Inflation forces increase in California minimum wage

SACRAMENTO, Calif. (AP) — Soaring inflation will trigger an automatic increase in California’s minimum wage next year, Gov. Gavin Newsom’s administration announced Thursday.

The minimum wage will jump to $15.50 per hour on Jan. 1, the highest of any state. That’s an increase from $15 per hour for companies with more than 25 employees and $14 per hour for companies with 25 workers or less.

California lawmakers voted to increase the minimum wage to $15 per hour in 2016, but the increase was phased in over several years. The law says the minimum wage must increase to $15.50 per hour for everyone if increased by more than 7%. Thursday, the California Department of Finance said they project inflation for the 2022 fiscal year — which ends June 30 — will be 7.6% higher than the year before, triggering the increase.

Official inflation figures won’t be final until this summer. But the Newsom administration believes the growth will be more than enough to trigger the automatic increase.

Inflation has been a problem everywhere, as consumer prices jumped 8.3% last month from a year ago and diluted the purchasing power of the U.S. consumer. A labor shortage throughout the pandemic has prompted many companies to increase pay sometimes beyond the minimum wage just to attract and retain workers.

California has about 3 million minimum wage workers, according to a conservative estimate from the state Department of Finance. The increase in the minimum wage will be about $3 billion, or less than 0.1% of the $3.3 trillion in personal income Californians are projected to earn.

Bosler said the increase could cause prices to jump for restaurants, which have low profit margins. But overall, she said the minimum wage increase is “expected to have a very minimal impact on overall inflation in the state’s economy.”

The minimum wage increase is only a portion of the extra money that could land in taxpayers’ pockets this year. Thursday, the governor doubled down on a proposal to send $800 checks to Californians who own cars to help offset high gas prices. The proposal would cost $11.5 billion and would also include spending $750 million to give everyone free rides on public transit for up to three months.

Newsom proposed that in March, but Democrats in the Legislature have rejected it. Instead, they want to send $200 checks to low-to-moderate income California taxpayers and their dependents, regardless of whether they own a car.

Bosler said the Newsom administration believes their proposal is better because they would hire an outside company to distribute the checks faster than the government could.

“I think they have their points, I think we have our reasons for wanting to stick with our proposal,” Bosler said. “We’ll keep working with them.”

Senate President Pro Tempore Toni Atkins said they are working on a plan that is “not just passing a one-size-fits-all windfall that benefits millionaires.”

“Senate Democrats do not believe a rebate tied to car ownership does the job,” Atkins said. “That plan leaves out non-car owners, including low income and elderly Californians, who are also impacted by the current high costs of consumer goods and are also deserving of relief.”

While that proposal has stalled, Newsom revealed a new plan on Thursday that would send $1,000 checks to workers in hospitals and nursing homes in recognition of their dangerous work during the pandemic. About 600,000 workers would be eligible for the money, which would go to anyone who works inside a hospital or a nursing home — including doctors, nurses and other support staff.

Workers would be guaranteed a $1,000 check. But if companies agree to add in another $500, the state will match it for a total of $2,000.

“These workers have been on the front lines throughout the COVID pandemic,” Bosler said. “They also are suffering very critical retention issues and shortages and we hope that additional payment will help to address those issues.”

Dave Regan, president of SEIU-United Healthcare Workers West, said staffing problems at hospitals and nursing homes have only worsened as workers left the industry in droves during the pandemic “because of increased health risks, emotional and mental stress, and overwork.”

“With this investment in keeping skilled health care workers on the job, the governor’s proposal moves us one step closer to a future where every Californian has access to care provided by valued and respected caregivers,” Regan said.