If you watch the news regularly, you probably heard that a deal was struck with the state’s largest labor unions to keep the $15/hour minimum wage off the ballot. Unions were gathering signatures to take the issue directly to California voters. One such initiative had already gained enough signatures to qualify. Instead, a bill was being introduced into the Legislature, with the Governor’s blessing, to gradually increase the minimum wage over the next six years, reaching $15/hour in 2022.

So, what will this mean and when?

The legislation reinforces California’s position as having the highest minimum wage of any state (though New York is also heading in that direction).
Here are the details:
• The current $10 statewide minimum wage would increase by 50 cents on Jan. 1 to $10.50 an hour.

• From there, it would rise to $11 in 2018 and subsequent dollar-a-year increases ending at $15 on January 1, 2022.

• Thereafter, cost of living-type increases are built in.
The legislation went through both houses on a rocket and was signed by the governor within ten days after the announcement of the deal with the unions. Apparently, legislative gridlock isn’t always a factor. Now, if they could just do that with the annual budget (but I digress)…

A (very) few bright spots:
• Governor Brown insisted on including ways to stop wage increases if the economy falters. There would be a temporary pause in the first few years of increases if California’s unemployment rate rises or if a deficit is projected in future state budgets.
• For companies with fewer than 26 employees, the increase is a little slower, reaching $15 on January 1, 2023.

The proposed increase disproportionately affects certain sectors, especially hospitality, non-profits and the care industry for children, disabled and elderly, which rely heavily on entry-level workers. Not surprisingly, employee groups are lauding the move, while business interests are very concerned about the effect on individual businesses as well as the economy in general. Though pleased the increase will not go directly to voters, which could have resulted in faster phase-in with no business downturn protection, The California Restaurant Association., the Los Angeles Area Chamber of Commerce, the California Hotel and Lodging Association and the California Retailers Association are all weighed in on the proposal, expressing concerns over the loss of competitive advantages and driving a move to employing fewer people. As observed by Ruben Gonzalez, senior advisor for strategic affairs at the Los Angeles Area Chamber of Commerce (quoted in The Los Angeles Times: “Everyone wants higher wages for folks, but if you can only raise prices so much … you’re going to be forced to cut hours, cut employees, change your business model and frankly, automate.”

The challenges to California small businesses continue unabated.

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