BILL ANALYSIS Ó
SB 3
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(Without Reference to File)
SENATE THIRD READING
SB
3 (Leno, et al.)
As Amended March 28, 2016
Majority vote
SENATE VOTE: (Vote not relevant)
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|Committee |Votes|Ayes |Noes |
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|----------------+-----+----------------------+--------------------|
|Labor | | | |
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|(Vote not | | | |
|relevant) | | | |
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|----------------+-----+----------------------+--------------------|
|Appropriations |12-7 |Gonzalez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Daly, Gallagher, |
| | |Calderon, |Jones, Obernolte, |
| | | |Wagner |
| | | | |
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| | |Eduardo Garcia, | |
| | | | |
| | | | |
| | |Roger Hernández, | |
| | |Holden, Quirk, | |
| | |Santiago, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Increases the state minimum wage, ultimately to $15
per hour, indexes the minimum wage thereafter, and provides for
paid sick days to providers of in-home supportive services
(IHSS), as specified. Specifically, this bill:
1)Increases the minimum wage as follows:
a) To $10.50 per hour on January 1, 2017 (and for employers
with 25 employees or less on January 1, 2018).
b) To $11 per hour on January 2, 2018 (and for employers
with 25 employees or less on January 1, 2019).
c) To $12 per hour on January 1, 2019 (and for employers
with 25 employees or less on January 1, 2020).
d) To $13 per hour on January 1, 2020 (and for employers
with 25 employees or less on January 1, 2021).
e) To $14 per hour on January 1, 2021 (and for employers
with 25 employees or less on January 1, 2022).
f) To $15 per hour on January 1, 2022 (and for employers
with 25 employees or less on January 1, 2023).
2)Defines "employer" to mean any person who directly or
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indirectly, or through an agent or any other person, employs
or exercises control over the wages, hours or working
conditions of any person (consistent with the definition
contained in the Industrial Welfare Commission Wage Orders).
"Employer" includes the state, political subdivisions of the
state, and municipalities.
3)Provides that employees who are treated as employed by a
"single qualified taxpayer" under a specified provision of the
Revenue and Taxation Code shall be considered employees of
that taxpayer for purposes of this bill.
4)Provides for two potential "off-ramps" whereby the Governor
can temporarily suspend a scheduled increase to the minimum
wage set forth above as follows:
Economic Conditions "Off-Ramp"
a) On or before July 28, 2017, and on or before every July
28 until the minimum wage is $15 per hour, to ensure that
economic conditions can support a minimum wage increase,
the Director of Finance shall annually make a determination
and certify to the Governor and Legislature whether each of
the following conditions is met:
i) Total nonfarm employment for California decreased
over the three-month period from April to June, prior to
the July 28 determination, as specified.
ii) Total nonfarm employment for California decreased
over the six-month period from January to June, prior to
the July 28 determination, as specified.
iii) Retail sales and use tax cash receipts, as
specified, for a specified period ending one months prior
to the July 28 determination date is less than the retail
sales and use tax cash receipts, as specified, for a
specified period ending 13 months prior to the July 28
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determination.
b) If, for any year, either of the nonfarm employment
criteria above are met and the retail sales and use tax
criteria is met, the Governor may, by August 1, notify the
Legislature of an initial determination to temporarily
suspend the scheduled minimum wage increase for the
following year. The Governor shall make a final
determination by proclamation whether to temporarily
suspend the scheduled minimum wage increase on September 1.
Budget Deficit "Off-Ramp"
a) On or before July 28, 2017, and on or before every July
28 until the minimum wage is $15 per hour, to ensure that
the state General Fund fiscal condition can support the
next scheduled minimum wage increase, the Director of
Finance shall annually make a determination and certify to
the Governor and Legislature whether the state General Fund
would be in a deficit in the current fiscal year, or in
either of the following two fiscal years, as specified.
"Deficit" is defined as a negative balance that exceeds 1
percent of the total state General Fund revenues and
transfers, as specified.
b) If the Director of Finance makes the above
determination, the Governor may, by August 1, notify the
Legislature of an initial determination to temporarily
suspend the scheduled minimum wage increase for the
following year. The Governor shall make a final
determination by proclamation whether to temporarily
suspend the scheduled minimum wage increase on September 1.
The Governor may temporarily suspend a scheduled minimum
wage increase related to a General Fund deficit no more
than two times.
1)Provides that if the Governor makes a final determination to
temporarily suspend the scheduled minimum wage increase
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pursuant to the "off-ramps" described above, all dates
specified above for scheduled minimum wage increases that are
subsequent to that final determination shall be postponed by
one additional year.
