UC Berkeley Layoffs Ignite Debate Over Minimum Wage Increase and Impact on Higher Education

Posted By Donna Fuscaldo on May 2, 2016 at 4:00 pm
UC Berkeley Layoffs Ignite Debate Over Minimum Wage Increase and Impact on Higher Education

You get what you ask for may be what some people are thinking after the University of California-Berkeley announced it would lay off 500 staffers. After all, the university and others like it were supporters of raising the minimum wage to $15 an hour in the state of California. UC Berkeley said wages of 5.6 million workers would increase by an average of 24 percent as a result.

But appearances aren’t everything. And while the minimum wage hike may play a role in rising costs at colleges across the state, the woes at UC Berkeley has more to do with losses and budget issues, than paying staffers $15 an hour.

“It’s ironic that a university whose scholars downplay the job losses resulting from minimum wage hikes is now seeing layoffs itself, but I find it difficult to believe that the minimum wage hike pushed them over the edge,” says Preston Cooper, a policy analyst at The Manhattan Institute for Policy Research. “My guess is that the layoffs are part of a concerted, necessary effort to control costs, not a byproduct of California’s minimum wage increase.”

The University of California-Berkeley has been reeling from budget troubles for some time, facing a $150 million deficit. The move to lay off 6 percent of the staff, or 500 workers, over two years is expected to save the university $50 million. The main reason for the school’s troubles: cuts in state support, a rise in the cost of healthcare and pensions for its employees and an increase in enrollment, says Mark Kantrowitz, publisher and vice president of strategy at Cappex.com, noting that construction costs required to earthquake-proof the campus also weighed on the budget. All of that put together is resulting in the job cuts for now.

Minimum wage increase could pressure colleges in the future

Raising the minimum wage is a battle being fought in many states around the country. Supporters of hiking the minimum wage argue it will boost the fortunes of millions of workers and narrow the wage gap, while detractors say it will actually result in more workers losing jobs. Even without laws on the books, some colleges have raised the rate they pay their hourly workers above the minimum wage for their state. In May of 2015, Duquesne University in Pennsylvania increased the minimum wage to $16 per hour for its staff, while in January of 2015, Duke University in North Carolina announced it would raise the minimum wage to $12 per hour, up from $10.91 per hour, affecting around 400 employees. Both moves exceed their state’s minimum wage levels, which stand $7.25 an hour.

Meanwhile, earlier this year Oregon raised its minimum wage to as high as $14.75. When the law goes into effect in July, the minimum wage will increase 50 cents to $9.75 an hour and will eventually rise to $14.75 in urban areas, $13.50 in midsize counties and $12.50 in rural areas by 2022. The increase in the minimum wage will cost the University of Oregon an additional $2 million and Oregon State University an extra $4 million. Because the schools employ a lot of students in minimum wage jobs, some of them could be at risk for layoffs as the colleges wrestle with the increased expense to operate.

UC Berkeley student workers could face cuts

A byproduct of the minimum wage hike could be layoffs for college student workers in California schools similar to what may play out in Oregon. Unlike in many states where student workers are exempted from minimum wage laws, that’s not the case in California. That could create a situation where schools are forced to cut back on student workers to deal with the increase in the pay rates. “Oregon State University has suggested that they would cut 650 to 700 student positions to cope with Oregon’s recent minimum wage hike,” says Cooper. “We can probably expect to see similar things happen in the UC system.”

While UC Berkeley’s recent layoffs may not be a direct result of an increase in the minimum wage, it remains to be seen how it will play out across other college campuses, particularly community colleges that hire lower-paid staff. After all, $15 minimum wage would be unprecedented and would mark an even higher amount than the pay at even some of the schools that have proactively raised the minimum wage.

By most accounts, colleges and universities are better able to absorb an increase in the minimum wage than businesses, but because $15 an hour is unprecedented, there’s no guarantee it won’t eventually catch up with them. “It’s uncharted territory. So it’s possible that such a high minimum wage could start causing job losses in sectors we don’t normally think of as affected by the minimum wage, such as public colleges,” says Cooper. “Since we don’t have any evidence on such high minimum wages, it’s difficult to say precisely what the effect will be.”

Donna Fuscaldo
Donna Fuscaldo is a freelance journalist hailing out of Long Island, New York. She has also written for Bankrate.com, Glassdoor.com, SigFig.com, FoxBusiness.com, Business Insider, Dow Jones Newswires and the Wall Street Journal.

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