BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                        SB 935|
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                                    THIRD READING

          Bill No:  SB 935
          Author:   Leno (D), et al.
          Amended:  5/27/14
          Vote:     21

          AYES:  Hueso, Leno, Padilla
          NOES:  Wyland
          NO VOTE RECORDED:  Yee

           SENATE APPROPRIATIONS COMMITTEE  :  5-2, 5/23/14
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NOES:  Walters, Gaines

           SUBJECT  :    Minimum wage:  annual adjustment

           SOURCE  :     California State Council of SEIU 
                      United Food and Commercial Workers Union
                      Western Center on Law and Poverty 
                      Womens Foundation of California 

           DIGEST  :    This bill approves a series of annual minimum wage  
          increases between 2015 and 2017, and approves an annual  
          adjustment based on the Consumer Price Index (CPI) to the  
          minimum wage starting in 2018.

           ANALYSIS  :    Existing federal law sets the minimum wage at $7.25  
          an hour. 

          Existing state law:


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          1.States that when state and federal laws differ, one must  
            comply with the more restrictive requirement.  In California,  
            the minimum wage is $8 an hour. 

          2.States that on July 1, 2014, the minimum wage in California  
            will increase to $9 an hour. 

          3.States that on January 1, 2016, the minimum wage in California  
            will increase to $10 an hour. 

          This bill increases the state's minimum wage in three separate  
          increments over the next three years.  Specifically, this bill:   

          1.Increases California's minimum wage to not less than $11 per  
            hour for all industries on January 1, 2015.

          2.Increases California's minimum wage to not less than $12 per  
            hour for all industries on January 1, 2016.

          3.Increases California's minimum wage to not less than $13 per  
            hour for all industries on January 1, 2017.

          4.Indexes automatically the minimum wage to inflation annually  
            on January 1 of each year commencing on January 1, 2018. 

          5.Requires 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 that occurred  
            during that year and adding that product to the minimum wage.

          6.States that the minimum wage applies to all industries,  
            including public and private employment.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

           The Department of Industrial Relations will incur costs of  
            about $450,000 (General Fund) to issue new Minimum Wage Orders  
            to approximately 800,000 employers in the state each time the  
            minimum wage is adjusted, as specified.



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           According to the State Controller's Office, state government  
            employs approximately 4,500 minimum wage workers, mostly  
            student assistants and seasonal employees.  As a direct  
            employer, this bill will lead to an estimate increase of $9.4  
            million in 2014-15, $18.7 million in 2015-16, and $23.4  
            million in 2016-17 (General Fund and various special funds).   
            In 2017-18, the first fiscal year that the CPI adjustment is  
            used, the estimated increase will be $30 million, assuming a  
            3% inflation rate.  Costs will continue to rise relative to  
            existing law in the out-years and will be reflective of future  
            inflation rates. 

           Additionally, the state pays the minimum wage to private  
            individuals who provide certain services at the local level  
            (heath care, social services, etc.).  The related impact of  
            this bill's raising the minimum wage is unknown, but likely to  
            be in the high tens of millions of dollars annually.

           This bill will result in cost pressures to increase wages for  
            state employees who at present earn slightly more than the  
            current minimum wage to avoid salary compaction. 

           SUPPORT  :   (Verified  5/28/14)

          California State Council of SEIU (co-source)
          United Food and Commercial Workers Union (co-source)
          Western Center on Law and Poverty (co-source)
          Women's Foundation of California (co-source)
          AFSCME, AFL-CIO
          California Applicant Attorneys Association
          California Association of Food Banks
          California Conference of Machinists
          California Conference of the Amalgamated Transit Union
          California Food Policy Advocates
          California Immigrant Policy Center
          California Labor Federation, AFL-CIO
          California Nurses Association
          California Public Defenders Association
          California School Employees Association, AFL-CIO
          California State Association of Electrical Workers
          California State Pipe Trades Council
          California Teamsters Public Affairs Council



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          California Welfare Directors Association of California
          Children's Defense Fund-California
          City and County of San Francisco
          Consumer Federation of California
          East Bay Alliance for a Sustainable Economy
          Engineers and Scientists, International Federation of  
           Professional and Technical Engineers Local 20
          Equal Rights Advocates
          Glendale City Employees Association
          International Longshore and Warehouse Union, Coast Division
          Laborers' International Union of North America, Locals 777 and  
          Mujeres Unidas Y Activas
          National Association of Social Workers, California Chapter
          Organization of SMUD Employees
          PICO California
          Professional and Technical Engineers, International Federation  
           of Professional and Technical Engineers Local 21
          Restaurant Opportunities Centers United
          Saint Anthony Foundation
          San Bernardino Public Employees Association
          San Luis Obispo County Employees Association
          Santa Rosa City Employees Association
          UNITE HERE
          United Domestic Workers of America - AFSCME Local 3930/AFL-CIO
          Utility Workers Union of America, Local 132
          Western States Council of Sheet Metal Workers

           OPPOSITION  :    (Verified  5/28/14)

          Agricultural Council of California 
          Air Conditioning Trade Association 
          Anaheim Chamber of Commerce
          Associated Builders and Contractors - San Diego Chapter
          Brawley Chamber of Commerce
          Brea Chamber of Commerce
          California Association for Health Services at Home
          California Association of Health Facilities
          California Association of Licensed Security Agencies, Guards and  
          California Association of Winegrape Growers
          California Attractions and Parks Association
          California Business Properties Association
          California Chamber of Commerce



