State legislature approves $15 minimum wage increase reflecting UC, city initiatives

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The California Legislature approved Gov. Jerry Brown’s proposed $15 per hour minimum wage Thursday, echoing wage-increase initiatives already taken by the University of California and the city of Berkeley.

The legislation, once signed into law, will be the nation’s highest statewide minimum wage, increasing the current minimum from $10 to $15 by 2022 for large businesses and by 2023 for small businesses.

A study from the UC Berkeley Center for Labor Research and Education, published Monday, showed the impacts of the proposed increase of California’s minimum wage, such as that about 5.6 million workers would see a 24 percent average increase to their annual salaries. Starting in 2024, the minimum wage would be indexed to the cost of living in California, according to the report.

Ken Jacobs, chair of the labor center and author of the study, said wage inequality in California has been growing since the late 1970s. He believes that this legislation is an important step in addressing income inequality.

The largest part of the cost will be passed on to consumers through higher prices, according to Jacobs, but the increase will hover around only 1 percent over roughly seven years. Legislative analysts determined the wage increase for government employees would cost taxpayers about $3.6 billion, as disclosed at a state Assembly committee meeting Wednesday, the Associated Press reported. Jacobs, however, said the fiscal impact would likely be smaller.

“We found that (price increases) generally balance out, and while they have a positive increase on workers’ earnings, they have not been found to have negative effects on employment or economic growth,” Jacobs said.

Employers would accommodate the wage increase through reduced worker turnover, improved productivity and modest price increases, the report stated.

“The adverse effects on businesses charging slightly higher prices are largely offset by the increased sales generated by the low-wage workers who receive raises,” the report said. “As a result, while the policy will have large positive effects on worker earnings, the net impact on employment is expected to be small.”

In November, Berkeley City Council voted to draft an ordinance that would raise the city’s minimum wage to $15 an hour by 2020, including for small businesses. The city ordinance currently in effect stipulates a hike to $12.53 an hour by October.

Similarly, the University of California adopted its own $15 minimum wage policy, the UC Fair Wage/Fair Work Plan, in July. Under the plan, UC employees who work at least 20 hours a week will be paid $15 per hour at minimum by October 2017.

Jamal Fares, owner of the Hummingbird Cafe, said it is getting tougher to survive as a business owner in Berkeley because of city and state regulations, such as the minimum wage increase.

“They’re going to be draining (us) of our profits,” Fares said.

But Mohamed Ail, manager at the Campus Store, said he supports the minimum wage increase, even though there will be less profit for business owners.

“Living wages are going up. It’s not fair to have employees live somewhere (else) and work here,” Ail said. “We just get less to take home. … We’ll get used to it and stop crying.”

Brown plans to sign the minimum wage legislation into law Monday.

Contact Sareen Habeshian at [email protected] and follow her on Twitter at @sareeenn