California Increased The Minimum Wage: Here’s What You Need To Know

The minimum wage was instituted at a federal level in 1938 through the Fair Labor Standards Act. It was set at $0.25 per hour, which is a little over $4 per hour in today’s dollars. Since then, it has been raised 22 times by 12 different presidents to the current federal minimum wage of $7.25 per hour. A number of states have their own laws that set the rate higher than the federal minimum, too. This year, California’s minimum wage is set at $10 per hour, but that’s about to change. Governor Jerry Brown just signed a bill that will eventually bump the minimum wage to $15. The California minimum wage increase is matched by a similar bill in New York, matching the highest minimum in the country.

The California Minimum Wage Increase

The increase isn’t set to happen all at once. It will get a $0.50 bump in January of 2017 and 2018, then a $1.00 bump every year after that until 2022, when it will reach $15. After that, the wage will rise to match inflation. Businesses with fewer than 25 employees have an extra year to comply. However, note that the governor retains the right to delay a raise in case of economic recession.

Raising the minimum wage is always a contentious issue. In this case, labor unions fought for a faster increase while business owners argued for a slower one. One side argues that the minimum wage should be a living wage while the other argues that raising the minimum wage will raise the cost of doing business, leading businesses to increase prices and lay off workers.

How Does The Minimum Wage Affect Workers?

The minimum wage has not historically been linked to inflation, so it can only be changed by federal or state legislatures. Inflation causes prices to increase, so prices may be going up while the minimum wage has stayed the same. How much money is the minimum wage actually putting in your pocket?

One way to measure is by comparing the minimum to the federal poverty level, which does increase with inflation (so it reflects real spending power). In 2016, the federal poverty level is $11,880 for a single person and $24,300 for a family of 4. Your eligibility for many federal benefits is determined by that line. For example, you may be entitled to health insurance tax credits if you make less than 4 times the poverty line ($47,520). If you earn the federal minimum and work full time, you’ll earn about $15,000 a year. As a single person, you’ll be over the poverty line but still eligible for many benefits. If you’re supporting a family of 4, you’re making just about 60% of the poverty line.

The minimum wage hasn’t always been so low, however. In 1968, it was $1.60, which is more than $10 an hour in today’s dollars – more than California’s current minimum wage! The 1968 poverty level was $1,600 for a single person and $3,300 for a family of 4. Working full time, a minimum wage earner would make almost $3,300 per year – that’s almost 100% of the poverty line for a family of 4.

In other words, the real spending power of the minimum wage has decreased significantly since 1968. California’s increase to $15 means you’ll earn about $30,000 a year working full time. We don’t yet know what the poverty level will be for 2022, but that’s well above today’s line for a family of 4.

What Raising The Minimum Wage Means For You

If you’re currently earning California’s minimum wage, you can expect a raise every year until 2022, barring recession. In addition, overtime laws are linked to the minimum wage and your overtime pay will also increase. If your company employs fewer than 25 people, the raises may be delayed by up to 1 year. It’s the law – your employer doesn’t have a choice.

However, employers do have the right to fire employees. One economics professor from UC Irvine suggests that up to 5-10% of minimum wage earners may lose their jobs as a result of the increase while businesses adjust to the higher costs. What can you do to protect your job? Unfortunately, employers are within their rights to fire you if they can’t afford to keep you on. However, firing due to discrimination or retaliation is always illegal, so you should keep careful records of your work and any incidences of harassment that you experience at work.

Raising the minimum wage may put more money in your pocket, and it’s also the law. Your employer is legally required to comply with all of California’s wage and hour laws. If they don’t, you may be entitled to back pay and compensation. If you believe that your employer is in violation of California’s labor code, consider speaking with an attorney to learn about your legal rights and options.

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