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Minimum wage to increase 50 cents on Jan. 1

December 10, 2017 GMT

Come Jan. 1, California businesses will have to pay their minimum-wage employees an additional 50 cents an hour.

The stepped increases over five years are part of minimum-wage legislation passed by the Legislature and signed into law by Gov. Jerry Brown last year.

Officials say they can only guess how the increases of $1 an hour per year could affect local businesses.

Irena Asmundson, chief economist for the state Department of Finance, said the increased wages could increase the propensity to consume – which means additional spending and an increased demand by businesses.

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“That’s the happy side of the story,” Asmundson said. “In the pockets of workers who really need that money... it has the tendency to enter the local economy right away.”

On the other hand, she said, if a business is already struggling with wages, the increase could force them to let go of employees.

Those remaining will get additional income but more people will find it harder to find a job, she said.

“What’s going to happen in your local economy, I’m not entirely sure,” she said.

Asmundson did speculate that the wage increase could fare better for communities where the cost of living is already high and it’s difficult to make a living off the wage. But in places where many of its residents already work for minimum wage and housing prices are relatively cheap, that probably means it’s going to be harder for businesses to afford it.

“It depends on whether more people get more income and fewer people are unemployed, or if this leads to an increase in unemployment,” Asmundson said.

Margaret Fernandez, vice chair of the Yuba-Sutter Economic Development Corporation and of the Plus Group, Inc., said when the minimum wage first rose last year, she noticed businesses expecting more of their employees.

“Now employers come up with, ‘how do I get the bigger bang out of my employees’ buck?’” she said. “Then, once you have that, there are other challenges as it keeps creeping up.”

One challenge, she said, is for those employees being paid just above minimum wage, employers will have to decide if those wages will get bumped up, as well.

“These are challenges that I think all the businesses are going to have, (and they will have) to re-evaluate how they’re going to deal with that,” Fernandez said.

What she hopes she doesn’t see from businesses is operating with fewer employees than the business actually needs to operate successfully.

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“It’s going to take some adjustments,” Fernandez said. “The big burden is going to be employees need to show their value.”

And she believes each January when the increases kick in, there will be a knee-jerk reaction from businesses to consider passing on the cost to customers.

“It could turn into a community economic situation,” she said. “(But) it could be a good thing – put people in the situation where they say (they) really have to assess their business and how to do that.”

MINIMUM WAGE INCREASE SCHEDULE:

Jan. 1, 2018 – $11 for businesses with 26 employees or more, $10.50 for businesses with fewer than 25 employees.

2019 – $12, $11.

2020 – $13, $12.

2021 – $14, $13.

2022 – $15, $14.

2023 – $15, $15.

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