BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                          SB 3|
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                                 UNFINISHED BUSINESS


          Bill No:  SB 3
          Author:   Leno (D), De León (D), and Leyva (D), et al.
          Amended:  3/28/16  
          Vote:     21  

           SENATE LABOR AND IND. REL. COMMITTEE:  4-1, 4/8/15
           AYES: Mendoza, Jackson, Leno, Mitchell
           NOES: Stone

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 5/28/15
           AYES: Lara, Beall, Hill, Leyva, Mendoza
           NOES: Bates, Nielsen

           SENATE FLOOR:  23-15, 6/1/15
           AYES: Allen, Beall, Block, De León, Hall, Hancock, Hernandez,  
            Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu,  
            McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Wieckowski,  
            Wolk
           NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines,  
            Huff, Moorlach, Morrell, Nguyen, Nielsen, Roth, Runner, Stone,  
            Vidak
           NO VOTE RECORDED: Galgiani, Glazer

          SENATE LABOR AND IND. REL. COMMITTEE:  4-1, 3/31/16 (pursuant to  
          Senate Rule 29.10)
          AYES:  Mendoza, Jackson, Leno, Mitchell
          NOES:  Stone

          ASSEMBLY FLOOR:  48-26, 3/31/16
          (ROLL CALL NOT AVAILABLE)

           SUBJECT:   Minimum wage:  in-home supportive services:  paid  
                     sick days








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          SOURCE:    Author


          DIGEST:  This bill requires paid sick days for the In-Home  
          Supportive Services (IHSS) workers, creates a schedule for a  
          phased increase in the minimum wage from $10.50 per hour to $15  
          per hour over seven years, depending on the size of the employer  
          and general economic conditions, and links the minimum wage to  
          the U.S. Consumer Price Index (CPI) once the minimum wage  
          reaches $15 per hour.




          Assembly Amendments create a schedule for a phased increase in  
          the minimum wage from $10.50 per hour to $15 per hour over seven  
          years, depending on the size of the employer and general  
          economic conditions, specify annual increase of the minimum wage  
          to the CPI once the minimum wage reaches $15 per hour, require  
          paid sick days for IHSS workers, and create a schedule for the  
          annual accrual of paid sick days for IHSS workers.




          ANALYSIS:   Existing federal law sets the minimum wage at $7.25  
          an hour. 
          (Fair Labor Standards Act of 1938, 29 U.S.C. Chapter 8)
           
           Existing state law:

          1)States that when state and federal laws differ, one must  
            comply with the more restrictive requirement. In California,  
            the minimum wage is $10.00 an hour. (Labor Code §1182.12)

          2)Excludes In-Home Supportive Services (IHSS) employers from the  
            requirement that employers provide paid sick days. (Labor Code  
            §245.5)
           
           This bill incrementally increases the state's minimum wage,  
          depending on the size of the employer, and then ties annual  
          minimum wage increases to the CPI, which is a measure of  







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          inflation.

          This bill phases in the following increase for employers with 26  
          or more employees: 

          1)From January 1, 2017, to December 31, 2017, inclusive,- $10.50  
            per hour.
          2)From January 1, 2018, to December 31, 2018, inclusive,- $11  
            per hour.
          3)From January 1, 2019, to December 31, 2019, inclusive,- $12  
            per hour.
          4)From January 1, 2020, to December 31, 2020, inclusive,- $13  
            per hour.
          5)From January 1, 2021, to December 31, 2021, inclusive,- $14  
            per hour.
          6)From January 1, 2022, and until adjusted by the CPI-$15 per  
            hour.

          This bill phases in the following increase for employers with 25  
          or fewer employees: 

          1)From January 1, 2018, to December 31, 2018, inclusive,- $10.50  
            per hour.
          2)From January 1, 2019, to December 31, 2019, inclusive,- $11  
            per hour.
          3)From January 1, 2020, to December 31, 2020, inclusive,- $12  
            per hour.
          4)From January 1, 2021, to December 31, 2021, inclusive,- $13  
            per hour.
          5)From January 1, 2022, to December 31, 2022, inclusive,- $14  
            per hour.
          6)From January 1, 2023, and until adjusted by the CPI-$15 per  
            hour.

