State leaders, labor groups announce deal on $15 minimum wage

minimum wage raiseDemocratic lawmakers and labor groups announced on Monday a deal to gradually raise the minimum wage to $15 per hour.

Gov. Jerry Brown and Senate President Pro Tempore Kevin de León of Los Angeles, joined by representatives of the Service Employees International Union and its affiliates, announced the measure to raise the minimum wage each year until 2022 and 2023, with an “off ramp” in place to slow growth in the event of an economic downturn.

“It will help our entire state do much better for its citizens,” Brown said, calling the measure a matter of “economic justice.”

However, Monday’s announcement was merely an agreement between state leaders. The measure still needs to go through the Legislature before it can become law.

Assembly Speaker Anthony Rendon, D-Paramount, who was not at Monday’s press conference, issued support in a statement afterwards and said a “significant number” of Assembly Democrats were on board.

Rendon also said he would have preferred a “more aggressive” path to $15 per hour, but said Monday’s deal was a “good middle ground.”

Things change

It wasn’t that long ago that Brown denounced a $15-per-hour minimum wage. During the unveiling of his budget in January, he estimated an increase of that size would saddle the state with an extra $4 billion in costs by 2021.

But Brown and de León conceded that a much more aggressive increase had already qualified for the November ballot, so legislators are wise to embrace the more “responsible” version they negotiated with labor groups.

“This is a very pragmatic decision,” said de León. “This was not made in a vacuum — there is a ballot initiative that’s already qualified.”

The measure would increase the minimum wage 50 cents per hour in both 2017 and 2018 and then raise it $1 per hour each year until it reaches $15 per hour in 2022 for employers of 26 or more employees and 2023 for employers or 25 or less employees. Following years would be tied to inflation.

The proposal gives the governor the annual power to pause the increase due to negative economic conditions.

Good policy?

There’s still a debate among economists as to whether the nominal gains to workers of an increase in the minimum wage are actually worth the costs to businesses, which will raise prices to absorb costs and potentially cut jobs (CalWatchdog wrote about this debate in greater detail earlier this year).

As it stands now, $10 per hour over a 40-hour work week comes out to $20,800 per year before taxes. With the increase of 50 cents per hour in 2017, minimum wage workers will make $21,840 per year before taxes, or around an extra $87 per month. At $15 per hour, the annual wage will be $31,200 in 2022.

The second 50 cent increase in 2018 would add $173 per month before taxes. The gains jump after two years to an increase of $1 per hour every year. The increase of $1 per hour in 2019 would come to an additional $347 per month, and so on.

However, many economists tie an increase in the minimum wage to inflation, so the gain to workers would likely not be as high as it seems now in terms of real dollars.

Lifting people out of poverty

The measure was repeatedly hailed on Monday as a strike against poverty. However, workers aren’t below the poverty line currently unless they are trying to support a family of at least four on only one minimum-wage income.

The federal poverty line is around $24,300 for a family of four, or $11,880 for an individual. The current minimum wage is nearly double the poverty threshold for an individual and just barely exceeds the threshold for a family of three on one minimum-wage income.

Skepticism

While the unveiling was all smiles between lawmakers and labor on Monday, the Republican leaders in both chambers were skeptical in statements that the measure would have a lasting impact on the working poor.

“Poverty reduction in California is extremely important,” said Senate Republican Leader Jean Fuller of Bakersfield. “Energy, housing and health care are cost drivers that we must address to make California more affordable. I am not sure how this new legislation moves the needle in improving California’s affordability.”

“This deal may help a small number of California’s workforce, but we are concerned that it will hurt many more by contributing to our state’s already high cost-of-living, making the California dream even less attainable for our middle class and low-income families,” said Assembly Republican Leader Chad Mayes of Yucca Valley. “We have a responsibility to build a better, more affordable state for all Californians.”

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6 comments

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  1. Dude
    Dude 29 March, 2016, 09:21

    I’d say this is a good example of how Common Core math is a failure, but the people who are about to lose their jobs never bothered to go to school. Also, I don’t believe the huge increase in the unemployed is a side effect. Increasing the number of people dependant on the government for their daily bread falls right in line with Lenin’s and Alinsky’s master plan. Say goodbye to democracy and capitalism American. Say hello to communism and socialism.

