BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Richard Alarcon, Chair
Date of Hearing: June 23, 2004 2003-2004 Regular
Session
Consultant: Frances Low Fiscal:Yes
Urgency:No
Bill No: AB 2832 REVISED
Author: Lieber
Version: As Amended June 17, 2004
Subject: Minimum Wage.
Purpose:
To set the minimum wage at $7.25 per hour as of July 1,
2005 and $7.75 per hour as of July 1, 2006, require the
Industrial Welfare Commission (IWC) to adopt consistent
minimum wage orders without convening wage boards no later
than April 1, 2005, and if the IWC fails to do so, require
the Department of Industrial Relations (DIR) to prepare and
distribute wage orders to effect prescribed changes no
later than May 1, 2005.
Analysis:
Existing law authorizes 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. California's current
minimum wage for all industries is $6.75 per hour.
All employers in California who are subject to both the
federal and state laws must pay the state minimum wage rate
unless their employees are exempt under California law.
Some employees 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
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.
This Bill would set the minimum wage at $7.25 per hour and
increase lodging and meal credits for all industries by
7.4% as of July 1, 2005. It would set the minimum wage at
$7.75 per hour and increase the lodging and meal credit
for all industries by an additional 6.9% as of July 1,
2006. It would require the Industrial Welfare Commission
to adopt consistent minimum wage orders without convening
wage boards. The wage orders would be final and conclusive
for all purposes. If the IWC failed to do so, DIR would
be required to prepare and distribute wage orders as
prescribed no later than May 1, 2005.
Comments:
1. Proponents :
Supporters of AB 2832 argue that California's current
minimum wage has lost significant value since it was last
raised. A recent report by the California Budget Project
states that 58.1% of minimum wage earners in California
are 25 years of age and older. The report also reveals
that 50.7% of minimum wage earners who are women work 35
hours of more per week. Over 69% of male earners of the
minimum wage work 35 hours per week or more. The same
report states that despite increases in the minimum wage,
the purchasing power of California's minimum wage is down
28% since 1968.
IWC is obligated to conduct a full review of the adequacy
of the minimum wage at least once every two years. IWC is
authorized on its own, or when it receives a petition, to
Hearing Date: June 23, 2004 AB
2832
Consultant: Frances Low
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Senate Committee on Labor and Industrial Relations
adopt, amend, or rescind a wage order. Although the
minimum wage has not been increased since January 1,
2002, IWC halted the process of discussing increases in
the minimum wage based on their determination that an
increase at this time was unsubstantiated. Partly due to
concerns regarding its commitment to fulfil its statutory
obligations, the IWC's budget was reduced by half last
year. Additionally, 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.
California's minimum wage is the lowest on the West
Coast. In 1998, by ballot initiative, the state of
Washington indexed its minimum wage, which is currently
$7.16. In 2002, Oregon increased its minimum wage to
$7.05 an hour, with annual indexing beginning after
January 1, 2004. Alaska recently increased its minimum
wage to $7.15 an hour.
2. Opponents :
Those opposed to AB 2832, state that it will make
California home to the highest minimum wage rate in the
country, hurting businesses already paying the highest
energy costs and the highest workers' compensation
premiums. Workers' compensation and health care
premiums, as well as other employment related taxes would
also increase because they are affected by increases in
payroll costs.
Opponents contend that most of today's minimum wage
earners are teenagers, young adults and adult women who
are relatively unskilled, have limited work experience or
work part time. Once these entry-level employees get a
foot on the employment ladder, they'll find hard work and
new abilities are quickly rewarded. The minimum wage
should not be perceived or expected to provide a
long-term wage solution for any employee.
Hearing Date: June 23, 2004 AB
2832
Consultant: Frances Low
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Senate Committee on Labor and Industrial Relations
Opponents also contend that increasing the minimum wage
will dramatically increase employer costs. In order to
account for these unanticipated costs, employers will
have no choice but to make cuts, resulting in a loss of
jobs among the lowest paid workers.
3. Prior 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 IWC 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.
4. Legislative History:
This measure passed the Assembly by a 46 - 30 vote.
Support:
California Labor Federation, AFL-CIO(sponsor)
American Federation of State, County and Municipal
Employees, AFL-CIO
American Federation of Television and Radio Artists
California Alliance for Retired Americans
California Catholic Conference
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Federation of Teachers
Hearing Date: June 23, 2004 AB
2832
Consultant: Frances Low
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Senate Committee on Labor and Industrial Relations
California National Organization for Women
California Partnership for Working Families
California Rural Legal Assistance Foundation
California School Employees Association, AFL-CIO
California State Employees Association
California Teamsters Public Affairs Council
Engineers and Scientist of California, IFPTE Local 20,
AFL-CIO
Gray Panthers
Hotel Employees & Restaurant Employees International Union
Housing California
JERICHO
Lieutenant Governor Cruz Bustamante
Mexican American Legal Defense and Educational Fund
(MALDEF)
North Bay Labor Council, AFL-CIO
Older Women's League
Professional and Technical Engineers, IFPTE Local 21,
AFL-CIO
Region 8 States Council of the United Food & Commercial
Workers
San Francisco Living Wage Coalition
Service Employees International Union, AFL-CIO
UAW, Region 5
United Farm Workers of America, AFL-CIO
Western Center on Law and Poverty
Opposition:
Agricultural Council of California
Automotive Aftermarket Services
Automotive Repair Coalition
California Apartment Association
California Association of Health Facilities
California Attractions and Parks Association
California Business Properties Association
California Chamber of Commerce
California Farm Bureau Federation
California Grocers Association
California Healthcare Association
Hearing Date: June 23, 2004 AB
2832
Consultant: Frances Low
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Senate Committee on Labor and Industrial Relations
California Hotel and Lodging Association
California Independent Grocers Association
California Landscape Contractors Association
California Lodging Industry Association
California Manufacturers and Technology Association
California Restaurant Association
California Retailers Association
California Service Station & Automotive Repair Association
California Travel Industry Association
California Women for Agriculture
Chico Chamber of Commerce
City of Costa Mesa
Consumer Alliance for A Strong Economy
Continental Airlines
Fresno County Farm Bureau
Mag Instrument, Inc.
Napa Chamber of Commerce
National Association of Theatre Owners of California/Nevada
National Federation of Independent Business
Newport Beach Chamber of Commerce
Orange County Business Council
Redondo Beach Chamber of Commerce & Visitors Bureau
South Orange County Regional Chamber of Commerce
Victorville Chamber of Commerce
Western Growers Association
* * *
Hearing Date: June 23, 2004 AB
2832
Consultant: Frances Low
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Senate Committee on Labor and Industrial Relations