          This bill requires that, after January 1, 2023, the minimum wage  
          will be increased annually from the seasonally adjusted the CPI,  
          but no more than 3.5% in a year, with the resulting amount  
          rounded to the nearest $0.10. The increase shall be calculated  
          on August 1 to take effect on January 1 of the following year.

          This bill allows the Governor to suspend the incremental minimum  
          wage increases if the following occurs:

          1)Total nonfarm employment for California, seasonally adjusted,  







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            decreased over the three-month period from April to June,  
            inclusive; or

          2)Total nonfarm employment for California, seasonally adjusted,  
            decreased over the six-month period from January to June,  
            inclusive.

          And: 

          3)Retail sales and use tax cash receipts from July 1 to June 30,  
            inclusive, period is less than retail sales and use tax cash  
            receipts for the July 1 to June 30, inclusive, period ending  
            13 months prior to the July 28 determination.

          Or:

          4)The Director of Finance finds that a minimum wage increase  
            would push the state budget into deficit in the current fiscal  
            year, or in either of the following two fiscal years. The  
            Governor may suspend the minimum wage increase due to a  
            General Fund deficit only twice.

          Minimum wage suspensions may occur until the minimum wage  
          reaches $15 per hour. If suspended, all remaining phased minimum  
          wage increases are advanced by a year.

          This bill also:

          1)Removes the exemption for IHSS workers from the paid sick days  
            statute;

          2)Sets the paid sick days annual accrual rate for IHSS workers  
            to eight hours or one paid sick day in 2018;

          3)Sets the paid sick days annual accrual rate for IHSS workers  
            to 16 hours or two days in 2019, or when the minimum wage hits  
            $13.00 per hour for employers of 26 employees or more,  
            whichever is later; and

          4)Sets the paid sick days annual accrual rate for IHSS workers  
            to 24 hours or three paid sick days in 2020, or when the  
            minimum wage hits $15 per hour for employers of 26 employees  
            or more, whichever is later.








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          Comments
          
          1)Minimum Wage Federally and in Other States  
           
            In 1938, the Fair Labor Standards Act established a national  
            minimum wage for workers in the United States. On a federal  
            level, the minimum wage has been periodically raised.  
            Beginning in the 1980s and 1990s, the federal minimum wage saw  
            few significant increases which led to more than half of the  
            states to enact higher state-level minimum wages, including  
            California. According to the National Conference of State  
            Legislatures, as of February 24, 2015, 29 states and D.C. have  
            minimum wages above the federal minimum wage of $7.25. 

            Additionally, 15 states, plus the District of Columbia, index  
            their minimum wage to rise automatically with cost of living.  
            Eleven states, including all of California's neighbors,  
            currently index minimum wage increases each year: Arizona,  
            Colorado, Florida, Missouri, Montana, Nevada, New Jersey,  
            Ohio, Oregon, South Dakota, and Washington. Four more states,  
            plus the District of Columbia, will index minimum wage  
            increases annually beginning in future years: Alaska (2017),  
            Michigan (2019), Minnesota (2018), and Vermont (2019).  
           
          2)Impact of Minimum Wage on Employment: Research Findings  
           
            Conventional economic theory would predict that a rise in  
            minimum wage leads perfectly competitive employers to reduce  
            their workforce. David Card and Alan Krueger authored a  
            minimum wage study in 1992 entitled "Minimum Wages and  
            Employment: A Case Study of the Fast-Food Industry in New  
            Jersey and Pennsylvania" which evaluated the effects of New  
            Jersey and Pennsylvania's minimum wage on employment. The  
            authors also compared employment, wages, and prices at stores  
            before and after the wage increase in both states and found no  
            evidence that the rise in New Jersey's minimum wage reduced  
            employment at fast-food restaurants in the state. 

