BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 935|
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THIRD READING
Bill No: SB 935
Author: Leno (D), et al.
Amended: 5/27/14
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-1, 3/26/14
AYES: Hueso, Leno, Padilla
NOES: Wyland
NO VOTE RECORDED: Yee
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Minimum wage: annual adjustment
SOURCE : California State Council of SEIU
United Food and Commercial Workers Union
Western Center on Law and Poverty
Womens Foundation of California
DIGEST : This bill approves a series of annual minimum wage
increases between 2015 and 2017, and approves an annual
adjustment based on the Consumer Price Index (CPI) to the
minimum wage starting in 2018.
ANALYSIS : Existing federal law sets the minimum wage at $7.25
an hour.
Existing state law:
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1.States that when state and federal laws differ, one must
comply with the more restrictive requirement. In California,
the minimum wage is $8 an hour.
2.States that on July 1, 2014, the minimum wage in California
will increase to $9 an hour.
3.States that on January 1, 2016, the minimum wage in California
will increase to $10 an hour.
This bill increases the state's minimum wage in three separate
increments over the next three years. Specifically, this bill:
1.Increases California's minimum wage to not less than $11 per
hour for all industries on January 1, 2015.
2.Increases California's minimum wage to not less than $12 per
hour for all industries on January 1, 2016.
3.Increases California's minimum wage to not less than $13 per
hour for all industries on January 1, 2017.
4.Indexes automatically the minimum wage to inflation annually
on January 1 of each year commencing on January 1, 2018.
5.Requires the minimum wage to be calculated annually by
multiplying the minimum wage in effect on December 31 of the
previous year by the percentage of inflation that occurred
during that year and adding that product to the minimum wage.
6.States that the minimum wage applies to all industries,
including public and private employment.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
The Department of Industrial Relations will incur costs of
about $450,000 (General Fund) to issue new Minimum Wage Orders
to approximately 800,000 employers in the state each time the
minimum wage is adjusted, as specified.
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According to the State Controller's Office, state government
employs approximately 4,500 minimum wage workers, mostly
student assistants and seasonal employees. As a direct
employer, this bill will lead to an estimate increase of $9.4
million in 2014-15, $18.7 million in 2015-16, and $23.4
million in 2016-17 (General Fund and various special funds).
In 2017-18, the first fiscal year that the CPI adjustment is
used, the estimated increase will be $30 million, assuming a
3% inflation rate. Costs will continue to rise relative to
existing law in the out-years and will be reflective of future
inflation rates.
Additionally, the state pays the minimum wage to private
individuals who provide certain services at the local level
(heath care, social services, etc.). The related impact of
this bill's raising the minimum wage is unknown, but likely to
be in the high tens of millions of dollars annually.
This bill will result in cost pressures to increase wages for
state employees who at present earn slightly more than the
current minimum wage to avoid salary compaction.
SUPPORT : (Verified 5/28/14)
California State Council of SEIU (co-source)
United Food and Commercial Workers Union (co-source)
Western Center on Law and Poverty (co-source)
Women's Foundation of California (co-source)
9to5
AFSCME, AFL-CIO
California Applicant Attorneys Association
California Association of Food Banks
California Conference of Machinists
California Conference of the Amalgamated Transit Union
California Food Policy Advocates
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California Nurses Association
California Public Defenders Association
California School Employees Association, AFL-CIO
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
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California Welfare Directors Association of California
Children's Defense Fund-California
City and County of San Francisco
Consumer Federation of California
East Bay Alliance for a Sustainable Economy
Engineers and Scientists, International Federation of
Professional and Technical Engineers Local 20
Equal Rights Advocates
Glendale City Employees Association
International Longshore and Warehouse Union, Coast Division
Laborers' International Union of North America, Locals 777 and
792
Mujeres Unidas Y Activas
National Association of Social Workers, California Chapter
Organization of SMUD Employees
PICO California
Professional and Technical Engineers, International Federation
of Professional and Technical Engineers Local 21
Restaurant Opportunities Centers United
Saint Anthony Foundation
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
UNITE HERE
United Domestic Workers of America - AFSCME Local 3930/AFL-CIO
Utility Workers Union of America, Local 132
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 5/28/14)
Agricultural Council of California
Air Conditioning Trade Association
Anaheim Chamber of Commerce
Associated Builders and Contractors - San Diego Chapter
Brawley Chamber of Commerce
Brea Chamber of Commerce
California Association for Health Services at Home
California Association of Health Facilities
California Association of Licensed Security Agencies, Guards and
Associates
California Association of Winegrape Growers
California Attractions and Parks Association
California Business Properties Association
California Chamber of Commerce
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California Farm Bureau Federation
California Grocers Association
California Independent Grocers Association
California League of Food Processors
California Manufacturers and Technology Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
California Taxpayers' Association
California Trucking Association
Chambers of Commerce Alliance of Ventura and Santa Barbara
Counties
Desert Hot Springs Chamber of Commerce and Visitors Center
El Centro Chamber of Commerce and Visitors Bureau
El Dorado County Chamber of Commerce
Folsom Chamber of Commerce
Fullerton Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Greater Fresno Area Chamber of Commerce
Greater San Fernando Valley Chamber of Commerce
Huntington Beach Chamber of Commerce
Long Beach Area Chamber of Commerce
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
San Jose Silicon Valley Chamber of Commerce
Santa Clara Silicon Valley Central Chamber of Commerce and
Convention-Visitors Bureau
Southwest California Legislative Council
The Greater Corona Valley Chamber of Commerce
Torrance Area Chamber of Commerce
Valley Industry and Commerce Association
Victor Valley Chamber of Commerce
Western Electrical Contractors Association, Inc.
