Minimum Wage California – Assembly Bill 10

Assembly Bill 10: Hope for Low-Wage Workers
Minimum Wage California

California’s minimum wage was set at $8.00 per hour in 2008 and has since not been changed for the last six years. However, Assembly Bill 10 could change all of that. The proposed bill seeks to increase the state’s minimum wage to $8.25 in 2014, $8.75 in 2015 and $9.25 in 2016. Then, as of January 1, 2017 the minimum wage will be automatically adjusted upward annually based on the state’s inflation rate. In years of no inflation, or deflation, the wage will stay the same. The purpose of the bill as stated by Democratic Assemblyman Luis Alejo, both sponsor and author of the bill, is to maintain employee purchasing power.

On April 24, 2013 the bill was passed by California’s Assembly Labor and Employment committee. However, the real hurdle comes next when the bill is up for approval by the Assembly’s Appropriations committee. In the last two years Alejo has proposed two similar minimum wage bills that passed the initial committee hearing only to die in the appropriations committee, which considers the financial impacts on the state.

While labor unions and other pro-labor groups are in favor of the bill and believe a minimum wage increase will benefit low-wage employees, there are others who strongly disagree and are actively working to keep the bill from becoming law.

The California Chamber of Commerce as well as all of the state’s major employer organizations, including the California Restaurant Association and the Western Growers Association, oppose the bill. The Chamber of Commerce has gone as far as placing the bill on its annual “job killer list” because of the negative impacts it perceives it to have on the number of low-wage jobs.

The underlying concern of the opponents is due to the increase in the cost of doing business. Employers will either have to absorb the increased labor costs themselves or pass them on to consumers in the form of a price increase, which will result in a decrease in sales. They believe this will actively harm both the employer’s business and the low-wage employees. In particular, they argue that it will have a negative impact on entry-level and less experienced job seekers because it will limit the number of jobs available and even result in job loss. They refer to a study by the National Federation of Independent Businesses that claims the bill will result in 48,000 to 68,000 lost jobs by 2023. They claim employers will eliminate those positions because they will be unprofitable at the increased rate. In turn, this will only stunt the state’s economic recovery.

On the other hand, labor unions and other pro-labor groups are in favor of the bill.  Over the next year, economists predict an increase in the price of wheat, corn and the animals that feed on them. In turn this will result in a forecasted six percent increase in the cost of food. Further, they predict the increase in the price of cotton will lead to a 10 percent rise in the cost of clothing. Not to mention, the continued rise of the price of oil. As the cost of goods and services increases, the purchasing power of minimum wage workers declines each year. Proponents of the bill argue that an increase in minimum wage is necessary in order to bridge the inequality gap and allow low-wage workers to keep up with inflation.

As far concerns of negative impacts on the state’s economy, Alejo turns to cities such as San Francisco and San Jose that have enacted higher minimum wages themselves in the absence of any state action for the past six years. Both cities have implemented a $10 per hour minimum wage with no evidence indicating that higher minimum wages have resulted in economic harm.

On the contrary, the California Labor Federation believes the bill will ensure economic security. First, it will make it will decrease reliance on government assistance through programs such as Food Stamps. Next, it will generate more consumer spending which will help the economy. As minimum wage workers make more money they are going to spend it—they cannot afford to save. Finally, opponents ignore the benefits of increased minimum wage. It will not only boost employee moral but it will also help businesses retain employees. This will result in fewer costs for employers associated with hiring and training new workers.

The basic arguments are that minimum wage could either help workers and the economy or hurt businesses and make it harder for people to both find and keep jobs. The dispute over the bill is due to different views on how to spur economic growth. On one side, those opposing the bill believe that increased wages will decrease the number of jobs and adversely affect the economy. On the other side, those in favor claim that increased wages will result in a rise in consumer spending benefitting the state’s economic recovery.

However, what remains undisputed is that currently one in eight workers in California earn less than $8.80 per hour. With evidence of increasing costs of goods and services and an unchanged minimum wages for six years, something must be done to ensure low-wage workers can keep up with the economy.

California’s Minimum Wage – Assembly Bill 10