BILL ANALYSIS
AB 2832
Page 1
Date of Hearing: March 31, 2004
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Paul Koretz, Chair
AB 2832 (Lieber) - As Introduced: February 20, 2004
SUBJECT : Minimum Wage.
SUMMARY : Sets the minimum wage at $7.25 as of January 1, 2005,
and $7.75 as of January 1, 2006, and would require the
commission to adopt consistent minimum wage orders without
convening wage boards.
EXISTING LAW : Authorizes the Industrial Welfare Commission
(IWC) to determine minimum wages in accordance with a prescribed
procedure that includes the selection of wage boards to consider
and make recommendations regarding wage issues. The current
minimum wage for all industries is $6.75 per hour.
FISCAL EFFECT : Unknown
COMMENTS :
In 1996, the voters approved the Living Wage Act, which
established a minimum wage of $5.75 per hour. The IWC, under
the authority delegated to it by the Legislature, acted in 2000
to increase the minimum wage from $5.75 to $6.25, effective on
January 1, 2001, and to $6.75 on January 1, 2002.
The Industrial Welfare Commission
The IWC is obligated to conduct a full review of the adequacy of
the minimum wage at least once every two years. The IWC is
authorized on its own, or when it receives a petition, to adopt,
amend, or rescind a wage order. In February of 2003, The
Industrial Welfare Commission (IWC) halted the process of
discussing increases in the minimum wage based on their
determination that an increase at this time was unsubstantiated.
Last year, the IWC's budget was reduced by half in part over
concerns regarding its commitment to fulfil its statutory
obligations. Additionally, the IWC has recently reported that,
due to fiscal constraints, it has not begun its review of the
minimum wage that should have begun in November of 2003.
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Other States
California's minimum wage is the lowest on the West Coast. It is
the only West Coast state without indexing. In 1998, Washington
State indexed its minimum wage, which is currently $7.01, by
ballot initiative. In 2002 Oregon increased its minimum wage to
$6.90 an hour, with indexing thereafter, and Alaska increased
its minimum wage to $7.15 an hour, with indexing thereafter,
both by ballot initiative.
Federal and State law
Most employers in California are subject to both the federal and
state minimum wage laws. The effect of this dual coverage is
that when there are conflicting requirements in the laws, the
employer must follow the stricter standard; that is, the one
that is the most beneficial to the employee. Thus, since
California's current law requires a higher minimum wage rate
than does the federal law, all employers in California who are
subject to both laws must pay the state minimum wage rate unless
their employees are exempt under California law.
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|Exemptions |
| |
|Although there are some exceptions, almost all employees in |
|California must be paid the minimum wage as required by state |
|law. Effective January 1, 2002, the minimum wage in California |
|is $6.75 per hour. There are some employees who are exempt |
|from the minimum wage law, such as outside salespersons, |
|individuals who are the parent, spouse, or child of the |
|employer, and apprentices regularly indentured under the State |
|Division of Apprenticeship Standards. |
| |
|There is an exception for learners, regardless of age, who may |
|be paid not less than 85% of the minimum wage rounded to the |
|nearest nickel during their first 160 hours of employment in |
|occupations in which they have no previous similar or related |
|experience. |
| |
|There are also exceptions for employees who are mentally or |
|physically disabled, or both, and for nonprofit organizations |
|such as sheltered workshops or rehabilitation facilities that |
AB 2832
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|employ disabled workers. Such individuals and organizations |
|may be issued a special license by the Division of Labor |
|Standards Enforcement authorizing employment at a wage less |
|than the legal minimum wage. |
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Recent Studies
There are roughly one million workers in minimum wage jobs in
California. The majority of minimum wage workers are adult
primary breadwinners in their families and many are immigrants.
The following is a summary of some recent studies regarding the
minimum wage.
1)According to an August 2002 study by the California Research
Bureau, of the 17.3 million wage and salary workers in
California, 2.9 million earned less than $7.00 per hour.
2)The CRB report argued that according to the evidence increase
the minimum wage has historically had minor effects on
inflation and employment.
3)The Department of Industrial Relations, in a report entitled
"Minimum Wages: The Economic Impact of the 2001 California
Wage Increases," reported that the 2001 increase had no impact
on employment levels in the state but helped move workers out
of poverty.
