Minimum wage bill awaits review by Appropriations Committee

By CMTA Staff

Capitol Update, May 4, 2012

The Assembly Labor and Employment Committee passed a bill on a partisan vote that would link the state required minimum wage to the Consumer Price Index. The bill, AB 1439 (Luis Alejo, D-Salinas), would provide for an annual increase adjustment of the minimum wage based on the previous year’s inflation percentage rate.  Further, it provides that the minimum wage could not be lowered if consumer prices or the inflation rate decreases - it would be required to remain at the same level. Estimates claim that the bill would make the state minimum wage jump by 14 cents in January.

Although an annual automatic rise in minimum wage according to the percentage of inflation may seem minimal, the impact can be significant. Notably, an increase in minimum wage would not only increase hourly employees’ wages, but other employer costs as well. There are reports of financial hardship for employers in other states where the minimum wage is tied to the percentage of inflation that has resulted in less employees working or being hired.  California still has the second highest unemployment rate in the nation. Given this, we should seek ways through legislation to encourage job growth, rather than discourage it.

Placing the increase in minimum wage on auto-pilot is also inappropriate when California has a full-time Legislature available and responsible for reviewing whether any adjustment in wages is proper given the state of the economy at that point. In fact, when enacting Labor Code section 1178.5, the Legislature determined that the Industrial Welfare Commission should not be allowed to annually index the minimum wage, but rather should review any increase in minimum wage by composing a board of employer and employee representatives to determine whether an increase was appropriate. Such a collaborative review process properly allows consideration of the current financial climate for businesses and the negative impact an increase in costs could have.

CMTA opposes this bill. It is on the suspense file in the Assembly Appropriations Committee.

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