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          California Farm Bureau Federation
          California Grocers Association 
          California Independent Grocers Association 
          California League of Food Processors
          California Manufacturers and Technology Association 
          California Professional Association of Specialty Contractors
          California Restaurant Association 
          California Retailers Association 
          California Taxpayers' Association 
          California Trucking Association 
          Chambers of Commerce Alliance of Ventura and Santa Barbara  
          Desert Hot Springs Chamber of Commerce and Visitors Center
          El Centro Chamber of Commerce and Visitors Bureau
          El Dorado County Chamber of Commerce
          Folsom Chamber of Commerce
          Fullerton Chamber of Commerce
          Greater Bakersfield Chamber of Commerce
          Greater Fresno Area Chamber of Commerce
          Greater San Fernando Valley Chamber of Commerce
          Huntington Beach Chamber of Commerce
          Long Beach Area Chamber of Commerce
          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
          San Jose Silicon Valley Chamber of Commerce
          Santa Clara Silicon Valley Central Chamber of Commerce and  
           Convention-Visitors Bureau
          Southwest California Legislative Council
          The Greater Corona Valley Chamber of Commerce
          Torrance Area Chamber of Commerce
          Valley Industry and Commerce Association 
          Victor Valley Chamber of Commerce
          Western Electrical Contractors Association, Inc. 
          Western Growers Association

           ARGUMENTS IN SUPPORT  :    According to proponents, millions of  
          working-class Californians are left behind trying to sustain  
          themselves and their families on an income that has not  
          commensurately kept pace with the increase in inflation.  They  
          contend that while the costs of goods, services, and inflation  
          have increased over the years, the minimum wage in comparison  



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          continues to remain relatively low - resulting in the purchasing  
          power of the working-class wallet to decline.  Proponents note  
          that the purchasing power of the minimum wage fell 28% between  
          1968 and 2013, with almost a quarter of that decline occurring  
          since 2008.  Proponents bring attention to a recently published  
          report from the Center for Economic Policy Research finding that  
          if the federal minimum wage had kept pace with productivity  
          growth it would be around $16. 

          Proponents argue that small minimum wage hikes do not harm  
          employment figures but instead boost economic activity.   
          Specifically, proponents point to the Center for American  
          Progress' comparison of states' minimum wages to job growth  
          figures over a 21 year period, which found no evidence that  
          minimum wage increases cost jobs.  Proponents contend that  
          numerous studies have come to a similar conclusion. 

          Lastly, proponents argue that while the $2 increase from AB 10  
          (Alejo, Chapter 351, Statutes of 2013) took a critical first  
          step towards lifting California's lowest wage workers out of  
          poverty and public assistance, the further increases and  
          indexing to inflation in this bill moves the state closer to  
          truly strengthening the middle class.  Proponents contend that  
          existing law will never push families of three or four beyond  
          the federal poverty line because by 2016 the minimum wage under  
          AB 10 will have lost ground because there is no increase in the  
          base or a cost of living adjustment provided.  Proponents note  
          that under this bill, families of three would be lifted out of  
          poverty starting in 2015 and would rise to 127% of the federal  
          poverty level by 2017 while families of four would gain ground  
          each year on the poverty level and by 2017 would be at 105% of  
          the federal poverty level.  Proponents maintain that by 2017,  
          this bill could have the effect of lifting hundreds of thousands  
          of Californians out of poverty as well as depoliticizing the  
          issue and allowing workers and employers the predictability  
          offered by small but reliable raises.

           ARGUMENTS IN OPPOSITION  :    The California Chamber of Commerce  
          along with a coalition of organizations writes in opposition,  
          labeling this bill as a job killer.  They argue this bill  
          overwhelms many businesses that are already struggling with the  
          current minimum wage increase and other cumulative costs imposed  
          in California, creating job loss.  Opponents argue that indexing  
          the minimum wage to inflation would be troubling to the business  



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          community because it fails to take into consideration other  
          economic factors of cumulative costs to which employers may be  
          subjected.  Opponents bring attention to various cost increases  
          that will impact employers over the next few years including,  
          higher taxes under Proposition 30, increased worker's  
          compensation rates, loss of federal unemployment insurance  
          credit, increased energy costs, as well as increased costs  
          associated with the Affordable Care Act, coupled with this bill  
          they contend that it will create concern and uncertainty for  

          Additionally, opponents argue that another increase in the  
          minimum wage will negatively impact any economic recovery either  
          by limiting available jobs or creating further job loss.   
          Specifically, opponents bring attention to a Congressional  
          Budget Office report from February 2014 regarding the impact of  
          the proposal to raise the federal minimum wage to $10.10.  The  
          opposition notes the report's conclusion that although some  
          low-wage workers would receive a higher income through the  
          increase, other low wage jobs would probably be eliminated,  
          resulting in the income of most workers who became jobless to  
          fall substantially. 

          Lastly, opponents argue that an increase in the minimum wage  
          would not only increase hourly employees' wages, but also  
          salaried employees' compensation as well.  They note that for  
          employees to qualify as "exempt" they must pass the salary-basis  
          test, which is two times the monthly minimum wage.  Opponents  
          contend that if this bill passes that then in January 2017 the  
          "exempt" salary amount will rise from $33,280 to $49,920 - which  
          is an increased cost to employers of over $15,000 per exempt  

          PQ/AL:k  5/28/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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