BILL ANALYSIS �
SB 935
Page A
Date of Hearing: June 25, 2014
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
SB 935 (Leno) - As Amended: May 27, 2014
SENATE VOTE : 21-12
SUBJECT : Minimum wage: annual adjustment.
SUMMARY : Increases the minimum wage over a three year period
then provides for an annual automatic adjustment thereafter
calculated by the California Consumer Price Index (CPI).
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
unless the average rate of inflation was negative, in that
case, no increase would be in order.
6)States that the minimum wage applies to all industries,
including public and private employment.
EXISTING FEDERAL LAW :
1)Establishes the Fair Labor Standards Act (FLSA), which sets
provisions for the federal minimum wage.
2)Requires employers to pay their employees a minimum wage of
not less than $7.25 per hour if the employees are not exempt
from the FLSA's provisions.
SB 935
Page B
3)Requires by Executive Order by President Obama a minimum wage
of $10.10 an hour beginning January 2015 then indexed
thereafter be paid to workers of Federal contractors and
subcontractors, as specified.
EXISTING STATE LAW :
1)States that on July 1, 2014, the minimum wage in California
will increase to $9 an hour.
2)States that on January 1, 2016, the minimum wage in California
will increase to $10 an hour.
3)Requires all employers in California who are subject to both
federal and state laws to pay the state minimum wage rate,
unless their employees are exempt under California law.
FISCAL EFFECT : According to the Senate Appropriations Committee
the Department of Industrial Relations (DIR) would 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 pursuant to this bill.
According to the State Controller's Office (SCO), state
government employs approximately 4,500 minimum wage workers,
mostly student assistants and seasonal employees. As a direct
employer, this bill would 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).
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.
Please see the Senate Appropriations Committee analysis for more
detailed fiscal information.
COMMENTS : The author states that lifting families out of
poverty and paying wages that allow for a decent standard of
living also benefits the economy generally by injecting much
needed consumer dollars into local communities and businesses.
SB 935
Page C
California took a critically important and much needed step in
2013 when the Legislature passed AB 10 (Alejo), which is going
to increase the minimum wage for our state.
The author argues it is vital that California increase the speed
with which it boosts the minimum wage and equally essential that
future annual increases be automatic and tied to the rate of
inflation to protect low-wage employee's purchasing power.
Research on Effects on Employment
According to economists at UC Berkeley, there have been almost
no adverse effects to employment with an increase in the minimum
wage. They studied San Francisco, eight other cities that
raised their minimum wages in the past decade and 21 states with
higher base pay than the federal minimum. The researchers found
that businesses absorbed the costs through lower turnover and
small price increases at restaurants, which have a high
concentration of low-wage workers, and higher worker
productivity<1>.
Paul Wolfson, a senior statistical research associate at
Dartmouth College, says that while there is significant research
on minimum wage increases, most of it is not statistically
reliable. He analyzed approximately 80 studies on minimum wage
increases for an upcoming book he is coauthoring called "What
Does the Minimum Wage Do?" He concluded, that increases in the
minimum wage had little effect on overall employment, but says
the data wasn't easy to extrapolate<2>.
A study by the Congressional Budget Office (CBO) found that
raising the federal minimum wage to $10.10 would boost the
earnings of 16.5 million workers, but an estimated half million
may lose their jobs<3>. An analysis by Goldman Sachs says in
their view the CBO's half million estimate in loss of employment
is likely a toward the upper end of reasonable estimates, both
---------------------------
<1> The Seattle Times, "Studies look at what happened when
cities raised minimum wage", by Lynn Thompson: IRLE UC Berkeley,
"The Economic Impacts of a Citywide Minimum Wage", Revised June
2007
<2>
http://www.utsandiego.com/news/2014/apr/26/minimum-wage-economy-j
obs-hiring-pay-money/all
<3> Congressional Budget Office, February 2014, "The Effects of
Minimum-Wage Increase on Employment and Family Income"
SB 935
Page D
because many studies find no significant impact of minimum wage
hikes on employment and because the offsetting boost to demand
is likely to be larger than usual at present<4>.