            In a more recent economic study published in 2012 by  
            Arindrajity Dube, T. William Lester, and Michael Reich looked  







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            at the effects of minimum wages on employment flows in the  
            U.S. labor market in "Minimum Wage Shocks, Employment Flows  
            and Labor Market Frictions." They used nationally  
            representative data to provide the minimum wage elasticities  
            of earnings as well as employment flows and stocks for teens  
            and the restaurant industry. Dube, Lester, and Reich concluded  
            that minimum wage increases can reduce the turnover that  
            characterizes the low-wage segment of the labor market and  
            even allows for the possibility of improving the structure and  
            functioning of the low wage labor market without substantially  
            affecting employment. 

            A Center on Wage and Employment Dynamics policy brief from the  
            Institute for Research on Labor and Employment at University  
            of California, Berkeley compared the effects of state minimum  
            wage increases in California, specifically the effects of $10,  
            AB 10 (Alejo 2013) and $13 minimum wage SB 935 (Leno 2014).  
            Entitled "Ten Dollars or Thirteen Dollars? Comparing the  
            Effects of State Minimum Wage Increases in California," the  
            report found that while AB 10 restores some of the lost ground  
            in recent years, it maintains the inflation-adjusted minimum  
            wage at about the same level as in 1988. The authors found  
            that an increase to $13 goes farther, raising the real minimum  
            wage to just about the peak value obtained in 1968. The  
            authors concluded that California businesses are likely to  
            absorb the increased labor costs of an increase in the minimum  
            wage with offsets from increased worker productivity, declines  
            in recruitment and retention costs, and with small price  
            increases in the restaurant industry. 

          3)What is the CPI?  
           
            As was noted above, annual increases to the minimum wage after  
            it reaches $15 per hour are tied to increases in the CPI. CPI  
            is a measure of the average change over time in the prices  
            paid by urban consumers for a market basket of consumer goods  
            and services. This market basket is based on 200 categories in  
            eight major goods and services groups. The groups are:

             a)   FOOD AND BEVERAGES (breakfast cereal, milk, coffee,  
               chicken, wine, full service meals, snacks);

             b)   HOUSING (rent of primary residence, owners' equivalent  
               rent, fuel oil, bedroom furniture);







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             c)   APPAREL (men's shirts and sweaters, women's dresses,  
               jewelry);

             d)   TRANSPORTATION (new vehicles, airline fares, gasoline,  
               motor vehicle insurance);

             e)   MEDICAL CARE (prescription drugs and medical supplies,  
               physicians' services, eyeglasses and eye care, hospital  
               services);

             f)   RECREATION (televisions, toys, pets and pet products,  
               sports equipment, admissions);

             g)   EDUCATION AND COMMUNICATION (college tuition, postage,  
               telephone services, computer software and accessories); and

             h)   OTHER GOODS AND SERVICES (tobacco and smoking products,  
               haircuts and other personal services, funeral expenses).

          The CPI is calculated by the federal Department of Labor every  
          year from detailed spending information from families and  
          individuals. The specific CPI used for annual minimum wage  
          increases is Consumer Price Index for Urban Wage Earners and  
          Clerical Workers (CPI-W), which is a subset of the total CPI the  
          measures spending for families and individuals where more than  
          one-half of the household's income must come from clerical or  
          wage occupations, and at least one of the household's earners  
          must have been employed for at least 37 weeks during the  
          previous 12 months. The CPI-W population represents about 32  
          percent of the total U.S. population.  As such, CPI-W can be  
          seen as a cost-of-living index for the purchase price of goods  
          and services, such as food, clothing, and housing, for working  
          individuals and families.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          According to the Assembly Appropriations Committee:


          1)Current year costs of approximately $19 million General Fund  







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            (GF), and Budget Year costs of approximately $40 million GF,  
            to increase state minimum wages for IHSS, Department of  
            Developmental Services and civil service employees from $10 an  
            hour to $10.50 an hour starting January 1, 2017. These costs  
            include offsetting savings to Medi-Cal and CalWORKS programs,  
            assuming increases in the minimum wage will result in  
            individuals and families no longer qualifying for all or a  
            portion of these services. The Administration estimates costs  
            of $3.6 billion GF assuming a minimum wage of $15 an hour is  
            provided by 2022-23. 


