Consumer Federation of California

California’s minimum-wage earners are one step closer to seeing their pay tied to the cost of living, a goal that advocates for low-income workers have sought for years.

Under a bill awaiting action in the Senate, the minimum wage, currently $8 per hour, would be raised by 25 cents per hour next year, then continue to increase pay step-by-step to $9.25 per hour by 2016.

The bill, AB 10 by Assemblymember Luis Alejo, D-Salinas, earlier passed the Assembly in a 45-to-25 vote, mainly along party lines. The Assembly is controlled by Democrats.

By 2017, the state’s minimum wage would be adjusted annually to the rate of inflation, pegging it to the cost of living according to the California Consumer Price Index. The last time California boosted its minimum wage was in 2008, when the hourly pay rate increased by 50 cents to $8.00.

‘This legislation is long overdue, considering the last time we saw a raise in wage was years ago,’ Alejo said. ‘Since then, we’ve seen gas prices, utilities, and other basic living expenses go up but not the average pay rate.’

The debate persists whether seeing an increase in the wage of those working the lowest paying jobs would actually reduce the amount of jobs opportunities for these individuals. Estimates vary, but perhaps 5 percent of California workers currently earn at or below the minimum wage, or about 800,000 workers. The state’s unemployment rate is about 9 percent.

The California Chamber of Commerce has put AB 10 on its ‘job killers’ list, contending that although California is rebounding economically, the recovery is only in an infancy stage. Hitting businesses with more costs, via a higher minimum wage, would prove a setback, the chamber argues.

A study conducted by the National Federation of Independent Business in California determined the impact of AB 10 could be more than 68,000 jobs lost for the state over a 10-year.

‘That’s the size of every resident in Chico evaporating over the next decade,’ NFIB/CA Executive Director John Kabateck said. ‘Is that the direction we want to take the golden state’?

Kabateck says AB 10 is a classic example of a feel good-policy trying to win over the public, but actually damaging California’s most vulnerable: employers.

‘Employers will feel a terrible hangover if this goes into effect,’ Kabateck said. ‘They already feel uncertainty about what will come out of unanticipated costs from the Affordable Care Act. If politicians wanted to help increase the amount of higher paying jobs, they would stop the regulatory nightmare for business and reduce costs.’

But supporters believe the bill is necessary and California should follow suit of surrounding states that have made similar adjustments to their minimum wages. Neighboring Nevada, Oregon, and Washington have implemented statewide minimum wage adjustments that haven’t had an adverse economic impact, Assemblymember Alejo said.

‘What we have now is a California that’s falling behind,’ said Barry Broad, a lobbyist whose client list includes organized labor. ‘The value of minimum wage starts to decline when we don’t tie it to the cost of living for workers, who end up never truly earning what they’re supposed to be.’

Broad argues that when California had a strong economy the minimum wage was comparatively higher, taking into account the cost of living wasn’t at the level we see it today.

Today, far more Californians than ever are earning minimum wage and represent adult heads of households, Broad said.

Broad rejected the opponents’ contention that an increase in the minimum wage will cause massive unemployment.

‘Nothing ever happens, these people are going to spend their money on food and rent,’ Broad said. Supporters of AB 10 don’t believe the state’s economy would take a hit due to the additional costs for business.

‘The longer we wait on raising the wages on a statewide basis the more we see cities taking action,’ Assemblymember Alejo said. ‘Local measures pursuing wage increases have already occurred in San Francisco, San Jose and Long Beach with Sacramento, Berkley and LA planning on it too.’

But the rise to minimum wage at the local level has been more dramatic, going up anywhere from $10 to $15 rather than a rising at a steady pace Alejo said.

‘What I’m proposing is a more reasonable and gradual increase over the next four years,’ said the assemblyman. The effect of an inevitable rise to minimum wage, by this route, would in theory be less devastating to business than hikes we’ve already seen at the local level.