Consumer Federation of California

In a nod to the growing class of Californians toiling at the bottom of the income scale, Gov. Jerry Brown put his signature on a bill Wednesday that will increase the minimum wage to $10 an hour in less than three years.

During a ceremony in downtown Los Angeles, Brown called Assembly Bill 10 a matter of justice that will help close the gap between “workers at the bottom and those who occupy the commanding heights of the economy.” It is the first rate hike since 2008, when the country’s economy was declining into the Great Recession.

Unemployed former restaurant worker Martha Castaneda was among those who welcomed the news. “That will help a lot of people,” said Castaneda, 27, who lives with her parents in Wilmington. “It’s a good thing because the … price of gas, food, everything is expensive.” Supporters say the increase will put more money in consumers’ pockets, enhance spending and boost the overall economy.

Federal law sets a minimum wage of $7.25 per hour, but California is among 19 states and the District of Columbia that have a higher minimum wage, now $8 an hour. The first rise will be to $9 on July 1, 2014, and the second to $10 on Jan. 1, 2016.

However, the legislation is controversial, especially among many business leaders and their supporters in Sacramento, who say the increase will result in higher expenses that businesses will pass on to consumers. Detractors also said the new law will force businesses to cut jobs.

“They are hurting the people that they think they are helping,” said Stuart Waldman, president of the Sherman Oaks-based Valley Business and Commerce Association. “A 25 percent wage increase over two years is pretty big. It’s going to affect everything. So at the end of the day, nobody is going to benefit from this.”

The California branch of the National Federation of Independent Business said the new law effectively represents one more tax increase hurting small-business owners.

“Small-business owners’ hopes have once again been dashed with a stroke of Gov. Brown’s pen,” Executive Director John Kabateck said in a statement. “After spearheading the effort to raise our state income tax to the highest in the nation, Governor Brown vowed to be more prudent this year. Increasing the minimum wage by a staggering 25 percent violates that promise and will only cement California’s status as the worst place to start a business.”

Despite warnings of mass job cuts statewide, a hike in the minimum wage to $10 an hour would not significantly reduce California’s employment, said John Husing, a Redlands-based economist who studies the Inland Empire.

“I’ve watched this (bump-ups in the minimum wage) time after time and what happens is food industries and other labor-intensive businesses try to figure out how to replace workers,” Husing said. “Then they realize they can’t and end up increasing prices slightly.”

Rather than layoffs, business owners will likely raise their prices to adjust, Husing said.

The price increases work for businesses because their competitors are in the same situation and they also will increase prices slightly, he said.

Sylvia Allegretto, a UC Berkeley labor economist who supported an increase in the minimum wage, said AB 10 did not raise the rate soon enough and should have retained language to increase the bottom wage annually by the rate of inflation — known as indexing. That provision was stripped out before the state Senate passed it.

“It’s good news, especially after all these years of the wage being stagnant and, in real terms, declining,” Allegretto said. “I would have liked to see a shorter time frame to get to $10 and also to have indexing at that time. … And it will start its annual erosion because it wasn’t indexed.”

It was no surprise that some sort of minimum wage rise would occur because the state had gone without an increase for so long, said Randy Gordon, president and CEO of the Long Beach Area Chamber of Commerce. Gordon expressed relief over the removal of the inflation indexing provision, which he said would have created added uncertainty. “That is better because this way the small-business owner knows exactly what’s coming and when it’s coming and they can prepare for that,” Gordon said. “It could have been worse but we still are concerned about its impact on small businesses.”

While a rise in the minimum wage will help many low-wage workers, it will not directly help those without a job like Castaneda, the former restaurant worker living in Wilmington. In August, Castaneda was one of about 30 people who walked off their jobs at Ramona’s Mexican Food Products in Gardena because they demanded higher pay and better conditions. Castaneda, who used to earn $9 an hour as a restaurant supervisor at Ramona’s, is now looking for warehouse work through temp agencies.

“I’ve applied at 10 different agencies and I call every day,” she said. “I have been calling, but they say right now it’s particularly slow. But I’m just going to keep on looking.”