4)A 2003 report by the California Budget Project stated that a
single adult needs an annual income of $22,943, or an hourly
wage of $11.03, to meet basic needs.
Arguments in Support
Supporters of this bill cite many of the recent studies
mentioned above. They also argue that the minimum wage, which
affects millions of Californians, is currently inadequate to
supply the cost of proper living. Supporters believe that an
increase in the minimum wage would dramatically improve the
lives of millions of Californians. Housing California, points
out in support, that a family of two minimum wage earners can
afford approximately $648 per month for housing.
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The California Labor Federation, AFL-CIO, sponsors of this bill,
also point out that the wage is failing to retain purchasing
power. In its letter of support, the Federation states that the
minimum wage to match the purchasing power it had in 1968,
today's minimum wage would have to be $8.92 per hour. If it had
kept up with productivity gains, it would be over $25.00 an hour
today.
The Federation also argues that there is strong moral argument
for raising the minimum wage. Their letter of support states
that because the current wage levels are inadequate in injurious
to workers, "As a society, we have the responsibility to make
work pay, and to provide those that toil in our shops, fields,
and factories with a wage that will allow them dignity, respect
and the ability to be full members of society."
Arguments in Opposition
Opponents argue that businesses in California are already
shouldering heavy burdens including the high-energy costs, high
worker's compensation premiums, and high unemployment insurance
taxes. Opponents also argue that this bill would make
California home of the highest minimum wage in the country and
therefore put additional pressure on business.
The California Restaurant Association (CRA) argues that a
minimum wage increase will hurt those employees it intends to
help. CRA believes that increasing the minimum wage by $1.00 is
expected to cost the average small business restaurateur upwards
of $20,000 in new payroll costs the first year and upwards of
$40,000 the second year. As such, employers will be forced to
make difficult decisions, including scaling back the shifts of
tipped employees, and, laying people off.
The California Association of Health Care Facilities (CAHF)
argues that increasing the minimum wage will burden the
long-term care industry by making it more difficult to attract
an adequate workforce. CAHF further argues that wages in the
industry are higher than the minimum wage, but still relatively
noncompetitive. Many employees in that industry could be lured
away to less physically and emotionally challenging work,
particularly if a minimum wage increase pressures other
industries to institute general wages increases throughout the
economy.
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Previous Legislation
SB 57 (Burton) automatically adjusts the hourly minimum wage on
January 1, 2004 and each year thereafter based on the California
Consumer Price Index for All Urban Consumers. This bill was
held in Senate Appropriations Committee and is now dead.
SB 996 (Alarcon) requires the Industrial Welfare Commission to
establish minimum living wage requirements, indexed to
inflation, that would apply to specified employers that enter
into specified contracts with the state or receive certain types
of state assistance. This bill passed the Senate, 25 to 14, on
June 4, 2003, but was subsequently held at the Assembly desk.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County, and Municipal Employees
American Federation of Television and Radio Artists
California Catholic Conference
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Federation of Teachers
California Labor Federation, AFL-CIO
California Partnership for Working Families
California Rural Legal Assistance Foundation
California School Employees Association
California Teamster Public Affairs Council
Center on Policy Initiatives
Engineers and Scientists of California, Local 20
Gray Panthers
Hotel Employees & Restaurant Employees International Union
Housing California
Jericho
North Bay Labor Council
Professional and Technical Engineers, Local 21
Region 8 States Council of the United Food & Commercial Workers
Service Employees International Union
Opposition
Agricultural Council of California
Automotive Aftermarket Services
Automotive Repair Coalition
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California Apartment Association
California Association of Health Facilities
California Chamber of Commerce
California Farm Bureau
California Healthcare Association
California Hotel and Lodging Association
California Independent Grocers Association
California Landscape Contractors Association
California Lodging Industry Association
California Restaurant Association
California Retailers Association
California Service Station & Automotive Repair Association
Napa Chamber of Commerce
National Association of Theatre Owners of CA/NV
National Federation of Independent Business
Analysis Prepared by : Nick Louizos / L. & E. / (916) 319-2091