Analyst: Wage hike would cost California taxpayers $3.6B

Staff Writer
Columbus CEO

SACRAMENTO, Calif. (AP) — Raising the minimum wage in California to the highest statewide level in the nation would eventually cost taxpayers an additional $3.6 billion a year in higher pay for government employees, according to a legislative analysis released Wednesday.

The estimate was disclosed as an Assembly committee considered boosting the wage to $15 an hour by 2022. The full Assembly and Senate could vote on the deal between Gov. Jerry Brown, labor unions and Democratic legislative leaders as early as Thursday.

The financial projection does not examine the broader economic impact that the proposed wage hike would have on businesses in the state.

The University of California, Berkeley, Center for Labor Research and Education projected the ripple effect of the increase could raise pay for 5.6 million Californians by an average of 24 percent.

Latinos would benefit most because they hold a disproportionate number of low-wage jobs, the university researchers said.

At $10 an hour, the current minimum wage in California is tied with Massachusetts for the highest among states.

Brown previously said the first-year cost to the state would be $20 million, when the minimum pay bumps to $10.50 on Jan. 1.

The proposal would increase the minimum wage to the next whole dollar amount in each of the five years, with a one-year delay allowed for businesses with 25 or fewer employees. The wage would rise to keep up with inflation after 2023.

Los Angeles, Seattle and other urban municipalities have recently approved $15 minimum wages. Oregon officials decided earlier this year to increase the minimum to $14.75 an hour in cities and $12.50 in rural areas by 2022.

Brown, a Democratic, argued that California's growing economy can absorb the annual wage increases. He noted that the agreement lets the governor pause the raises if there are budgetary or economic downturns.

Business leaders and economists fear the wage hike would prompt layoffs and other unintended consequences.

Matthew Sutton of the California Restaurant Association, an opponent, told lawmakers the $15 minimum wage had not been adequately studied.

"In a three-day period, you're looking at doing this huge experiment of $15," Sutton said.

The bill is intended to replace a November ballot measure by the Service Employees International Union that would ask voters to raise the minimum wage to $15 by 2020 or 2021. A second wage-raising ballot measure also is gathering signatures.

California extended three annual paid sick days to approximately 6.5 million employees in 2014, but left out in-home care providers due to cost concerns. The wage agreement phases those workers into the law, allowing them one paid sick day per year beginning in 2018, two days after 2020 and three days after 2022.

The legislative analyst suspects that would cost the state $468,000 in 2018 and up to $227 million in 2022.