Wage Hike Will Cost CA Taxpayers $3.6B

Raising the minimum wage in California to the highest statewide level in the nation would eventually cost taxpayers an additional $3.6 billion a year in higher pay for government employees, legislative analysts determined.

The estimate was disclosed as an Assembly committee gave initial approval Wednesday to boosting the wage to $15 an hour by 2022. The full state Assembly and Senate could vote on the deal between Democratic Gov. Jerry Brown and labor unions as early as Thursday. The financial projection does not examine the broader economic impact that the proposed wage hike would have on businesses in the state.

The University of California, Berkeley, Center for Labor Research and Education projected the ripple effect of a $15 minimum wage on higher earners could raise pay for 5.6 million Californians by an average of 24 percent.

Latinos would benefit most because they hold a disproportionate number of low-wage jobs, the university researchers said.

At $10 an hour, the current minimum wage in California is tied with Massachusetts for the highest among states.

Assembly Appropriations Committee Chairwoman Lorena Gonzalez, D-San Diego, said minimum wage has not kept up with people’s needs.

“Even with a full-time job, they’re relying on food stamps and public housing and free lunch programs,” Gonzalez said before the committee voted 12-7 to advance the measure. “We are subsidizing all of these businesses who are not providing enough for people to live on.”

First-year costs to the state would total $19 million, when the minimum pay bumps to $10.50 on Jan. 1, according to the legislative analysis. The proposal would then increase the minimum wage to the next whole dollar amount in each of the five years, with a one-year delay allowed for businesses with 25 or fewer employees. The wage would automatically rise to keep up with inflation after 2023.

Contrary to other proposals to raise the minimum wage above $10, the current plan allows the governor to stall increases in times of economic or budgetary downturn. Business leaders and economists fear the wage hike would prompt layoffs and cause price increases that would outweigh benefits. Matthew Sutton of the California Restaurant Association, an opponent, told lawmakers the $15 minimum wage had not been adequately studied.

“In a three-day period, you’re looking at doing this huge experiment of $15,” Sutton said.

The bill is intended to replace efforts to put a $15 minimum wage on November ballots. California extended three annual paid sick days to 6.5 million people in 2014 but excluded in-home care providers due to cost concerns. The wage agreement would add those workers into the law, allowing them one paid sick day per year beginning in 2018, two days after 2020 and three days after 2022.

The legislative analysis found that would cost the state $468,000 in 2018 and up to $227 million in 2022.