BILL ANALYSIS �
AB 1439
Page 1
Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1439 (Alejo) - As Amended: March 29, 2012
Policy Committee: Labor and
Employment Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires the state's minimum wage to automatically
adjust 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 adjustment to be made on January 1 of each year
in order to maintain the purchasing power diminished by the
rate of inflation that occurred during the previous year.
2)Requires the adjustment to be made by multiplying the minimum
wage in effect on August 31 of the previous year by the
percentage of inflation that occurred during that year, and by
adding the product to the minimum wage in effect during that
year. Further requires the result to be rounded to the
nearest $0.05, and requires the Industrial Welfare Commission
(IWC) to publicize the adjusted wage
3)Prohibits the IWC from adjusting the minimum wage if the
average percentage of inflation for the previous year was
negative.
4)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).
5)Defines "previous year" as the 12-month period that ends on
August 31 of the calendar year prior to the adjustment.
6)Prohibits the IWC from reducing the minimum wage, and
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authorizes the IWC to increase the minimum wage in an amount
greater than the calculated rate, except when the percentage
of inflation for the previous year was negative.
FISCAL EFFECT
1)According to the State Controller, state government employs
91,272 minimum wage workers. Approximately 90% of these
workers are student assistants (SAs). If at least 1,000
workers are not SAs, there would be a GF cost of $360,000 to
the state beginning January 1, 2013 to adjust the minimum wage
based on the CPI, as specified.
2)GF costs of approximately $400,000 to DIR to issue new Minimum
Wage Orders to approximately 815,000 employers in the state
each time the minimum wage is adjusted pursuant to this bill.
COMMENTS
1)Background . The Federal Labor Standards Act (FLSA)
establishes provisions for the federal minimum wage.
Currently, the federal minimum wage is $7.25 per hour.
California's current minimum wage is $8.00 per hour (effective
January 2008), which exceeds the federal standard by 0.75 per
hour. As of January 2012, The National Council of State
Legislatures (NCSL) reports 17 states, including California,
have a wage higher than the federal minimum wage. According
to the United States Department of Labor (USDL), 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.
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 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
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almost 80 million persons with regard to social security
beneficiaries, food stamp recipients, and federal civil
service retirees.
In April 2012, the USDL reported the CPI increased by 0.3% in
March on a seasonally adjusted basis. USDL states: "Over the
last 12 months, the all items index increased 2.7% before
seasonal adjustment. The indexes for food, energy, and all
items less food and energy all increased in March. The
gasoline index continued to rise, more than offsetting a
decline in the household energy index and leading to a 0.9%
increase in the energy index. The food index rose 0.2% as the
index for meats, poultry, fish, and eggs increased notably."
2)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 to confer
legislative, executive and judicial powers on a commission.
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."
According to the author, "It has been five 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 conclude
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.
"AB 1439 addresses this historic income gap by adjusting the
state minimum wage on an annual basis according to the rate of
inflation. In years of negative inflation, the minimum wage
would remain the same."
3)Minimum wage indexing in other states . According to the NCSL,
as of January 2012, 10 states link their minimum wage rates to
some type of inflation or cost-of-living adjustment (COLA).
Of these 10 states, five specifically link this adjustment to
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the CPI.
4)Opposition . Several business organizations, including the
CalChamber 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. Specifically, business
groups have expressed opposition to the automatic nature of
the adjustment proposed in this bill. In an article published
in the Sacramento Bee on April 24, 2012, a representative from
the CalChamber argued against the bill putting the minimum
wage on "autopilot." The representative also stated
statistics �i.e., the CPI] should not be the sole factor in
determining whether or not to increase the minimum wage.
5)Previous legislation . AB 10 (Alejo), 2011, would have
increased 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
provided for the automatic adjustment of the minimum wage each
year by the percentage of inflation as measured by the CPI,
beginning January 1, 2013. This bill was held on this
committee's Suspense File.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081