State minimum wage will go up gradually
California’s minimum wage workers can expect a pay increase in the next several years, thanks to legislation recently signed by Gov. Jerry Brown.
AB 10 was passed Sept. 25 and raises the minimum wage from $8 an hour, established in 2008, to $9 an hour as of July 1, 2014, and $10 an hour as of Jan. 1, 2015.
The increase means increased pay for low-wage employees, but challenges for business owners who will be forced to spend more of their budget on salaries.
“As a business owner, it is going to hurt the economy in the long run because we have to pay a higher salary, and because of that, we’ll have to cut back hours or increase our prices,” said Cindy Smith, owner of Beach Hut deli at 522 Sutton Way, Grass Valley. Implementation of the increase, though gradual, does not fall in line with the economic times, Smith said. “I just don’t think it’s a good thing overall,” she said. “It’s not the best timing, either. It’s going to help the first year that we don’t have to go straight up to $10 an hour, but I don’t see the economy making any kind of turn-around in the next two years to warrant a $2 an hour raise for minimum wage.”
Hailey Donado, who has worked for Beach Hut for about seven months, said she can see both sides of the increase.
“The pros are that a lot of people need that extra money and employees will be happier, but also, employees will be laid off, and that could make our economy go downhill,” she said. “I think it will impact us all because we’ll have to have someone laid off, and then we’ll all get our hours cut. Some will get more than others, and it won’t be fair.”
Supporters argue that this bill will strengthen and depoliticize California’s minimum wage by providing a modest increase to millions of struggling Californians. Proponents cite the California Budget Project, which calculated that between 1968 and 2008, the purchasing power of California’s minimum wage fell by 24.8 percent.
Proponents also bring attention to the Public Policy Institute of California’s findings that the state is experiencing the largest income gap in at least 30 years, exacerbated by the fact that California’s current minimum wage, when adjusted for inflation, is less than the minimum wage workers earned in 1979.
Peggy and Bob Wright, owners of Treats, an ice cream and sweets shop at 110 York St., Nevada City, say they pay employees more than $8 an hour already.
“If we find employees we want to keep, we continue to bump them up,” said Peggy Wright. “The longer they’re there and trained, the more valuable they are, and it’s hard to get by on $8 an hour. I think it would be nice if employees working full time could support themselves earning a living wage.”
Opponents state that California’s economic recovery is still in the infancy stage and that a minimum wage increase in 2014 will negatively impact any economic recovery by limiting available jobs or creating further job losses. Opponents also argue that although the initial $0.25 increase may seem minimal, combined with the unknown increased costs associated with the implementation of the Affordable Care Act, the tax increases approved under Proposition 30 and the partial reduction in federal tax credit in 2014 could force struggling employers to reduce their costs in other areas, such as labor, or pass such increased costs on to consumers through higher prices.
“From a job-seeker’s standpoint, they are excited to see the increase,” One Stop Business and Career Center Staffing Specialist Christine Hoxsie said. “On the flip side in Nevada County, we have a lot of small businesses, and those are big jumps. It feels like, ‘Wow, we are finally starting to see a light at the end of the tunnel,’ and on top of the Affordable Health Care Act and those changes, it’s a lot for a business to absorb.”
Opponents state that a study conducted by the National Federation of Independent Business found that depending on the rate of inflation in future years, enacting this bill could result in 46,000 to 68,000 lost jobs in California by 2023, and a reduction in real output of somewhere between $4.7-$5.7 billion.
Opponents note that the Federation study also claims that the increase in minimum wage might cause employees currently earning above the minimum wage to put pressure on their employers for raises in order to maintain the wage premium between them and the lowest-earning individuals in the economy.
According to the State Controller’s Office, the state government employs approximately 4,500 minimum wage workers, mostly student assistants and seasonal employees. Based on a 40-hour work week, this bill results in increased salary costs of $585,000 in 2013-14, rising to $16.3 million in 2017-18 (General Fund and various special funds). Payroll taxes would increase by $1.2 million in 2017-18 upon full implementation of the wage increase. Additionally, there would likely be increased state budget costs for workers currently paid between $8.01 and $10 per hour, the extent of which is unknown.
Local business entrepreneur Robert Trent said the increase is necessary, especially for those who spend an hour’s wages on gasoline alone just to commute to work. But the increase also strains small businesses.
“It’s hard to make it on minimum wage. It is nearly impossible, and for a person that has to drive for a job, it’s really difficult. I think that’s going to give some relief to those type of people, which is much needed,” he said. “The area I’m most concerned with is local micro-enterprises that are just trying to start to hire more people. If you tack on a couple bucks an hour, it’s a challenge. There’s definitely a double-edged sword aspect about it.”
To contact Staff Writer Jennifer Terman, email email@example.com or call 530-477-4230.
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