California Passes Highest Minimum Wage in the Nation

by Gary Toebben

Yesterday, Governor Brown and legislative leaders gathered in Los Angeles to sign a bill raising California's minimum wage to $15 an hour - the highest in the country - by 2022. While discussions had been ongoing in the Capitol about a compromise to ward off two competing ballot measures for the November election, the language in the bill that was signed yesterday did not exist two weeks ago.

A deal was finalized over Easter weekend between Sacramento leaders and labor, with no input from the business community on the impacts this may have on us or the economy. The deal flew through the Assembly and Senate with little to no public hearing or debate. Don’t let it ever be said Sacramento cannot move fast when they really want something.

The details of the plan are as follows:

• Raise the minimum wage from the current $10, to $10.50 an hour on Jan. 1, 2017.
• Raise to $11 on Jan 1, 2018 and then an additional $1 each January until 2022.
• Businesses with 25 employees or less have an additional year to comply with each step.
• The Governor can utilize an “off-ramp” twice to delay the next scheduled raise if certain economic or budget conditions are met.
• After the hourly wage hits $15 an hour, it will be indexed to national CPI.
• An additional sick day is added in July 2018, a second in the July following the $13 an hour implementation and a third in July 2022, which will bring the required days of sick leave to six.

The state implementation schedule does not pre-empt any city or locality that has gone further. Thus, employers in the City of L.A. are subject to the minimum wage schedule approved by the City Council last year. Employers in the unincorporated parts of L.A. County are subject to the ordinance passed last July by the Board of Supervisors, which mirrors the schedule for rate increases passed by the City of L.A.

According to a legislative analysis released last week, increasing the minimum wage 50 percent will cost taxpayers an additional $3.6 billion for higher pay for government employees. The report did not examine broader impacts the increase would have on all employers in the state. Combined with the most recent wage increase, which was fully implemented in January of this year, businesses with minimum wage employees will have been hit with an 87 percent increase in labor costs in eight years.

As a recent Los Angeles Times editorial critiquing the deal pointed out, "what makes sense in Brentwood may not work for Barstow." California is a diverse, sprawling state with a myriad of industries and economic pressures. This legislation ignores those differences in favor of a one size fits all approach, without a nod to any sort of mitigation to the impacts businesses will face. Businesses and non-profits cannot simply absorb a 50 percent increase in wages. Costs will be passed on to consumers, employee hours will be cut and we'll see an increase in automation replacing low skill jobs. Some will go out of business or move to another state.

Gov. Brown himself told the Sacramento Business Journal earlier this year that “raise the minimum wage too much and you put a lot of poor people out of work.” Our legislative leaders took just four days.

And that's The Business Perspective.