Inflation spikes California’s minimum wage to $15.50 next year

Ahead of a June deadline to finalize the state budget, Gov. Gavin Newsom’s office on Thursday announced that for the first time, California’s high inflation rate has triggered a hike in the minimum wage next year — to $15.50 an hour for all workers.

The announcement came as the governor’s office also unveiled an $18.1 billion spending package that provides wide-ranging financial relief to car owners, hospital workers and other Californians hit with high costs for consumer goods and experiencing pandemic burnout.

Under the 2016 law that determines the state’s minimum wage, an inflation rate above 7% mandates the upward adjustment, Keely Martin Bosler, director of Newsom’s Department of Finance, told reporters on Thursday. This means large employers will increase their workers’ hourly rate from $15 to $15.50, and businesses employing 25 or fewer people, already bracing for a $1 minimum wage hike next year, will see an increase from $14 to $15.50.

Bosler said a bump in the minimum wage should not further fuel inflation because minimum wage income is a tiny fraction of the state’s personal income growth. “You may see some prices going up,” she said, referencing restaurants. But she said those increases are “really quite small” while having a “huge impact” for the families living on minimum wage.

Many California cities set their own minimum wage levels at rates well above the state’s, so the $15.50 state mandate has little impact. However, some of those cities also have their own inflation adjustment formulas, so minimum wage workers here can expect increases as well in coming months.

The minimum wage announcement and Newsom’s new spending package came to light Thursday, a day before the governor holds a broader May budget revision to fully outline his spending priorities, including what to do with a skyrocketing budget surplus that is expected to blow past January estimates by tens of billions of dollars and was recently estimated at $68 billion.

As part of his package, the governor is looking to provide every hospital and health care worker across the state with $1,000 payments in a bid to stave off the growing wave of staffing shortages in the industry, Bosler told reporters. The payments could increase to $2,000 under employee matching options, Bosler said.

The so-called hazard pay would cover an estimated 600,000 workers and total $933 million.

“I appreciate the recognition, and I think it’s long overdue,” said Kathy Stromberg, a nurse and union official at Stanford Hospital. She said the bonuses may alleviate some of the worker stress plaguing the industry. “But there’s more work that needs to be done to address the issues,” she added.

The largest chunk of Newsom’s relief package is proposed to be funneled to vehicle owners in the form of $400 payments for each car, capped at $800 for two vehicles — to lessen the sting of high gas prices since Russia invaded Ukraine and inflation took off. Newsom first announced that proposal some months ago, and it is now estimated to return $11.5 billion to taxpayers.

Related Articles

Business |

US inflation dips from 4-decade high but still causing pain

Will Fed’s inflation fight cost Californians their jobs?
Stocks end rocky week with their 5th straight weekly decline
US added 428,000 jobs in April despite surging inflation
Fed raises key rate by a half-point in bid to tame inflation

While some form of cash back proposal is all but certain, Newsom and Democratic leadership in the Legislature have been at odds over how exactly to structure the gas price payments. Lawmakers say the money should be targeted to low- and middle-income Californians, identified as such by tax returns. But the governor has said those plans would delay financial relief until October and has instead proposed using the DMV to issue the payments this summer.

To address the equity concerns, Bosler said the governor is seeking to impose a vehicle value limit that could prevent some luxury vehicle owners from getting the gas rebate. The governor is also proposing $750 million in grants to fund free public transit across the state.

“There’s going to be a lot of back and forth between the administration and the legislature to get to a compromise in a month’s time, hopefully,” Bosler said during a press briefing.