Inflation forces increase in California minimum wage

Soaring inflation will trigger an automatic minimum wage increase in California next year, Governor Gavin Newsom’s administration announced Thursday.

The minimum wage will increase to $15.50 an hour on Jan. 1, the highest of any state. This is an increase of $15 per hour for companies with more than 25 employees and $14 per hour for companies with 25 employees or less.

California lawmakers voted to raise the minimum wage to $15 an hour in 2016, but the increase was phased in over several years. The law states that the minimum wage must increase to $15.50 an hour for everyone if it is increased by more than 7%. On Thursday, California’s Treasury Department said it expects inflation for fiscal year 2022 – which ends June 30 – to be 7.6% higher than a year earlier, triggering the increase .

Official inflation figures won’t be final until this summer. But the Newsom administration believes the growth will be more than enough to trigger the automatic increase.

Inflation has been a problem everywhere, as consumer prices jumped 8.3% last month from a year ago and diluted the purchasing power of the American consumer. A labor shortage throughout the pandemic has prompted many companies to raise wages sometimes beyond the minimum wage just to attract and retain workers.

California has about 3 million minimum-wage workers, according to a conservative estimate by the state Department of Finance. The minimum wage increase will be about $3 billion, or less than 0.1% of the $3.3 trillion in personal income Californians are expected to earn.

Bosler said the increase could drive up prices at restaurants, which have low profit margins. But overall, she said raising the minimum wage should “have a very minimal impact on overall inflation in the state’s economy.”

Raising the minimum wage is just part of the extra money that could land in the pockets of taxpayers this year. On Thursday, the governor doubled down on his proposal to send $800 checks to Californians who own cars to help offset high gas prices. The proposal would cost $11.5 billion and would also include spending $750 million to provide everyone with free public transit rides for up to three months.

Newsom proposed it in March, but Democrats in the Legislature voted it down. Instead, they want to send $200 checks to low-to-moderate income California taxpayers and their dependents, whether or not they own a car.

Bosler said the Newsom administration thinks their proposal is better because it would hire an outside company to distribute the checks faster than the government could.

“I think they have their points, I think we have our reasons for wanting to stick with our proposal,” Bosler said. “We will continue to work with them.”

Senate Pro Tempore Speaker Toni Atkins said they were working on a plan that “doesn’t just pass on a one-time windfall that benefits millionaires.”

“Senate Democrats don’t believe that a reimbursement tied to owning a car does the trick,” Atkins said. “This plan excludes non-car owners, including low-income Californians and seniors, who are also impacted by today’s high consumer goods costs and also deserve relief.”

While that proposal has stalled, Newsom revealed a new plan on Thursday that would send $1,000 checks to hospital and nursing home workers in recognition of their dangerous work during the pandemic. Around 600,000 workers would be eligible for the money, which would go to anyone working in a hospital or nursing home, including doctors, nurses and other support staff.

The workers would be guaranteed a check for $1,000. But if the companies agree to add another $500, the state will match them for a total of $2,000.

“These workers have been on the front lines throughout the COVID pandemic,” Bosler said. “They are also suffering from very critical retention issues and shortages and we hope an additional payment will help address these issues.”

Dave Regan, president of SEIU-United Healthcare Workers West, said staffing issues in hospitals and nursing homes have only worsened as workers leave the industry in droves during the pandemic “in due to increased health risks, emotional and mental stress and overwork”.

“Through this investment to keep skilled healthcare workers on the job, the Governor’s proposal brings us closer to a future where every Californian has access to care from valued and respected caregivers,” Regan said.