BILL ANALYSIS Ó
SB 3
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Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 3
(Leno) - As Amended March 11, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill increases the minimum wage to $11 per hour starting
January 1, 2016 and $13 per hour starting July 1, 2017.
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Beginning in January 1, 2019, this bill requires the minimum
wage to be increased annually based on inflation as measured by
the California Consumer Price Index (CCPI). Specifically, this
bill:
1)Requires, starting January 1, 2019, the minimum wage to be
calculated annually by multiplying the minimum wage in effect
on December 31 of the previous year by the percentage of
inflation (as measured by the CCPI) that occurred during that
year and adding that product to the minimum wage.
2)Requires the Division of Labor Standards and Enforcement
(DLSE) to publicize the automatically adjusted minimum wage.
3)Prohibits the Industrial Welfare Commission from reducing the
minimum wage but does not preclude the commission from
increasing the minimum wage.
4)States that the minimum wage applies to all industries,
including public and private employment.
FISCAL EFFECT:
1)Administrative costs of approximately $500,000 (Labor
Enforcement Compliance Fund) for the Department of Industrial
Relations to print and mail wage orders to approximately
800,000 employees. These costs would be incurred each time
the minimum wage is increased.
2)Ongoing costs in the low tens of millions of dollars (General
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Fund and various special funds) to provide minimum wage
increases, primarily to seasonal and intermittent staff, at
the Department of Fish and Wildlife, California Conservation
Corps, California Science Center, the Department of Parks and
Recreation and Cal Fire. Additionally, Cal Fire anticipates
increased costs to the Emergency Fund due to changes in
unplanned overtime.
3)Ongoing General Fund and federal fund costs, likely in the
hundreds of millions, to support minimum wage increases to
individuals who provide certain services at the local level
(heath care, social services, after-school programs, etc.).
For example, the Department of Social Services estimates
General Fund costs of approximately $36 million starting in
2015-16 to support wage increases for regional center
consumers. This cost is estimated to increase to
approximately $430 million by 2017-18. General Fund costs due
to wage increases will be partially offset by savings to
Medi-Cal and CalWORKS programs to the extent minimum wage
increases result in individuals and families no longer qualify
for these services or qualify for a reduction in services.
4)Unknown, potentially significant cost pressures to increase
wages for state employees who at present earn slightly more
than the current minimum wage to avoid salary compaction.
COMMENTS:
1)Purpose. In 2013, AB 10 (Alejo) was signed into law and
authorized a minimum wage increase of $9 an hour starting July
1, 2014. An increase to $10 an hour is scheduled to begin
January 1, 2016.
Sponsors of this bill, including the Service Employees
International Union - California State Council, the United
Food and Commercial Workers Union, and the Western Center on
Law and Poverty, acknowledge AB 10 was an important step in
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reducing the degree of poverty in California and that it has
contributed to a national conversation about income
inequality. Not only have many jurisdictions passed minimum
wage increases that exceed the provisions of AB 10 but large
employers like Walmart and McDonalds have announced plans to
increase their wages also.
Supporters also state that, beginning in 2017, the AB 10
minimum wage will begin to lose ground to the Federal Poverty
Level (FPL) because there is no COLA provided. Supporters
maintain that under SB 3, families of three will be lifted out
of poverty starting in 2016 and will rise to 127% of the FPL
by 2017. Under SB 3, by 2017 they predict families of four
will be at 105% of the FPL. Beginning in 2019, SB 3 requires
the Industrial Welfare Commission to provide annual cost of
living increases so that the minimum wage will not drop below
the federal poverty level for most families. Supporters also
note that raising the minimum wage will benefit the state by
reducing state spending on health care through moving
individuals' eligibility from Medi-Cal to Covered California.
2)Opposition. Opponents, including the California Chamber of
Commerce, argue that this bill will overwhelm many businesses
that are already struggling with the current minimum wage
increase under AB 10 and will result in job losses. Opponents
contend that indexing the minimum wage to inflation is a
concern to the business community because it fails to take
into account other economic factors or cumulative costs.
Additionally, opponents argue that another increase in the
minimum wage will negatively impact economic recovery either
by limiting available jobs or creating further job losses.
Opponents also note that while low-wage workers would receive
a higher income through the increase, other low wage jobs
would probably be eliminated, thereby creating a net loss of
jobs.
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The California Restaurant Association (CRA) also opposes this
bill on the basis that it does not include mitigating
measures, such as a "total compensation" concept that accounts
for tips and gratuities, establishing a youth wage, and a
mechanism for periodic economic review before additional
increases. The CRA notes that the minimum wage has a perverse
effect on the restaurant industry. Wages typically benefit
those who are the best paid individuals; minimum wage earners
that are often tipped well above the minimum wage. The CRA
also notes the impact of a minimum wage increase is compounded
by other recent mandates such as the paid sick leave law and
impacts of the federal Affordable Care Act.
Some school groups have also expressed opposition to this
bill, including the California School Funding Coalition and
the California School Boards Association. They note that
increasing the minimum wage will impact school district salary
schedules, given that the minimum wage establishes the
baseline for the wages of all other employees. They also note
compounding effects such as the sick leave law, retirement
contributions and health care costs may mean districts will
have to make program cuts or reduce staffing levels to
accommodate higher wages.
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081
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