BILL ANALYSIS Ó
AB 10
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 10 (Alejo) - As Introduced: December 3, 2012
Policy Committee: Labor and
Employment Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill increases the state's minimum wage from its current
rate of $8.00 per hour to $9.25 per hour over a three year
period and provides for the automatic adjustment of the minimum
wage each year by the percentage of inflation as measured by the
California Consumer Price Index (CPI), beginning January 1,
2017. Specifically, this bill:
1)Increases the minimum wage as follows:
a) $8.25 per hour, beginning January 1, 2014.
b) $8.75 per hour, beginning January 1, 2015.
c) $9.25 per hour, beginning January 1, 2016.
2)Requires the minimum wage adjustment to be made based on the
percentage of inflation, as specified. This measure also
requires the Industrial Welfare Commission (IWC) to publicize
the adjusted wage.
3)Prohibits the IWC from adjusting the minimum wage, if the
average percentage of inflation for the previous year was
negative.
4)Defines percentage of inflation as the percentage of inflation
specified in the CPI for All Urban Consumers (CPI-U), as
published the Department of Industrial Relations (DIR), or its
successor index.
5)Defines previous year as the 12-month period that ends on
August 31 of the calendar year prior to the adjustment.
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6)Prohibits the IWC from reducing the minimum wage rates
established in this measure, and specifies this measure does
not preclude an increase in the minimum wage by the IWC in an
amount that is greater than wage adjustment rate, based on the
percentage of inflation, as specified.
FISCAL EFFECT
1)According to the State Controller, state government employs
approximately 4,500 minimum wage workers, mostly student
assistants and seasonal. If the state pays the increased
minimum wage for six months each year, the annual GF cost
(beginning in January 2014 at $8.25 per hour) to the state
would be approximately $500,000 and at full implementation in
January 2016, the cost would be approximately $2.6 million for
minimum wage workers employed by the state. Upon full
implementation of the wage increase in January 2016, there
will be increased GF costs for workers currently paid between
$8.01 per hour and $9.25, likely in the hundreds of thousands
of dollars. Likewise, there will be cost pressure to increase
wages for state employees who make more than $9.25 per hour.
These figures do not include increases that may result from an
inflation adjustment required under this measure.
2)GF costs of approximately $400,000 to DIR to issue new Minimum
Wage Orders to approximately 800,000 employers in the state
each time the minimum wage is adjusted pursuant to this bill.
COMMENTS
1)Purpose . Article XIV, Section 1 of the California Constitution
empowers the Legislature to provide for minimum wages and the
general welfare of employees and for those purposes may confer
on a commission legislative, executive and judicial powers.
Existing law provides authority to the IWC "to ascertain the
wages paid to all employees in this state, to ascertain the
hours and conditions of labor and employment in the various
occupations, trades and industries in which employees are
employed in this state, and to investigate the health, safety,
and welfare of those employees."
California's current minimum wage is $8.00 per hour (effective
January 2008). The author cites the research conducted by the
Public Policy Institute of California that details the state
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is "facing the largest gap between upper and lower income
Californians in at least 30 years. In fact, California has
one of the widest income gaps in the nation - even wider than
Texas." The author further states: "We have created a system
where we pay workers less but need them to spend more. That
causes middle class families to fall down the economic ladder.
It's the reason our middle class is shrinking and our income
gap is new wider than ever."
2)Local ordinances increase minimum wage . In November 2003, the
City of San Francisco increased their minimum wage rate to
$8.50 per hour, beginning in January 2006 - two years before
the state increased its minimum wage rate to $8.00 per hour.
San Francisco's wage ordinance required the rate to be
increased by the CPI. Beginning January 1, 2013, employers in
the City of San Francisco are required to pay a minimum wage
rate of $10.55 per hour.
In November 2012, two cities: San Jose, CA and Long Beach, CA
increased their minimum wage rates. Specifically, the voters
in San Jose passed an ordinance (with 60% of the vote) that
requires employers in the city to pay their employees a
minimum wage of $10.00 per hour and requires the minimum wage
to increase annually by the cost of living, if any, beginning
on January 1, 2014. This wage rate went into effect on March
11, 2013.
In Long Beach, the voters passed an ordinance (with 64% of the
vote) that increased the minimum wage for hotel workers only
to $13.00 per hour, with an annual automatic adjustment not to
exceed two percent. This wage rate went into effect in
December 2012.
3)Minimum wage in other states . The Federal Labor Standards Act
establishes provisions for the federal minimum wage.
Currently, the federal minimum wage is $7.25 per hour.
California exceeds this standard by $0.75 per hour. According
to the United States Department of Labor (USDL), 19 states
(including California) and the District of Columbia have a
higher minimum wage standard than the federal minimum. 22
states have established the minimum wage at the federal
minimum of $7.25 per hour and four states have a minimum wage
lower than the federal standard. Also, five states have no
minimum wage law.
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4)CPI . The CPI is a measure of the average change over time in
the prices paid by urban consumers for a fixed market basket
of goods and services. The CPI provides a way to compare what
this market basket of goods and services costs in comparison
to a previous point in time. Also, as inflation erodes
consumer purchasing power, the CPI is often used to adjust
consumers' income payments, including Social Security; to
adjust income eligibility levels for government assistance;
and to automatically provide cost-of-living wage adjustments
to millions of American workers. The CPI affects the income of
almost 80 million persons with regard to social security
beneficiaries, food stamp recipients, and federal civil
service retirees.
The USDL also reports there are 10 states whose minimum wage
is linked to the CPI.
5)Opposition . Several business organizations, including the
CalChamber, Western Growers, the California Restaurant
Association, and the California Grocers Association, have
expressed opposition to this bill. These organizations argue
the economy is only beginning to recover and an increase in
the minimum wage will hinder this recovery and may even lead
to job losses. These organizations further contend
increasing the minimum wage in conjunction with implementation
of the Affordable Health Care Act and taxes imposed under
Proposition 30 will place a larger burden on business.
6)Previous legislation .
a) AB 1439 (Alejo), similar to this measure, was held on
this committee's Suspense File in May 2012.
b) AB 10 (Alejo), similar to this measure, was held on this
committee's Suspense File in May 2011.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081