Health Impact Analysis of Lower Income Workers
Human Impact Partners worked with the Health Officers
Association of California to conduct a rapid health analysis of
this bill. A multitude of studies have established family
income as one of the strongest and most far-reaching
determinants of health. Their analysis of the California Health
Interview Survey (CHIS), the nation's largest state health
survey, found that people whose family incomes are below the
federal poverty line are more than four times as likely to rate
their health as poor or fair compared to people with family
incomes of more than three times the federal poverty level.
Income affects health not only through one's ability to meet
material needs, like food and clothing, but through access to
health care, the quality of neighborhoods in which people can
afford to live, child health and development, chronic stress and
interpersonal relationships.
They conclude that raising the minimum wage under this bill
would significantly benefit the health and well-being of
low-wage workers. Californians would experience fewer chronic
diseases, less hunger, smoking and obesity; lower rates of
depression and bipolar illness. The longer one lives with low
income, the more negative health impacts accumulate<5>.
Arguments in Support :
The Women's Foundation of California, a cosponsor of this bill,
points out that women currently make up two thirds of all
minimum wage workers. A disproportionate number of them are
African American and Latinas, they would immediately benefit
from this bill. They argue that minimum wage is a family issue
and low wages hurt women and families. In their estimation
raising the minimum wage to $13 an hour cuts government costs by
reducing enrollment in the Supplemental Nutrition Assistance
Program (SNAP), formerly the food stamps program by an estimated
---------------------------
<4> Goldman Sachs, March 25 2014, "Here Behind Paywall, Michael
Cahill and David Mericle
<5> Human Impact Partners, May 2014, "Health Impacts of Raising
California's Minimum Wage", Rajiv Bhatia, MD, MPH
SB 935
Page E
740,000 to 891,000 people and an estimated savings to SNAP
expenses of $1,450,000 to $1,700,000 a year.
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 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 dollars.
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 $2.00 increase from AB
10 (Alejo) 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
SB 935 moves the state closer to truly strengthening the middle
class. Proponents contend that current 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 COLA
provided. Proponents note that under SB 935, 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, SB 935 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.
SB 935
Page F
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 would overwhelm 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 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, which coupled with this bill they contend 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 (CBO) 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 SB 935 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.
The California After School Coalition and LA's Best express
concerns with this bill stating they realize this bill is not
the appropriate vehicle to address a budget increase to After
School Education and Safety Act (ASES), however they argue that
SB 935
Page G
the current state budget and funding structure for ASES sites
already provide insufficient room to accommodate a single
minimum wage increase and hope for an analysis by the Department
of Finance or other appropriate entity to cast light on the
challenges after school programs face with increased minimum
wages and could be helpful for them in future budget
deliberations. The Arc and United Cerebral Palsy California
Collaboration, among others, have an oppose unless amended
position sharing they too would like budget trailer bill
language to requires the Department of Developmental Service
(DDS) to raise rates to cover costs from all minimum wage
increases, payments such as OASDI and FICA. Additionally, they
seek to require DDS to use the same appeals process it uses for
other rate issues and DDS to annually report to the Legislature
costs of wage compression for the budget process.
Lastly, numerous ambulance service companies, who serve a high
number of Medi-Cal beneficiaries with medical services, voice
their opposition seeking higher Medi-Cal reimbursement rates
within the budget which have continued to decline against
inflation in our state.
Prior Legislation :
AB 10 (Alejo) Chapter 351, Statutes of 2013 increased the
minimum wage to $9.00 an hour on July 1, 2014 and to $10.00 an
hour on January 1, 2016.
AB 1439 (Alejo) of 2012 would have increased the minimum wage to
$8.50 per hour and provided for the automatic adjustment of the
wage each year by the rate of inflation as measured by the
California Consumer Price Index for all Urban Consumers. The
bill was held in the Assembly Appropriations Committee.
