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The Minimum Wage in California

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Mark McKenzie, Staff DirectorCalifornia Senate Appropriations Committee

September 6, 2016

History of the California Minimum Wage

First implemented in 1916.

Wage rate was $0.16 per hour.

Increased 3 times (by a total of 106 percent) during the 1st four years.

Wage rate was $0.33 per hour in 1920.2

History of the California Minimum Wage

Federal minimum wage took effect in 1938.

National wage rate was $0.25 per hour.

California’s minimum wage started 22 years earlier than the national wage, and was 32 percent higher in 1938.

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History of the California Minimum Wage

California's minimum wage increased a total of 27 times since 1916.

Wage rate is $10 per hour as of January 1, 2016.

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History of the California Minimum Wage

A growing number of California cities have enacted local minimum wage ordinances, including Los Angeles, San Francisco, Oakland, Berkeley, Emeryville, Mountain View, Richmond, and San Jose.

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History of the California Minimum Wage

Proposition 210 (1996): 3-step increase from $4.75 to $5.75 per hour by March 1, 1998.

AB 1835 (Lieber): 2-step increase from $6.75 to $8 per hour by January 1, 2008.

AB 10 (Alejo): 2-step increase from $8 to $10 per hour by January 1, 2016 (current rate)

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The 2016 CaliforniaMinimum Wage Compromise

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SB 3 (Leno), in a Nutshell…

Brings California minimum wage from current $10/hour to $15/hour, over the course of 6 years.

Provides for annual “indexing” to account for impacts of inflation, after $15 level is reached.

Provides for an “off-ramp”/pause in climb to $15, if economic or budgetary conditions deteriorate.

Provides paid sick leave for In-Home Supportive Services (IHSS) workers, over time, consistent with other state workers.

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Schedule to Reach $15

Current law: $10.00

January 1, 2017: $10.50

January 1, 2018: $11.00

January 1, 2019: $12.00

January 1, 2020: $13.00

January 1, 2021: $14.00

January 1, 2022: $15.00

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Small Businesses

Businesses with 25 or fewer employees have a one-year lag in the climb to $15:

January 1, 2018: $10.50

January 1, 2019: $11.00

January 1, 2020: $12.00

January 1, 2021: $13.00

January 1, 2022: $14.00

January 1, 2023: $15.00

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Potential “Pause”/Off-Ramp on the climb to $15

Governor can suspend the climb for one-year if either of two tests is met:

• Economic: If job growth for previous 3 or 6 months is negative and retail sales tax receipts for previous 12 months is negative.

• Budgetary: If state is projected to have a budget deficit in the current-year fiscal year or either of the next two years. – “Deficit” must be at least 1% of total General Fund revenues

and transfers. – Can only be used twice during the climb to $15.

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Future “Indexing”

• To account for the impacts of inflation, there will be an annual increase in the wage.

• The “indexing” will begin one-year after the $15 level is reached (in 2024, unless there is “pause”).

• Based on U.S. Consumer Price Index (CPI).

• No reduction in wage if CPI is ever negative ($15 is a “floor” ).

• No “pause”/off-ramp on indexing, after $15 level is reached.

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Paid Sick Leave for IHSS Workers

• IHSS workers will get 3 days of paid sick leave, consistent with provisions of law for other state workers.

• 3 days would be phased in:

– Day 1: July 1, 2018

– Day 2: when minimum wage reaches $13 (in 2020, unless paused).

– Day 3: when minimum wage $15 (in 2022, unless paused).

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Comparison to SEIU-UHW Initiative(had already qualified for November)

• Schedule to reach $15: 2021 (one-year earlier than compromise).

• Small businesses: No provision.

• Indexing: Similar, using California CPI.

• “Pause”/Off-Ramps: No provision.

• Paid sick leave: No provision.

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Compared to SEIU-State Council Initiative(in circulation)

• Schedule to reach $15: 2020 (two years earlier than compromise).

• Small businesses: Similar, slightly different schedule.

• Indexing: Similar, using California CPI.

• “Pause”/Off-Ramps: No provision.

• Paid sick leave: Includes IHSS workers; increases from 3 to 6 days for all workers.

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Considerations weighed by CA’s Legislative Leaders

Legislature enacts a major measure to help 5.6 million Californians (32% of the state workforce)—first $15 wage in the nation.

Avoids November ballot fight.

Same overall goal as initiatives but with nuances, such as slower climb to $15 and “off-ramps” to take into account poor economic or budgetary conditions.

Annual “indexing” intended to avoid future fights to raise wage.

Deal includes paid sick leave for IHSS workers, which was not part of one of the initiatives.

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Final Actions

• Compromise was a single, majority-vote, bill.

• Compromise was amended into Senate Bill 3 (Mark Leno, D-San Francisco).

• SB 3 was signed by the Governor on April 4th, 2016.

• Unions sponsoring the two initiatives dropped their measures as soon as the compromise was signed by the Governor.

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Questions?

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