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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