Gov. Jerry Brown on Monday will sign landmark legislation making California the first state in the country to commit to a $15 hourly minimum wage, capping the measure’s rapid progression from handshake deal to easy approval in the Democrat-controlled Legislature.
Lawmakers have raised the minimum wage before – a $10 minimum took effect in January. Some communities, meanwhile, have passed local ordinances that phase in a $15 minimum.
But the prospect of a $15 minimum in every corner of California has raised questions about what the impact will be in areas of the state where wage levels are significantly lower.
In parts of the Central Valley and inland Southern California, for example, average wages for all occupations are less than the statewide average, sometimes significantly so. That means the phase-in of the $15 minimum wage by 2022 for employers with 26 or more employees could well be more difficult to absorb for employers in those areas.
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This is moving things into a completely new tier, into a tier we haven’t seen before.
Professor Jeffrey Michael, University of the Pacific’s Center for Business and Policy Research
“This is moving things into a completely new tier, into a tier we haven’t seen before, particularly in some of these inland areas,” said Professor Jeffrey Michael at the University of the Pacific’s Center for Business and Policy Research, who has studied the issue.
In Bakersfield, about quarter of all workers were employed in occupations that had average hourly wages of just $8 to $12. In Riverside-San Bernardino, 18 percent fell into that range. Statewide, only 12 percent fell into that low-wage category. In Silicon Valley, meanwhile, less than 6 percent fall into the low-wage category.
Unemployment rates also vary tremendously across the state. California had a 5.7 percent unemployment rate in February, but 13 counties still had jobless rates of 10 percent or more.
Michael said he hopes the Valley and other lower-income parts of the state will attract more skilled jobs that have better pay. Absent that, a $15 hourly wage “would be a very significant adjustment (for employers), even phased in.”
Republicans and some business groups predicted that the higher wage will be disastrous in certain parts of the state.
“Part of our whole concern with this is it’s a one-size-fits-all,” said Rob Lapsley, president of the California Business Roundtable. “Areas with double-digit unemployment, this is scaring them to death.”
It’s not like we’re going to fall off a cliff. It’s a gradual approach.
UC Berkeley Professor Michael Reich
Regional economic differences have been recognized in other minimum wage legislation. Oregon’s recently approved minimum wage bill will raise wages from $9.25 to $14.75 in the Portland metro area, $12.50 in coastal and rural areas with sluggish economies, and $13.50 elsewhere by 2022.
And a New York budget deal announced late Thursday raises the minimum wage to $15, but the increase would take effect at different times around the state. New York City employers, for example, will have to pay a $15 minimum by 2018 but their counterparts in some upstate counties will be allowed to wait much longer. Some areas will reach only $12.50 an hour by 2021.
Michael Reich, an economics professor at UC Berkeley, has studied minimum wage issues in California, New York and elsewhere. Regional differences in the minimum wage, he said, can create confusion, are harder to enforce, and can prompt employers to move within a state. Reich also noted that the average wages of occupations with some of the most low-wage workers typically differ less between regions than average wages as a whole.
For example, California’s average hourly wage for food preparation workers in mid-2014 – $11.55 – was about $1.25 more than the $10.32 average in the Chico area. That is only a fifth of the difference in the average hourly wage overall for the state and Chico.
“It’s not like we’re going to fall off a cliff,” Reich said. “It’s a gradual approach.”