          2)GF costs of approximately $90 million GF in 2018-19 to provide  
            one day of sick leave to the approximately 468,000 IHSS  
            providers in California. These costs are estimated to increase  
            to approximately $227 million GF in 2022-23, when the state  
            provides three paid sick days per year. Medi-Cal does not  
            provide federal funding for services not rendered by IHSS  
            providers, therefore, the state is responsible for the costs  
            of a provider's wage while on paid sick leave. These cost  
            estimates also include back up provider costs, Case  
            Management, Information and Payroll System automation changes  
            and Department of Social Services administrative costs.


          SUPPORT:   (Verified3/31/16)


          SEIU - California State Council (co-source)
          United Food and Commercial Workers (co-source)
          Western Center on Law and Poverty (co-source)
          Insurance Commissioner Dave Jones
          9to5 California, National Association of Working Women 
          ACLU
          AFSCME Council 57
          AFSCME, AFL-CIO
          Alliance of Californians for Community Empowerment 
          American Academy of Pediatrics, California
          California Alliance for Retired Americans 
          California Association of Food Banks 
          California Catholic Conference of Bishops
          California Communities United Institute  
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists







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          California Employment Lawyers Association
          California Equity Leaders Network
          California Federation of Teachers
          California Hunger Action Coalition
          California Immigrant Policy Center
          California Labor Federation
          California Nonprofits
          California Partnership 
          California Rural Legal Assistance Foundation
          California School Employees Association
          California Teachers Association
          California Teamsters Public Affairs Council
          Californians United for a Responsible Budget  
          Children's Defense Fund-California 
          Cities Association of Board of Directors
          City and County of San Francisco
          City of Long Beach 
          City of Los Angeles
          City of Mountain View
          City of San Jose
          City of Sunnyvale
          Coalition of California Welfare Rights Organizations, Inc. 
          Community Food and Justice Coalition
          Consumer Federation of California 
          County of Napa
          County Welfare Directors Association of California
          Engineers and Scientists of California, IFPTE Local 20, AFL-CIO
          Family Economic Security Partnership 
          Friends Committee on Legislation
          Glendale City Employees Association
          International Longshore and Warehouse Union
          Long Beach Mayor Robert Garcia 
          Los Angeles Mayor Eric Garcetti
          National Association of Social Workers, California Chapter
          National Employment Law Project
          Oakland Mayor Libby Shaaf 
          Older Women's League Sacramento Capitol
          Organization of SMU Employees
          Organize Sacramento
          Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
          Redlands Area Democratic Club
          Roots of Change
          Sacramento Central Labor Council, AFL-CIO
          San Bernardino Public Employees Association







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          San Diego County Court Employees
          San Diego Hunger Coalition
          San Francisco Mayor Ed Lee
          San Francisco Unified School District
          San Jose Mayor Sam Liccardo 
          San Luis Obispo County Employees Association
          Santa Ana Mayor Miguel Pulido 
          The Women's Foundation of California
          United Domestic Workers of America AFSCME Local 3930  
          UNITE-HERE, AFL-CIO
          Utility Workers Union of America
          Western Regional Advocacy Project
          Young Invincibles


          OPPOSITION:   (Verified3/31/16)


          Agricultural Council of California 
          Air Conditioning Trade Association
          Alhambra Chamber of Commerce
          American Pistachio Growers
          Associated Builders and Contractors - San Diego Chapter
          Association of California Egg Farmers
          Auburn Chamber of Commerce
          Brea Chamber of Commerce
          California Agricultural Aircraft Association
          California Ambulance Association
          California Asian Pacific Chamber of Commerce
          California Association of Nurseries and Garden Centers
          California Association of Wheat Growers
          California Association of Winegrape Growers
          California Attractions and Parks Association
          California Bean Shippers Association
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce 
          California Citrus Mutual
          California Cotton Ginners Association
          California Cotton Growers Association
          California Craft Brewers Association
          California Dairies, Inc.
          California Farm Bureau Federation
          California Grain and Feed Association







