BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               SB 3         Hearing Date:    March 31,  
          2016
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          |Author:    |Leno                                                 |
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          |Version:   |March 28, 2016                                       |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Gideon Baum                                          |
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          Subject:  Minimum wage:  in-home supportive services:  paid sick  
                                        days


          KEY ISSUE
          
          Should the Legislature create a schedule for a phased increase  
          in the minimum wage from $10.50 per hour to $15 per hour over 7  
          years, depending on the size of the employer and general  
          economic conditions, and link the minimum wage to the U.S.  
          Consumer Price Index once the minimum wage reaches $15 per hour?

          Should the Legislature require paid sick days for In-Home  
          Supportive Services (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 law  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)








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          Existing law  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 U.S. Consumer Price Index (CPI),  
          which is a measure of inflation.

          Specifically,  this bill  phases in the following increase for  
          employers with 26 or more employees: 

             A)   From January 1, 2017, to December 31, 2017,  
               inclusive,-ten dollars and fifty cents ($10.50) per hour.
             B)   From January 1, 2018, to December 31, 2018,  
               inclusive,-eleven dollars ($11) per hour.
             C)   From January 1, 2019, to December 31, 2019,  
               inclusive,-twelve dollars ($12) per hour.
             D)   From January 1, 2020, to December 31, 2020,  
               inclusive,-thirteen dollars ($13) per hour.
             E)   From January 1, 2021, to December 31, 2021,  
               inclusive,-fourteen dollars ($14) per hour.
             F)   From January 1, 2022, and until adjusted by the U.S.  
               Consumer Price Index (CPI)-fifteen dollars ($15) per hour.

          Specifically,  this bill  phases in the following increase for  
          employers with 25 or fewer employees: 

             A)   From January 1, 2018, to December 31, 2018,  
               inclusive,-ten dollars and fifty cents ($10.50) per hour.
             B)   From January 1, 2019, to December 31, 2019,  
               inclusive,-eleven dollars ($11) per hour.
             C)   From January 1, 2020, to December 31, 2020,  
               inclusive,-twelve dollars ($12) per hour.
             D)    From January 1, 2021, to December 31, 2021,  
               inclusive,-thirteen dollars ($13) per hour.
             E)    From January 1, 2022, to December 31, 2022,  
               inclusive,-fourteen dollars ($14) per hour.
             F)   From January 1, 2023, and until adjusted by the U.S.  
               Consumer Price Index (CPI)-fifteen dollars ($15) per hour.

           This bill  requires that, after January 1, 2023, the minimum wage  
          will be increased annually from the seasonally adjusted U.S.  
          Consumer Price Index, but no more than 3.5% in a year, with the  







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          resulting amount rounded to the nearest $0.10. The increase  
          shall be calculated on August 1st to take effect on January 1st  
          of the following year.

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

             A)   Total nonfarm employment for California, seasonally  
               adjusted, decreased over the three-month period from April  
               to June, inclusive; or
             B)   Total nonfarm employment for California, seasonally  
               adjusted, decreased over the six-month period from January  
               to June, inclusive;
          And: 
             C)   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:
             D)   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 would also  :

             1)   Remove the exemption for IHSS workers from the  paid  
               sick days statute;
             2)   Set the paid sick days annual accrual rate for IHSS  
               workers to 8 hours or 1 paid sick day in 2018;
             3)   Set 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;
             4)   Set the paid sick days annual accrual rate for IHSS   
               workers to 24 hours or 3 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.  The Federal Minimum Wage and the Minimum Wage 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  
            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  







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            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 U.S. Consumer Price Index (CPI)?

            As was noted above, annual increases to the minimum wage after  
            it reaches $15 per hour are tied to increases in the Consumer  
            Price Index (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 8 major goods and services groups. The  
            groups are:

             1)   FOOD AND BEVERAGES (breakfast cereal, milk, coffee,  
               chicken, wine, full service meals, snacks)
             2)   HOUSING (rent of primary residence, owners' equivalent  
               rent, fuel oil, bedroom furniture)
             3)   APPAREL (men's shirts and sweaters, women's dresses,  
               jewelry)
             4)   TRANSPORTATION (new vehicles, airline fares, gasoline,  
               motor vehicle insurance)
             5)   MEDICAL CARE (prescription drugs and medical supplies,  
               physicians' services, eyeglasses and eye care, hospital  







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               services)
             6)   RECREATION (televisions, toys, pets and pet products,  
               sports equipment, admissions);
             7)   EDUCATION AND COMMUNICATION (college tuition, postage,  
               telephone services, computer software and accessories);
             8)   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 index 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.




          4.  Proponent Arguments  :
            
            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 her 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 U.S.  
            Consumer Price Index (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. 







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          5.  Opponent Arguments  :

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

          6.  Prior Legislation  :

            AB 10 (Alejo), Chapter 351, Statutes of 2013, gradually raised  
            the minimum wage to $10 per hour in 2016.


          


          SUPPORT
          
          Western Center on Law and Poverty (co-sponsor)
          United Food and Commercial Workers (co-sponsor)
          SEIU-CA State Council (co-sponsor)
          9to5 California, National Association of Working Women 
          ACLU
          AFSCME Council 57
          AFSCME, AFL-CIO
          Alliance of Californians for Community Empowerment (ACCE Action)
          American Academy of Pediatrics, California
          CA School Employees Association
          California Alliance for Retired Americans (CARA)
          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 Teachers Association
          California Teamsters Public Affairs Council
          Californians United for a Responsible Budget (CURB)  
           Children's Defense Fund-California (CDF-CA)
          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 CA, IFPTE Local 20, AFL-CIO
          Family Economic Security Partnership (FESP)
          Friends Committee on Legislation
          Glendale City Employees Association
          Insurance Commissioner Dave Jones
          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
          San Diego County Court Employees







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          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 (WRAP)
          Young Invincibles

          OPPOSITION
          
          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
          California Grocers Association
          California League of Food Processors
          California Pear Growers Association
          California Pool and Spa Association







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          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
          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







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          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


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