California will have the nation’s highest minimum wage — $10 per hour — when, as expected, Gov. Jerry Brown, a Democrat, signs a bill that the state legislature sent to him on Thursday, September 12. The $10 per hour wage will begin in January 2016. California’s current minimum wage is $8.00 per hour. The federal minimum wage is $7.25 per hour.
California’s new minimum wage comes at a time when California’s unemployment rate is 8.7 percent. The national unemployment rate is 7.3 percent.
California is the nation’s leader in a number of other economic categories. California has the highest statutory sales tax in the country. The Golden State has the nation’s highest gasoline tax. California has the nation’s top personal income-tax bracket: 13.3 percent. Members of the state legislature earn more money (over $90,000 per year) than legislators in any other state.
For businesses with low profit margins, California’s new minimum wage could cause job losses and have other negative effects on compensation. Bosses whose businesses are not doing well economically may have to eliminate jobs, cut workers’ hours, reduce benefits (like health insurance), lower the pay of workers earning more than the minimum wage, move to another state or country, or close the business.
The California legislature refused to consider an alternative to the minimum wage. The legislature could have provided an Earned Income Tax Credit (EITC), which gives low-paid workers extra money — money which comes from the state government’s coffers. The EITC, as a substitute for the minimum wage, should not affect workers’ salaries or job status.
California, like Illinois and New York State, has a reputation for having a bad business climate. The new $10 an hour minimum wage will do nothing to improve California’s ability to create jobs.