AB 10 (Alejo) of 2011 would have increased the minimum wage to
$8.50 per hour and provided for the automatic adjustment of the
wage each year by the rate of inflation as measured by the
California Consumer Price Index for all Urban Consumers. The
bill was held in the Assembly Appropriations Committee. The
author also amended AB 196, with the same language, which was
ineligible to be heard by Assembly Labor and Employment
Committee in January of 2012.
AB 1835 (Lieber) Chapter 230, Statutes of 2006, increased the
minimum wage to $7.50 per hour effective January 1, 2007 and to
SB 935
Page H
$8.00 per hour, effective January 1, 2008.
REGISTERED SUPPORT / OPPOSITION :
Support
9to5
AFSCME
Alameda County Community Food Bank
American Association of University Women of California
American Civil Liberties Union of California
Bridge of Life
California Applicant Attorneys Association
California Association of Food Banks
California Church IMPACT
California Conference of Machinists
California Conference of the Amalgamated Transit Union
California Employment Lawyers Association
California Federation of Teachers
California Food Policy Advocates
California Healthy Nail Salon Collaborative
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California Nurses Association
California Professional Firefighters
California Public Defenders Association
California School Employees Association,
California State Association of Electrical Workers
California State Council of SEIU (cosponsor)
California State Pipe Trades Council
California Teachers Association
California Teamsters Public Affairs Council
California Welfare Directors Association of California
Children's Defense Fund-California
City and County of San Francisco
City of Oakland
City of Sunnyvale
Consumer Federation of California
County Welfare Directors Association of California
East Bay Alliance for a Sustainable Economy
Engineers and Scientists, IFPTE Local 20
Equal Rights Advocates
Friends Committee on Legislation of California
SB 935
Page I
Glendale City Employees Association
Housing California
International Longshore and Warehouse Union, Coast Division
Kingsley & Kingsley
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
Parent Voices
PICO California
Professional and Technical Engineers, IFPTE Local 21
Restaurant Opportunities Centers United
Roots of Change
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
St. Anthony's Foundation
UAW Local 5810
UFCW Western States Council
UNITE HERE
United Domestic Workers of America - AFSCME Local 3930
United Food and Commercial Workers Union (cosponsor)
Utility Workers Union of America, Local 132
Western Center on Law and Poverty (cosponsor)
Western States Council of Sheet Metal Workers
Women's Foundation of California (cosponsor)
Concerns
California After School Coalition
LA's BEST
Oppose Unless Amended
AR&C Long Beach
Bakersfield ARC
Becoming Independent
Easter Seals Superior California
Inland Regional Center
Manos Home Care
New Alliance for People with Disabilities
OPARC
Options In Supported Living LLC
Pleasantview Industries
SB 935
Page J
Serenity Respite Services
The Alliance
The Arc Alameda County
The Arc and United Cerebral Palsy California Collaboration
Opposition
Agricultural Council of California
Air Conditioning Trade Association
American Legion Ambulance Service
Anaheim Chamber of Commerce
Arcata-Mad River Ambulance
Associated Builders and Contractors - San Diego Chapter
Automotive Service Councils of California
Bayshore Ambulance
Brawley Chamber of Commerce
Brea Chamber of Commerce
California Ambulance Association
California Asian 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 Automatic Vendors Council
California Business Properties Association
California Chamber of Commerce
California Farm Bureau Federation
California Grocers Association
California Hotel and Lodging 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 & Santa Barbara
Counties
Del Norte Ambulance
Desert Ambulance Service, Inc.
Desert Hot Springs Chamber of Commerce & Visitors Center
El Centro Chamber of Commerce & Visitors Bureau
SB 935
Page K
El Dorado County Chamber of Commerce
Escalon Community Ambulance
Flynn Restaurant Group LLC
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
Lodi Chamber of Commerce
Long Beach Area Chamber of Commerce
Medic Ambulance Service
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 Diego East County Chamber of Commerce
San Jose Silicon Valley Chamber of Commerce
Santa Clara Silicon Valley Central Chamber of Commerce &
Convention-Visitors Bureau
Simi Valley Chamber of Commerce
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
Analysis Prepared by : Lorie Alvarez / L. & E. / (916)
319-2091