GRASS VALLEY, Calif. — California’s minimum wage workers can expect a pay increase in the next several years, thanks to legislation recently signed by Gov. Jerry Brown.
AB 10 was passed Sept. 25 and raises the minimum wage from $8 an hour, established in 2008, to $9 an hour as of July 1, 2014, and $10 an hour as of Jan. 1, 2015.
The increase means increased pay for low-wage employees, but challenges for business owners who will be forced to spend more of their budget on salaries.
“As a business owner, it is going to hurt the economy in the long run because we have to pay a higher salary, and because of that, we’ll have to cut back hours or increase our prices,” said Cindy Smith, owner of Beach Hut deli in Grass Valley.
Implementation of the increase, though gradual, does not fall in line with the economic times, Smith said.
“I just don’t think it’s a good thing overall,” she said. “It’s not the best timing, either. It’s going to help the first year that we don’t have to go straight up to $10 an hour, but I don’t see the economy making any kind of turn-around in the next two years to warrant a $2 an hour raise for minimum wage.”
Supporters argue this bill will strengthen and depoliticize California’s minimum wage by providing a modest increase to millions of struggling Californians.
Proponents cite the California Budget Project, which calculated that between 1968 and 2008, the purchasing power of California’s minimum wage fell by 24.8 percent.
Proponents also bring attention to the Public Policy Institute of California’s findings that the state is experiencing the largest income gap in at least 30 years, exacerbated by the fact that California’s current minimum wage, when adjusted for inflation, is less than the minimum wage workers earned in 1979.
Peggy and Bob Wright, owners of Treats, an ice cream and sweets shop at 110 York St., Nevada City, say they pay employees more than $8 an hour already.
“If we find employees we want to keep, we continue to bump them up,” said Peggy Wright. “The longer they’re there and trained, the more valuable they are, and it’s hard to get by on $8 an hour. I think it would be nice if employees working full time could support themselves earning a living wage.”
Opponents say California’s economic recovery is still in the infancy stage and that a minimum wage increase in 2014 will negatively impact any economic recovery by limiting available jobs or creating further job losses.
Opponents also argue that although the initial $0.25 increase may seem minimal, combined with the unknown increased costs associated with the implementation of the Affordable Care Act, the tax increases approved under Proposition 30 and the partial reduction in federal tax credit in 2014 could force struggling employers to reduce their costs in other areas, such as labor, or pass such increased costs on to consumers through higher prices.
Opponents state that a study conducted by the National Federation of Independent Business found that depending on the rate of inflation in future years, enacting this bill could result in 46,000 to 68,000 lost jobs in California by 2023, and a reduction in real output of somewhere between $4.7-$5.7 billion.
Opponents note that the Federation study also claims that the increase in minimum wage might cause employees currently earning above the minimum wage to put pressure on their employers for raises in order to maintain the wage premium between them and the lowest-earning individuals in the economy.
According to the State Controller’s Office, the state government employs approximately 4,500 minimum wage workers, mostly student assistants and seasonal employees.
Based on a 40-hour work week, this bill results in increased salary costs of $585,000 in 2013-14, rising to $16.3 million in 2017-18 (General Fund and various special funds). Payroll taxes would increase by $1.2 million in 2017-18 upon full implementation of the wage increase.
Additionally, there would likely be increased state budget costs for workers currently paid between $8.01 and $10 per hour, the extent of which is unknown.