sense for a couple, one of whom earns $50,000 and the other $30,000 a year, to keep that lower income coming in. That doesn’t mean they won’t do it just that it won’t make financial sense.
I’m not predicting any of this will happen. Just pointing out that it might.
Speaking from experience, that is a real concern. One reason I was a stay-at-home Dad (except for my reserve duty) for eight years is because of child-care costs. It simply didn’t make financial sense. We calculated that, taking everything into account, I’d have to make $20-25k a year just to break even. It’s not as expensive now for us since two kids are in school and the third is starts school in the fall. I was also fortunate that I got a job that made enough to justify the costs when we moved back here to Florida. We’ll move again in a year or two and we’ll have to see what happens.
Indexing it to the CPI will stair-step the problem, and this is why the minimum wage only works for a short period of time. Otherwise, it would still be $0.25/hr.