BILL ANALYSIS �
AB 10
Page 1
Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 10 (Alejo) - As Amended: March 14, 2011
Policy Committee: Labor and
Employment Vote: 5-1
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill increases the state's minimum wage from its current
rate of $8.00 per hour to $8.50 per hour, as of January 1, 2012
and provides for the automatic adjustment of the minimum wage
each year by the percentage of inflation as measured by the
California Consumer Price Index (CPI), beginning January 1,
2013. Specifically, this bill:
1)Requires the minimum wage adjustment to be made based on the
percentage of inflation, as specified. This measure also
requires the Industrial Welfare Commission (IWC) to publicize
the adjusted wage.
2)Prohibits the IWC from adjusting the minimum wage, if the
average percentage of inflation for the previous year was
negative.
3)Defines "percentage of inflation" as the percentage of
inflation specified in the CPI for All Urban Consumers
(CPI-U), as published the Department of Industrial Relations
(DIR).
4)Defines "previous year" as the 12-month period that ends on
August 31 of the calendar year prior to the adjustment.
FISCAL EFFECT
According to the State Controller, state government employs
between 1,200 and 1,400 minimum wage workers, mostly seasonal
employees. If the state pays the increased minimum wage for
three months each year, the annual GF cost (beginning in January
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2012) to the state would be between $288,000 and $336,000, for
minimum wage workers employed by the state, as specified in this
measure.
COMMENTS
1)Purpose . Article XIV, Section 1 of the California
Constitution empowers the Legislature to provide for minimum
wages and the general welfare of employees and for those
purposes may confer on a commission legislative, executive and
judicial powers. Existing law provides authority to the IWC
"to ascertain the wages paid to all employees in this state,
to ascertain the hours and conditions of labor and employment
in the various occupations, trades and industries in which
employees are employed in this state, and to investigate the
health, safety, and welfare of those employees."
California's current minimum wage is $8.00 per hour (effective
January 2008). According to the author, "It has been three
years since minimum wage workers have been given a raise. The
purchasing power of minimum wage workers declines on an annual
basis while the cost of goods and services increase every
year. The current minimum wage is inadequate to support a
single adult, and grossly inadequate to support a family.
Economists agree that raising the minimum wage will help our
economy by generating more consumer spending. When minimum
wage workers have more money to spend, they spend it since
they cannot afford to save it."
2)Minimum wage in other states . The Federal Labor Standards Act
(FLSA) establishes provisions for the federal minimum wage.
Currently, the federal minimum wage is $7.25 per hour.
California exceeds this standard by $0.75 per hour. According
to the United States Department of Labor (USDL), 16 states
(including California) and the District of Columbia have a
higher minimum wage standard than the federal minimum. 25
states have established the minimum wage at the federal
minimum of $7.25 per hour and three states have a minimum wage
lower than the federal standard. Also, five states have no
minimum wage law.
3)CPI . According to the Department of Industrial Relations
(DIR), the CPI is a measure of the average change over time in
the prices paid by urban consumers for a fixed market basket
of goods and services. The CPI provides a way to compare what
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this market basket of goods and services costs one month in
comparison to a previous point in time. Also, as inflation
erodes consumer's purchasing power, the CPI is often used to
adjust consumers' income payments, including Social Security;
to adjust income eligibility levels for government assistance;
and to automatically provide cost-of-living wage adjustments
to millions of American workers. The CPI affects the income of
almost 80 million persons with regard to social security
beneficiaries, food stamp recipients, and federal civil
service retirees.
The USDL also reports that there are 10 states whose minimum
wage is linked to the CPI.
4)Opposition . Several business organizations, including the
CalChamber, Western Growers, the California Restaurant
Association, and the California Grocers Association, have
expressed opposition to this bill. These organizations argue
employers are under a severe economic strain due to the
recession and cannot afford to provide a higher minimum wage
at this time.
In a letter to the committee, they collectively state:
"California is already lagging the rest of the nation in
recovering from this recession, and is anticipated to continue
to lag until at least 2012. Although, a $0.50 increase may
sound minimal in theory, the realistic impact is significant.
For example, a small business with 10 full-time, hourly
employees who are paid minimum wage, will face an annual
payroll increase of $10,400 in January 2012 due to this
increase."
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081