2)Provides that, following implementation of the $15 per hour
minimum wage for all employers, on or before August 1 of that
year (and each year thereafter), the Director of Finance shall
calculate an adjusted minimum wage (indexing).
3)Provides that that calculation shall increase the minimum wage
by the lesser of: a) 3.5 %, or b) the rate of change in the
United States Consumer Price Index for Urban Wage Earners and
Clerical Workers (US CPI-W), as specified. The result shall
be rounded to the nearest $0.10.
4)Provides that each adjusted minimum wage calculated shall take
effect on the following January 1.
5)Provides that if the rate of change in the US CPI-W, as
specified, is negative, there shall be no increase or decrease
in the minimum wage.
6)Provides that if the rate of change in the US CPI-W, as
specified, exceeds seven percent in the first year of
implementation of the $15 per hour minimum wage for employers
with 26 or more employees, the indexing provisions described
above shall be implemented immediately, such that indexing
will be effective the following January 1.
7)Further provides that if that occurs, for employers with 25 or
fewer employees, the minimum wage shall be set equal to the
minimum wage for employers with 26 or more employees,
effective on the following January 1. For those employers,
the $15 per hour minimum wage shall be considered to have been
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implemented.
8) Provides that on an after July 1, 2018, a provider of IHSS
services who works in California for 30 or more days within a
year is entitled to paid sick days as follows:
a) Eight hours or one day beginning July 1, 2018.
b) Sixteen hours or two days beginning when the minimum
wage (accounting for any temporary suspension described
above) for employers with 26 or more employees has reached
$13 per hour.
c) Twenty-four hours or three days beginning when the
minimum wage (accounting for any temporary suspension
described above) for employers with 26 or more employees
has reached $15 per hour.
9)Requires the State Department of Social Services (DSS), in
consultation with stakeholders, to convene a working group to
implement paid sick leave for IHSS providers. The workgroup
shall finish its implementation work by November 1, 2017, and
DSS shall issue guidance such as an all-county letter or
similar instruction by December 1, 2017.
10)Makes related and conforming changes.
EXISTING LAW:
1)Establishes the minimum wage under federal law as $7.25 per
hour. (Fair Labor Standards Act of 1938, 29 United States Code
Chapter 8).
2)Effective January 1, 2016, establishes the minimum wage in
California for all industries as not less than $10 per hour.
(Labor Code Section 1182.12).
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3)Provides for the provision of paid sick days for employees, as
specified, but excludes from the definition of "employee" a
provider of IHSS services.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Current year costs of approximately $19 million General Fund
(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)General Fund 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 (CMIPS) automation
changes and Department of Social Services administrative
costs.
COMMENTS: In recent years, much debate at the national, state,
and local level has centered around efforts to increase the
minimum wage as an effort to address income inequality and raise
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individuals out of poverty.
Although under federal law the minimum wage is currently $7.25
per hour, many state governments and some local governments have
established higher minimum wage rates.
California first established a statewide minimum wage in 1916,
and has increased the minimum wage several times over the years.
California's current minimum wage is $10 per hour (which was
enacted pursuant to AB 10 (Alejo) of 2013). According to the
National Conference of State Legislatures, as of January 1,
2016, California and Massachusetts had minimum wages of $10 per
hour. The District of Columbia has a minimum wage of $10.50 per
hour. An additional nine states have minimum wages above $9 per
hour.
Although the state's minimum wage has never declined, it has
often grown more slowly than inflation. Unlike California,
current laws in 15 states and the District of Columbia establish
minimum wages that automatically increase (or index)
proportionally to some measure of inflation.
Some cities in California have established minimum wages that
are higher than the current statewide minimum wage. For
example, the cities of San Francisco, Oakland, and Emeryville
all have minimum wages higher than $12 per hour. The Los
Angeles City Council recently voted to raise that city's minimum
wage to $15 per hour by 2020.
In summary, this bill would increase California's statewide
minimum wage from the current $10 per hour to $15 per hour, over
the course of the next six years. There would be a one-year lag
in the increase for small businesses with 25 or fewer employees.
For these businesses, the first increase (to $10.50) will begin
in 2018, and the $15 would be achieved in 2023. The bill
permits a temporary "pause" in the scheduled statewide increase
to $15 per hour should the State's economic or budgetary
conditions deteriorate. In addition, this bill would provide
for annual "indexing" of the statewide minimum wage (to account
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for rising costs of living) in the future, starting after the
$15 wage level is reached.
