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California Legislature Passes Historic Minimum Wage Increase

Minimum Wage IncreaseOn April 4th, Gov. Jerry Brown signed S.B. 3 into law, a historic measure by the California legislature which will raise the state’s minimum wage to $15/hour by 2022, followed by annual adjustments for inflation.  The impact of the bill will reach beyond just the 2.2 million California workers who currently make minimum wage: economists have estimated the move will raise wages for 5.6 million, or 1 in 3 workers statewide.  For example, many California teachers are likely to benefit, as they must be paid at least double the state minimum in order to be exempt from state overtime regulations.

The measure comes about as a legislative compromise in the face of a proposed ballot measure, which would have required the same increase with a quicker implementation.

The law provides for gradual annual increases over the next six years.  For businesses who have 26 or more employees, the minimum wage will increase to $10.50 on January 1, 2017 and to $11.00 by January 1, 2018, with yearly increases of $1.00 thereafter through 2022.  Employers with fewer 25 employees will have an additional year to implement each of the annual increases. The bill also features certain “safety valves” which allow the governor to pause the scheduled increase by September 1st of each year in the event of either a budget deficit of over 1%, negative job growth, or other indications of economic stagnation.  Finally, the new law includes a provision which will phase in paid sick leave for in-home health care workers starting in 2018.

While the California minimum wage is currently $10.00/hr, already the highest in the nation, workers across the state face some of the highest costs of living in the country.  Opponents of the increase argue that, while a $15.00 wage makes sense for cities in the San Francisco Bay Area and Silicon Valley, which in recent years have become some of the most expensive areas to live in the country, there could be negative consequences for workers in more rural regions like the San Joaquin Valley and Inland Empire.

However, many scholars have pointed out that, even in the least expensive regions, the current minimum of $10.00/hour is woefully insufficient to support the cost of living.  Among them is Amy K. Glasmeier, a professor of Economic Geography and Regional Planning at MIT, founding editor of the Cambridge Journal of Economics, and creator of the Living Wage calculator, which draws on data provided through government agencies in order to calculate what the “living wage” is in every corner of the country.  According to her work, even in one of the most affordable regions of the state—Modoc County—a parent hoping to support a spouse and two children would need to earn $21.67/hour working full-time in order to cover basic household expenses. (An interactive map is available here: http://ww2.kqed.org/lowdown/2015/11/05/calculating-the-real-cost-of-living-in-calfornia/).

California is not alone in recognizing the growing need to address wage inequality.  The state legislature of New York has also just recently approved a bill that would raise their state minimum wage to $15 in the coming years.  The federal minimum wage, currently $7.25, was last increased in 2009, nearly seven years ago. The Obama Administration supports a Congressional proposal to raise the federal minimum wage to $10.10.

While the full impact of the legislation is still an open question, many have argued the issue is greater than the sum of its economic effects.  As Los Angeles Assemblyman Sebastian Ridley-Thomas declared during the bill’s floor debate, “[t]his is an argument about economic justice. Justice is not something that can be negotiated or compromised.”

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