    Reply this comment
  2. Sean
    Sean 29 March, 2016, 10:50

    Having worked in industry that supports manufacturing most of my life, I’d say you are about to see a lot of low wage jobs vanish. The cost of automation has been coming down while the cost of employees is going to rise rapidly. 30 years ago if you visited a molding shop making plastic parts, you see one operator per machine. The last time I visited a molding shop, not a single machine had an operator, and the 40 odd machines on the floor were fully automated and serviced my a maintenance crew of 2.
    A few years back, congress decided to apply the US minimum wage to Puerto Rico. It resulted in a rapid decline in the workforce participation rate and a loss in population as residents have to leave the island for job opportunities. http://www.wsj.com/articles/puerto-ricos-wages-are-no-benefit-to-its-economy-1435787367 As a result, the minimum wage is now 79% of the per capita income while the workforce participation rate is in the low 40’s while the US its in the low 60’s. Fully 40% of the total income on the island is now transfer payments. While I would not expect California to be anywhere near this bad on average, a lot of low end jobs may find their way to automation, other states or off-shoring.

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  3. Dyspeptic
    Dyspeptic 29 March, 2016, 10:51

    “But Brown and de León conceded that a much more aggressive increase had already qualified for the November ballot, so legislators are wise to embrace the more “responsible” version they negotiated with labor groups.”

    The Libtards tell us that there is no empirical evidence that minimum wage laws cause unemployment. If they really believed that then why is this agreement more responsible than the alternative ballot initiative? And why increase the minimum wage to a piddling $15/hr.? That’s very timid and heartless of them.

    If there are no significant costs to minimum wage laws then why not an increase to $100/hr. right now? After all, that puts more money in the hands of consumers, reduces profits for greedy business owners (who have too much money anyway) and acts like a massive Keynesian stimulus to create economic growth and prosperity for all. It’s a win-win-winner, come and get your chicken dinner!

    It’s not surprising that the profoundly ignorant general public supports minimum wage laws, but what’s really disconcerting is that economic science has degenerated to a level where many “economists”, who should know better, believe this B.S. too.

    Reply this comment
  4. Ron
    Ron 29 March, 2016, 10:58

    Again, our elected officials never look at the unintended consequence of higher wages for everyone will benefit the rich more than those on minimum wage via those annual Cost of Living Adjustments in the years ahead. The separation of the rich from the financially challenged continues to be perpetuated with the “traditional” COLA wage adjustments.

    Cost Of Living Adjustments (COLA) to wages favors the well paid: A 3% COLA adjustment for someone making $100K will result in their compensation being almost $135K in 10 years, but for someone making $30K, their compensation will be $40K in 10 years. The differential being $24K more for the well compensated as the financially challenged continue to fall further behind.

    Is it fair to give a COLA adjustment to someone making the big bucks $24K more than the person making lower wages for “their” cost of groceries, housing, utilities, transportation, and health care? These higher wage folks are eating similar foods and using the same fuels for their cars as those making fewer wages.

    The crusade to put a “band aid” on the wound of these ever increasing costs, is to raise the minimum wage. The better solution would be to HEAL the wound by DECRASING the over regulations, over taxation, and uncontrollable “fees” on businesses that are slight inconveniences to those making the big bucks but the California financially challenged will continue to disproportionally pick up the costs “camouflaged” at businesses.

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  5. bob
    bob 31 March, 2016, 13:26

    Why not just make it $25 an hour? Even at that you couldn’t afford a house in Colliefornia (as Ahnode call it). So why not $50 an hour? Who cares if a burger and fries will cost $100.

    Reply this comment
    • Dude
      Dude 31 March, 2016, 13:51

      Spot on. The Dimtards are unable or refuse to understand/accept the fact that Californians wont/can’t afford a $100 burger, Either that or they’re concocting a new socialist plan to have all us evil money makers pay for the EBT crowd’s burgers. Maybe they’ll call the program, “The Affordable Burger Act”

      Reply this comment

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