California political leaders and labor have compromised on a political deal to raise the minimum wage to $15 per hour over the next seven years with a new California labor law, Senate Bill 3.
Gov. Jerry Brown, casting a living wage as a moral imperative while questioning its economic rationale, signed Senate Bill 3 on April 4, 2016 effectively raising California’s mandatory minimum to $15 an hour by 2022, acting within hours of a similar bill signing in New York.
New California Labor Law Increases Minimum Wage Requirements for Employers
The new California labor law will raise the statewide minimum to $10.50 on January 1, 2017 for businesses with 26 or more workers. This will be the first of several incremental increases to $15, with future raises tied to inflation.
Smaller businesses will have an additional year to phase in each increase.
The new legislation raises the state’s minimum wage to $10.50 per hour in January 2017 and $11 in January 2018. The state’s bottom wage would then increase an additional $1 per hour each year until reaching $15 in 2022.
The bill allows the Governor to put a hold on scheduled increases as the minimum wage if the state has an economic downturn or budget crisis.
SB 3 establishes annual increases capped at 3.5 percent based on the U.S. Consumer Price Index once California’s minimum wage reaches $15. The bill also delays wage increases for businesses with 25 or fewer employees. For those small companies, the first increase to $10.50 will begin in 2018. The new minimum wage of $15 an hour will be reached a year later in 2023 for them.
New Minimum Wage Increase Will Impact Business and Service Automation
California's new minimum wage law is expected to have a significant impact on Silicon Valley's growing robot and automation industry as businesses will move to replace increasingly expensive workers.
With wages going up and automation technology improving and becoming affordable, agriculture, restaurants and hotels are expected to replace more workers with automation. It's an unintended consequence of a law designed to improve the lives of lower-paid workers living in California.
An article in the Mercury News noted that:
Bryan Little, employment policy director at the California Farm Bureau Federation, said rising wages will probably push some farmers to automation. Producers confronted with competition from other states and countries won't be able merely to jack up their prices to make up for higher labor costs, Little said.
Increased automation in agriculture could change the types of crops grown in California, Little said. "What you may see would be people electing to grow more of the kinds of commodities that lend themselves to machine harvesting," Little said. "It might mean more almonds and walnuts, more non-fresh-market tomatoes."
Those products, and lower-grade wine grapes produced in California's Central Valley, are so far the most amenable to automated harvesting, Little said.
Benefits and Costs Associated With the New Minimum Wage Law
Los Angeles and San Francisco, among other cities, have already enacted ordinances to gradually raise their own minimum wages to $15. The new state law is expected to affect millions of low-wage workers and businesses that employ them, especially in the state’s agriculture, restaurant and retail industries.
Some 6 million Californians currently earn the minimum wage.
By 2022, a full-time minimum-wage worker would see annual earnings increase to $30,000 from $20,000 today. UC Berkeley’s Center for Labor Research and Education predicted that the ripple effect of the increase could boost wages for 5.6 million Californians by an average of 24 percent.
According to California's Department of Finance, a $15 minimum will cost California about $4 billion a year.
Where to go for Help on Payroll Management Changes and Questions
It is critical to keep your company safe and your management team informed and in compliance. If you have questions regarding this, or other HR issues and practices, let us help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.
