California minimum wage agreement reached

California Governor Edmund G. Brown Jr. joined legislators and labor leaders on March 28 to announce a landmark agreement that makes California the first state in the nation to commit to raising the minimum wage to $15 per hour statewide.

The Governor was joined in the announcement by: Senate President pro Tempore Kevin de Leon; California Labor Federation president Kathryn Lybarger; SEIU United Long Term Care Workers’ Union president Laphonza Butler; Burger King employee Holly Diaz; Senator Mark Leno; California Labor and Workforce Development Agency secretary David Lanier; United Domestic Workers of America executive director Doug Moore; Teamsters Union International vice president Rome Aloise; and United Healthcare Workers West executive board member Georgette Bradford.

Under the plan, the minimum wage will rise to $10.50 per hour on January 1, 2017, for businesses with 26 or more employees, and then rises each year until reaching $15 per hour in 2022. This plan also recognizes the contributions of small businesses—those with 25 or fewer employees—to California’s economy and allows additional time for these employers to phase in the increases.

The purpose of the plan is to increase the minimum wage over time, consistent with economic expansion, while providing safety valves—known as “off-ramps” —to pause wage hikes if negative economic or budgetary conditions emerge. The Governor can act by September 1 of each year to pause the next year’s wage increase for one year if there is a forecasted budget deficit (of more than one percent of annual revenue) or poor economic conditions (negative job growth and retail sales).

The scheduled wage increases, if no increases are paused, would be as follows:

  • $10.50 per hour on January 1, 2017, for large businesses (26 employees or more) and on January 1, 2018, for smaller employers (with 25 employees or less)
  • $11 per hour on January 1, 2018, for large businesses and on January 1, 2019, for smaller employers
  • $12 per hour on January 1, 2019, for large businesses and on January 1, 2020, for smaller employers
  • $13 per hour on January 1, 2020, for large businesses and on January 1, 2021, for smaller employers
  • $14 per hour on January 1, 2021, for large businesses and on January 1, 2022, for smaller employers
  • $15 per hour on January 1, 2022, for large businesses and on January 1, 2023, for smaller employers

Once the minimum wage reaches $15 per hour for all businesses, wages could then be increased each year up to 3.5 percent (rounded to the nearest 10 cents) for inflation as measured by the national Consumer Price Index.

This plan also phases in sick leave for In-Home Supportive Services workers starting in July 2018. Such workers would get one sick day in July 2018, with a second day added in the first July following $13/hour implementation for larger businesses, and a third day added following $15/hour implementation.

Governor Brown signed AB 10 in September 2013 to raise California’s minimum wage 25 percent, from $8 to $10 per hour, effective as of January 1, 2016. There are approximately 7 million hourly workers in California, of which about 2.2 million earn the minimum wage.

The Governor’s minimum wage announcement follows an announcement by Secretary of State Alex Padilla on March 22 that an initiative to raise the minimum wage was eligible to go before the voters in the November 2016 General Election. The ballot initiative calls for an increase to $11 per hour in 2017, followed by $1 annual increases to reach $15 by 2021, and then increases based on the cost of living to be determined annually after that. (State of California, Office of the Governor, Press Release, March 28, 2016, https://www.gov.ca.gov/news.php?id=19359; Minimum Wage Fact Sheet, https://www.gov.ca.gov/docs/Fact_Sheet_Boosting_Californias_Minimum_Wage.pdf.)

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