Western Growers Association
ARGUMENTS IN SUPPORT : According to proponents, millions of
working-class Californians are left behind trying to sustain
themselves and their families on an income that has not
commensurately kept pace with the increase in inflation. They
contend that while the costs of goods, services, and inflation
have increased over the years, the minimum wage in comparison
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continues to remain relatively low - resulting in the purchasing
power of the working-class wallet to decline. Proponents note
that the purchasing power of the minimum wage fell 28% between
1968 and 2013, with almost a quarter of that decline occurring
since 2008. Proponents bring attention to a recently published
report from the Center for Economic Policy Research finding that
if the federal minimum wage had kept pace with productivity
growth it would be around $16.
Proponents argue that small minimum wage hikes do not harm
employment figures but instead boost economic activity.
Specifically, proponents point to the Center for American
Progress' comparison of states' minimum wages to job growth
figures over a 21 year period, which found no evidence that
minimum wage increases cost jobs. Proponents contend that
numerous studies have come to a similar conclusion.
Lastly, proponents argue that while the $2 increase from AB 10
(Alejo, Chapter 351, Statutes of 2013) took a critical first
step towards lifting California's lowest wage workers out of
poverty and public assistance, the further increases and
indexing to inflation in this bill moves the state closer to
truly strengthening the middle class. Proponents contend that
existing law will never push families of three or four beyond
the federal poverty line because by 2016 the minimum wage under
AB 10 will have lost ground because there is no increase in the
base or a cost of living adjustment provided. Proponents note
that under this bill, families of three would be lifted out of
poverty starting in 2015 and would rise to 127% of the federal
poverty level by 2017 while families of four would gain ground
each year on the poverty level and by 2017 would be at 105% of
the federal poverty level. Proponents maintain that by 2017,
this bill could have the effect of lifting hundreds of thousands
of Californians out of poverty as well as depoliticizing the
issue and allowing workers and employers the predictability
offered by small but reliable raises.
ARGUMENTS IN OPPOSITION : The California Chamber of Commerce
along with a coalition of organizations writes in opposition,
labeling this bill as a job killer. They argue this bill
overwhelms many businesses that are already struggling with the
current minimum wage increase and other cumulative costs imposed
in California, creating job loss. Opponents argue that indexing
the minimum wage to inflation would be troubling to the business
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community because it fails to take into consideration other
economic factors of cumulative costs to which employers may be
subjected. Opponents bring attention to various cost increases
that will impact employers over the next few years including,
higher taxes under Proposition 30, increased worker's
compensation rates, loss of federal unemployment insurance
credit, increased energy costs, as well as increased costs
associated with the Affordable Care Act, coupled with this bill
they contend that it will create concern and uncertainty for
businesses.
Additionally, opponents argue that another increase in the
minimum wage will negatively impact any economic recovery either
by limiting available jobs or creating further job loss.
Specifically, opponents bring attention to a Congressional
Budget Office report from February 2014 regarding the impact of
the proposal to raise the federal minimum wage to $10.10. The
opposition notes the report's conclusion that although some
low-wage workers would receive a higher income through the
increase, other low wage jobs would probably be eliminated,
resulting in the income of most workers who became jobless to
fall substantially.
Lastly, opponents argue that an increase in the minimum wage
would not only increase hourly employees' wages, but also
salaried employees' compensation as well. They note that for
employees to qualify as "exempt" they must pass the salary-basis
test, which is two times the monthly minimum wage. Opponents
contend that if this bill passes that then in January 2017 the
"exempt" salary amount will rise from $33,280 to $49,920 - which
is an increased cost to employers of over $15,000 per exempt
employee.
PQ/AL:k 5/28/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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