Minimum-wage law’s opt-out provision unlikely to be used by governor

A California governor is asked to sign historic, far-reaching legislation that could have unknown consequences — and tells the Legislature he will only go along if there is an escape clause that can be used if the law causes economic mayhem.

That’s what happened in 2006 when Arnold Schwarzenegger worked with legislative leaders to shape Assembly Bill 32, the landmark law forcing a shift to cleaner, costlier sources of energy. And it’s what happened in the last month with Jerry Brown and the bill increasing the state’s minimum wage steadily until it reaches $15 an hour in 2022, which Brown signed Monday. A provision that allows future governors to suspend an increase in bad economic times was included at Brown’s insistence:

Brown had warned a $15-an-hour wage must be done carefully, noting costs to employers and the state. But with a measure heading for the November ballot, he negotiated with unions and other advocates to include provisions that allow governors to postpone an increase if the economy falters.

 

Those provisions would allow governors to suspend annual wage increases short of $15 if officials project that the state’s budget reserves will be in the red, or if employment and sales tax revenue decline. Governors would need to decide each September whether to suspend increases coming the following January.

That’s from the Sacramento Bee.

AB32’s escape hatch was never used

But will this escape hatch ever be used? The history of AB32 suggests not. Schwarzenegger was adamant that there must be a way that the law could be suspended, as the Los Angeles Times reported in an Aug. 31, 2006, story about negotiations over the law:

For his part, Schwarzenegger won the ability for the governor to suspend the rules for as much as a year in cases of “extraordinary circumstances, catastrophic events or threat of significant economic harm.”

But in the years that followed, California had among its roughest economic stretches since the Depression. Unemployment, which averaged 4.9 percent in 2006, went to 5.3 percent in 2007, 7.2 percent in 2008, 11.3 percent in 2009 and 12.4 percent in 2010. Fewer Californians had jobs in 2010 than in 2000 — even as the state’s population went from 33.9 million to 37.3 million.

Business interests who said higher energy costs put California at a competitive disadvantage implored Schwarzenegger to suspend AB32. They eventually backed Proposition 23, a 2010 ballot measure that sought but failed to suspend the landmark law on greenhouse gases.

Not only did Schwarzenegger reject the idea that AB32 had an economic downside, he promoted the idea that it would create hundreds of thousands of jobs and touted the claim that California would inspire the world to adopt similar laws. Republican critics said he was more concerned about his legacy than Californians struggling in the recession.

If Brown invokes the clause that suspends the law steadily increasing the minimum wage in coming years, that too would muddy his legacy as the governor of the first U.S. state to have a $15 minimum wage law. If the person who succeeds him as governor in January 2019 suspends the law, that also would muddy California’s image as a bold, progressive state going places no state has gone before.

5 comments

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  1. Ronald
    Ronald 8 April, 2016, 06:10

    With one stroke of the pen, the do-something Legislature has bought the votes of the high wage earners and the financially challenged. Higher wage earners are rejoicing as the impact on their wages will be fantastic in the next 10 to 20 years. Because our elected officials never look at the unintended consequences that 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.

    The new minimum wage crusade will result in ALL wages increasing. 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 DECREASING 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.

    Throwing money as a band aid to cover the rising costs for everyone buys votes for reelection, but does not heal the wound of why the costs are rising.

    Reply this comment
  2. phood
    phood 8 April, 2016, 07:47

    I applaud some basic minimum wage increases. However, the problem of inadequate wages for a segment of the population is a challenge with multiple causes. One law or initiative won’t solve the problem.
    I grew up in North Carolina in the 1950s and 1960s. It was a place and time in which schoolteachers, dry cleaning managers, policemen, and engineers could all own similar homes based on their incomes. That is not true today. In many urban areas, there’s hardly housing at all for the poor. School teachers often fall way behind small business owners or engineers and other positions in salary. Cops and firemen often choose to live far from the cities they serve just to find good housing and safe schools.
    The causes for these changes can’t be addressed just by raising minimum wage. These are issues driven by globalization, changing culture in the US, the evolution of the economy toward services rather than manufacturing jobs, overpopulation, immigration and other changes that are only tangentially related to legislative decisions. If we want to make real headway we need to think and talk much more about what kind of world we want for ourselves and our children and then look at what personal behavioral changes, or systemic changes to capitalis, might be necessary to achieve a world in which economic stresses are relieved or more equally distributed.

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    • Rex the Wonder Dog!
      Rex the Wonder Dog! 8 April, 2016, 16:09

      School teachers often fall way behind small business owners or engineers and other positions in salary. Cops and firemen often choose to live far from the cities they serve just to find good housing and safe schools
      Well, you are clearly not talking about CA, where we have the highest paid, and compensated, school teachers in the nation, and LE and FF in this state are 1%-5%ers, so please, make sure you’re qualifying your comment to the South or Mid-West…

      Reply this comment
      • skj1191
        skj1191 9 April, 2016, 21:10

        Well that’s truly a sad state of affairs because my mother has been a 6th grade teacher for over 35 years, she’s acquired every possible extra teaching credential that qualifies for a pay-raise that is available in CA and is earning the highest tier wage rate that a public elementary school teacher can earn in CA, and… guess what? Still only $42k per year which, living in Sacramento, is not enough to ever be able to buy her own house.
        So yeah… don’t make it sound like CA teachers live high on the hog or something because they really don’t. They’re barely making it in the ranks of the upper lower-class or lower middle-class, at best, regardless of how much worse off teachers in other states are.

        Reply this comment
  3. Queeg
    Queeg 10 April, 2016, 10:02

    Comrades

    Freebies are legend to pacify the masses of piker Visgoths in urban jungles.

    Now the “command” unlinking of productivity from wages infuriates the lower manager and skilled technican classes….salaried workers getting sacked or not getting government mandated wage gains.

    No end well-

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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