In addition to the minimum wage proposals, this bill would also
provide for three days of paid sick leave to IHSS workers,
bringing these workers the same benefits provided to other
workers in California pursuant to AB 1522 (Gonzalez), Chapter
317, Statutes of 2014, the Health Workplaces, Healthy Families
Act of 2014, which went into effect on July 1, 2015. According
to the Assembly Appropriations Committee, "Providers of IHSS
were originally included in AB 1522 but were excluded towards
the end of the Legislative process due to cost concerns. These
cost concerns have been addressed by phasing in the provision of
paid sick days, consistent with increases in the minimum wage."
Arguments in Support
Supporters of this bill, including the California Labor
Federation, AFL-CIO, argue that it represents a reasonable and
responsible proposal. This proposal is phased in over a long
period of time. Small businesses are given an additional year
to catch up. Indexing only applies after initial wage increases
are implemented. The Governor will be able to temporarily pause
the increase if we are in a recession or the budget is in
significant deficit.
Supporters also argue that this proposal guarantees that, while
our economy is growing, workers are sharing in the economic
gains. Both the wage increases and the indexing guarantee that
workers will not have inflation swallowing their raises. No one
who works full-time should live in poverty. This proposal takes
a responsible approach to lifting millions of working
Californians out of poverty.
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They note that, thanks to worker organizing, we have higher
minimum wages in some cities and counties of California. This
patchwork creates situations where a worker on one side of the
street makes less than a worker doing the same job on the other
side of the street. Workers also live in different cities from
where they work. This bill raises the floor for all workers and
addresses growing inequities between local minimum wages.
Supporters also contend that this bill will create
predictability and stability for employers and workers. No
longer will our state's minimum wage be subject to politics.
Indexing allows for businesses to plan for incremental increases
and workers to plan for family budgets. Rather than large
legislative jumps going forward, incremental increases can be
planned for.
Supporters conclude by stating that, under this bill, nearly 6
million California workers will receive a raise, which
represents over one third of our total workforce. They note
that, already, more than 750,000 workers will reach $15 under
local minimum wage laws. Taken together, 6.5 million
Californians will get a raise. Supporters state that workers
will, on average, get a $3700 annual raise under this proposal.
Of those workers, 96% are over 20 years old, 36% have kids, 74%
are workers of color, 55% are Latino, 44% are immigrants, and
more than two-thirds (67%) work full-time.
Arguments in Opposition
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Opponents, including the California Chamber of Commerce, argue
that this unprecedented increase in the minimum wage will simply
overwhelm many businesses that are already struggling with the
current minimum wage increase and will limit job growth in this
state.
Opponents argue that not all regions of California can absorb
the increase to the minimum wage proposed by this bill. They
state that, while California's overall unemployment rate is at
5.7%, there are still many regions of the state (more than one
dozen counties) where the unemployment rate is 10% or higher.
Imposing such a significant increase in the minimum wage on
employers in these areas that are still trying to recover from
the "Great Recession" will further inhibit job growth. They
argue that, as evidenced by the 16 local jurisdictions in
California which have adopted their own local minimum wage
ordinances, regions that believe they can afford a higher
minimum wage without impacting job growth or the local economy
have done so.
Opponents also argue that the "off-ramps" to suspend the
scheduled minimum wage increases are discretionary and limited.
The suspension is not mandatory and, for a budget deficit, can
only be utilized twice. Moreover, once the minimum wage reaches
$15 an hour and is adjusted to national inflation, there is no
"off-ramp" available. They argue that, in order to protect
California's economy, this bill should have mandatory off-ramps
when the job market or state revenue has declined, is stagnant,
or is not increasing at the same rate as the proposed minimum
wage increase.
In addition, opponents contend that raising the minimum wage
creates job loss for untrained workers and those who are new to
the job market. This bill will negatively impact economic
recovery by either limiting available jobs, hours of work or,
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worse, creating further job loss, especially for vulnerable
workers who are untrained and new to the job market. An
increase in the minimum wage also significantly impacts teenage
employees who are new to the job and untrained. Opponents also
cite to evidence that they argue suggests that increasing the
minimum wage does not target those in actual need. They state
that increasing the minimum wage does not assist those actually
living in poverty and could potentially harm them further if
low-wage jobs are reduced due to the increased cost on
businesses.
The California Restaurant Association, writing in opposition to
this bill, argues that "a minimum wage is a starting wage - not
a forever wage." They contend that minimum wage increases often
have a perverse effect on the restaurant community. Wage
increases typically benefit those who are the best paid
individuals; minimum wage earners are often tipped well above
the minimum wage. The added cost pressure from the mandatory
annual wage increase for the employees already earning the most
takes finite dollars an operator may have and reduces, if not
eliminates, their ability to provide non-tipped employees with a
wage increase.
Analysis Prepared by:
Ben Ebbink / L. & E. / (916) 319-2091 FN:
0002667
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