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          California Grocers Association
          California League of Food Processors
          California Pear Growers Association
          California Pool and Spa Association
          California Professional Association of Specialty Contractors
          California Restaurant Association
          California Retailers Association
          California Seed Association
          California State Floral Association
          California Taxpayers Association
          Camarillo Chamber of Commerce
          Carlsbad Chamber of Commerce
          Chamber of Commerce Alliance of Ventura and Santa Barbara  
          Counties
          Culver City Chamber of Commerce
          Desert Hot Springs Chamber of Commerce
          El Centro Chamber of Commerce
          El Dorado Hills Chamber of Commerce and California Welcome  
          Center
          Family Business Association of California
          Greater Bakersfield Chamber of Commerce
          Greater Conejo Valley Chamber of Commerce
          Greater Fresno Area Chamber of Commerce
          Greater Riverside Chamber of Commerce
          International Franchise Association
          Irvine Chamber of Commerce
          Lake Elsinore Chamber of Commerce
          Los Angeles Area Chamber of Commerce
          Molly Maid of Placer County
          Montclair Chamber of Commerce
          Murrieta Chamber of Commerce
          National Federation of Independent Business
          Nisei Farmers League
          North Orange County Chamber of Commerce
          Official Police Garages Association of Los Angeles
          Ojai Valley Chamber of Commerce
          Orange County Business Council
          Oxnard Chamber of Commerce
          Palm Desert Area Chamber of Commerce
          Plumbing-Heating-Cooling Contractors Association of California 
          Porterville Chamber of Commerce
          Redondo Beach Chamber of Commerce & Visitors Bureau
          Roseville Area Chamber of Commerce
          Santa Ana Chamber of Commerce







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          Santa Maria Valley Chamber of Commerce Visitor & Convention  
          Bureau
          South Bay Association of Chambers of Commerce
          Temecula Chamber of Commerce
          The Chamber of the Santa Barbara Region
          The Greater Corona Valley Chamber of Commerce
          Torrance Area Chamber of Commerce
          United Ag
          Valley Industry & Commerce Association
          Victor Valley Chamber of Commerce
          VinoPRO
          Western Agricultural Processors Association
          Western Electrical Contractors Association
          Western Growers Association

          ARGUMENTS IN SUPPORT:  Proponents note that SB 3 will raise the  
          minimum wage gradually to $15 per hour, as well as grant paid  
          sick days to IHSS workers. Proponents argue that the existing  
          minimum wage is simply too little for a family to survive on,  
          noting that a minimum wage worker currently earns less than  
          $21,000 per year, assuming he or she works 40 hours in a  
          workweek. Proponents also cite a recent study that found the  
          current minimum wage, when adjusted to inflation, is at about  
          the same as the minimum wage paid in 1988 and far from the  
          inflation-adjusted minimum wage paid in 1968. Proponents argue  
          that SB 3 will ensure that the minimum wage is sufficient to  
          keep families above the poverty line by increasing the minimum  
          wage to $15 per hour and tying the minimum wage to the CPI. Yet,  
          Proponents also argue that SB 3 includes important "pause"  
          provisions that will ensure that the minimum wage increase will  
          be delayed in the event of a recession or budget deficit. 

          ARGUMENTS IN OPPOSITION:Opponents argue that SB 3 is an  
          unacceptably large wage increase in a short period of time,  
          threatening to overwhelm California's small businesses.  
          Specifically, opponents note that a $15 per hour minimum wage  
          will impact different areas of the state differently, as some  
                                areas of the state have completely emerged from the Great  
          Recession and others have not. Opponents also note that the  
          "off-ramps" which suspend the increases to the minimum wage are  
          discretionary and not applicable once the minimum wage crosses  
          the $15 per hour threshold, which opponents argue is not  
          sufficient protecting for California's economy. Opponents also  
          cite several studies which suggest that increasing the minimum  







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          wage creates job losses for unskilled labor and does not target  
          individuals living in poverty.





          Prepared by:  Gideon Baum / L. & I.R. / (916) 651-1556
          3/31/16 12:34:14


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