California Gov. Jerry Brown has agreed to raise the statewide minimum wage to $15 an hour, making the Golden State the subject of an unprecedented experiment into whether a wage floor that high is economically sustainable. The deal would give California by far the highest rate in the nation.
Brown announced the “landmark deal” Monday afternoon to raise the current rate in increments until it reaches $15 in 2022. The governor would have the authority to halt the annual increases if the economy sours or if there is a state budget deficit. The deal was worked out with statehouse leaders in Sacramento. It still must win support from moderate lawmakers to pass.
“California is proving once again that it can get things done and help people get ahead,” Brown said. “This plan raises the minimum wage in a careful and responsible way and provides some flexibility if economic and budgetary conditions change.”
The current federal minimum wage is $7.25 an hour, but states are free to set their rates higher. California is tied with Massachusetts for the highest state-level minimum wage at $10, while the District of Columbia’s rate is $10.50. New York has a $15 rate for fast-food restaurants and $9 for all other businesses.
Brown’s announcement pushes the state into unknown economic territory. Previously, most minimum wage increases at the state or federal level were marginal ones, giving businesses time to adapt. There is no precedent for setting basic labor costs that high and it is not clear what the broader effects will be, economists say.
The $15 minimum wage movement began in 2012 as a labor-backed push directed at the fast-food industry. Little progress was made, but the idea caught on with local lawmakers, especially on the West Coast. San Francisco, Los Angeles, Los Angeles County and SeaTac, Wash., has adopted $15 rates.
How California adjusts to the change likely would be a test case for the nation. The state has a diverse economy and a population of nearly 39 million. The unemployment rate is 5.5 percent, slightly above the national rate of 5.1 percent, according to the Labor Department.
Minimum wage activists cheered the news Monday, arguing it would be a major boost for workers. “Back in 2012, a few hundred fast-food workers went on strike in New York City and the Fight for $15 began. Our opponents said $15 would NEVER happen — but we kept on fighting. We won in San Francisco. In Seattle. In Los Angeles. Statewide in New York for fast-food workers and in Massachusetts and Oregon for home-care workers. Now we’ve won $15 for millions of Californians,” wrote Guadalupe Salazar, a McDonald’s worker with the group Fight for $15.
Fight for $15 is subsidized and run by the Service Employees International Union, which has long sought to unionize fast-food restaurants and other industries that rely heavily on minimum wage workers. The union has spent heavily to promote the effort, pouring $23 million into it in 2014 alone, according to Labor Department filings. A higher minimum wage helps unions by making nonunion labor less economical. SEIU representatives, among other labor activists, stood with Brown at Monday’s announcement.
Critics of the $15 movement contend that the state is shooting itself in the foot since many businesses wouldn’t be able to pay that much, forcing them to lay off workers or cut their hours.
Jordan Bruneau, spokesman for the pro-business Employment Policies Institute, said many businesses were already struggling with the state’s current rate or the higher ones in some municipalities.
“Childcare providers in Oakland, for instance, have been forced to cut employee hours and services in response to that city’s wage hike. A number of small businesses in the Bay Area have gone out of business or laid off employees because of the increased labor costs associated with the wage hike,” Bruneau said.
