California’s minimum wage would rise to $10 an hour within three years under a bill passed Thursday by the state Legislature, making it one of the highest rates in the nation.
Washington state currently has the top minimum wage at $9.19 an hour, an amount that is pegged to rise with inflation. Some cities, including San Francisco, have slightly higher minimum wages.
The state Senate approved AB10 on a 26-11 vote and the Assembly followed hours later on a 51-25 vote, both largely along party lines. Gov. Jerry Brown indicated earlier this week that he would sign the bill, calling it an overdue piece of legislation that would help working-class families.
The bill would gradually raise California’s minimum wage from the current $8 an hour to $10 by 2016.
It would be the first increase in the state’s minimum wage in six years and comes amid a national debate over whether it is fair to pay fast-food workers, retail clerks and others wages so low that they often have to work second or third jobs.
Democrats said the bill by Assemblyman Luis Alejo, D-Watsonville, would help workers left behind during the recent recession.
“It simply gives hardworking Californians the dignity and respect to provide for their families with their own hard-earned wages,” Alejo said in arguing for the bill before his Assembly colleagues.
Sen. Marty Block, D-San Diego, said raising the minimum wage will stimulate the economy by giving lower-wage workers more money to spend.
“They’re not going to put it into a hedge fund,” he said.
But Republican lawmakers said it would do the opposite, encouraging businesses to cut jobs and automate.
“This is a classic example with how out-of-touch state leaders are,” said Sen. Jim Nielsen, R-Gerber.
Sen. Ted Gaines, R-Rocklin, said liberals want to raise the cost of tobacco to discourage its use without realizing the same principle applies to labor: “If you make something more expensive, people will buy less of it.”
The California Chamber of Commerce opposed the bill, saying it will drive up businesses’ costs by ratcheting up other wages and workers’ compensation payments.
“We have it tagged as a job killer, given the increased costs businesses will be faced with,” Jennifer Barrera, an advocate for the chamber, said before the vote.
Federal law sets a minimum wage of $7.25 per hour, but California is among 19 states and the District of Columbia that set a higher state minimum wage.
The federal minimum provides $15,080 a year assuming a 40-hour work week, which is $50 below the federal poverty line for a family of two. More than 15 million workers nationally earn the national minimum, which compares to the median national salary of $40,350, according to the U.S. Bureau of Labor Statistics.
President Barack Obama has sought an increase of the federal minimum wage to $9 an hour. San Francisco currently has the nation’s highest minimum wage at $10.50 an hour.
California’s minimum wage would increase to $9 an hour next July 1 and to $10 on Jan. 1, 2016. The bill does not index the rate to inflation, however, meaning it would remain at $10 per hour unless the Legislature raises it again in the future.
Washington and other states that index minimum wage rate hikes to inflation each year would, over time, outpace California’s rate unless the state made an adjustment.
A $10 minimum wage would increase earnings for a projected 2 million Californians by $4,000 a year and put $2.6 billion into the economy, Assembly Speaker John Perez, D-Los Angeles, estimated in a statement supporting the increase.
Opponents say businesses would suffer because owners also face voter-approved increases in sales and income taxes, and because of the uncertain costs of the federal Affordable Care Act.
Businesses are likely to cut jobs, increase consumer prices or both, they argue, citing a study by the National Federation of Independent Business. The group projects that mean the loss of between 46,000 and 68,000 jobs by 2023, depending on other factors including inflation.
MEGHNA CHAKRABARTI, HOST:
This is HERE AND NOW.
Two coasts, two different decisions on the minimum wage. Washington, D.C. Mayor Vincent Gray has vetoed a living wage bill that would have raised wages for some retail employees to $12.50 an hour. Over in California, however, legislators passed a bill to raise the minimum wage to $10 by 2016. Governor Jerry Brown said he'll sign it, giving California the highest minimum wage in the country. The state's unemployment rate is 8.6 percent, a full percentage point above the national rate, so will the wage increase have an effect, positive or negative, on the Californian economy?
With us is Scott Detrow, Sacramento bureau chief for HERE AND NOW contributor network station KQED. So, Scott, lay out the context for us. California already has one of the highest minimum wages in the country.
SCOTT DETROW, BYLINE: That's right. California already has one of the highest minimum wages in the country at $8 an hour. Over the next couple of years, this would raise that to $10. Next July, it would go up to $9, and in the beginning of 2016 it would go to $10 an hour. That's higher than any other state has it right now. Washington state currently is in the lead at $9.19 cents.
CHAKRABARTI: OK. So is this the right time, though? I mean, what have people been saying in Sacramento because the California economy has been in the doldrums for some time?
DETROW: Well, the supporters of this measure kind of flipped that on its head and say, look, a lot of people lost their jobs during the recession. They took jobs that paid less, that had less hours than they were used to. And this is really going to help out the people who are making minimum wage right now.
And, of course, the other side of that argument from the business community is that the businesses who would be paying this money out who would have to spend more on payroll than before have been very slowly recovering. And if they're doing well, they're doing well by a very small margin. And this is going to set them back.
CHAKRABARTI: But on the flipside, I imagine that business owners and the business lobby would say that and have said that increasing the minimum wage is a job killer. And that is a concern in California whose unemployment numbers haven't been great either.
DETROW: That's right. California has an 8.7 percent unemployment rate. That's higher than the national average. And California's wealth is really distributed in a way that while the big cities on the Coast tend to be doing well, the inland parts of the state, the kind of middle valleys had a really tough time recovering from this recession. So there are certainly a lot of people making minimum wage in that part of the state who are looking forward to this. But at the same time, there are a lot of businesses that have had a hard time getting through the last few years.
CHAKRABARTI: Now we've got some tape here that you've given us from Ken DeVore of the National Federation of Independent Businesses basically talking about what he thinks the impact would be on low-wage workers in California.
KEN DEVORE: Yes, some of the employees are going to end up with more money in their pockets, but I believe there will be fewer of those employees now, or people working fewer hours.
CHAKRABARTI: So persistent underemployment or even making the underemployment problem maybe worse there. But you mentioned that the state of Washington which, until California passed this measure, had the highest minimum wage in the country. Did Californian's look up north and say, hey, well, you know, what's happened to Washington?
DETROW: Yeah. Actually, both of California's northern neighbors have higher minimum wages. Oregon and Washington are both above California right now, around $9 an hour, and both of them have a better economy right now. Washington state's unemployment rate is a full two points lower than California's. So the supporters of this measure were saying, look, the idea that increasing the minimum wage is going to suddenly tank the economy is not true. Just look up north to us.
But the main argument from the business community is not only an increase in the minimum wage that's concerning them. It's the rapid increase, a 25 percent hike over a two-year window. And this bill was actually amended over the course of the process here to speed up and increase that hike in the wage from where it was before.
CHAKRABARTI: Scott Detrow is Sacramento bureau chief for KQED, a HERE AND NOW contributor network station. Scott, thank you much.
DETROW: Hey, thanks for having me. Transcript provided by NPR, Copyright NPR.
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