California Fights Inflation With Relief Package, Minimum Wage Bump 

May 17, 2022 by Reece Nations
California Fights Inflation With Relief Package, Minimum Wage Bump 

SACRAMENTO, Calif. — Californians are getting help addressing the costs of rising inflation through a higher minimum wage and a new relief package proposal from Gov. Gavin Newsom.

California’s minimum wage will rise to $15.50 per hour next year under a state law passed in 2016 that requires a pay bump for workers if inflation increases by more than 7% between the 2021 and 2022 fiscal years. The California Department of Finance released projections last week indicating just that, leading to an accelerated increase of the state’s minimum wage.

“Raising the minimum wage is one of the strongest anti-poverty measures we have as a state,” California Labor Federation Executive Secretary-Treasurer Art Pulaski said in a written statement. “For low-wage workers, a higher minimum wage is life-changing. Better wages for workers also means they have more to spend at local businesses in our communities. If we’re serious about combating poverty and reducing inequality, raising the minimum wage is an absolute necessity.”

The state’s minimum wage rate was already scheduled to increase next year according to the California Labor Commissioner’s office. Now, more help could be on the horizon for low-wage workers after Newsom unveiled an inflation relief package proposal last week.

The governor’s proposal includes $11.5 billion for tax refunds, $2.7 billion for emergency rental assistance and $1.4 billion for past-due utility bill assistance. The proposal comes after another stimulus package was passed last year to support the state’s economic recovery from the COVID-19 pandemic.

Newsom said in a statement that his inflation relief proposal will help offset the higher costs consumers face currently while continuing to support individuals still recovering from pandemic-induced hardships. While a pay bump for the lowest-paid workers in the state will help some make ends meet, William Luther, an associate professor of economics at Florida Atlantic University told The Well News it could lead to reduced employment.

“The preponderance of evidence suggests that a binding minimum wage reduces employment,” Luther said. “It will make it harder for industries that rely on low-skilled workers to stay in business — and harder for low-skilled workers to find jobs.”

Infusing employees at the low end of the pay spectrum with cash shouldn’t cause the rate of inflation to soar even higher, Luther said. Because a minimum wage increases the relative prices of low-skilled labor, and goods and services produced with low-skilled labor, it should not cause the general level or prices for consumer goods to grow more rapidly.

Prices paid by urban consumers rose nationwide by 0.3% in April and are up 6.2% over the year, according to the Bureau of Labor Statistics consumer price index. But even as California’s minimum wage is set to increase more than anticipated in 2023, it will not do much to improve living standards in the state.

“A minimum wage helps some workers at the expense of others,” Luther told The Well News. “To raise the living standard of the average worker, we would need to increase the productivity of workers. A minimum wage doesn’t do that.”

While the minimum wage cannot be lowered even if consumer prices decrease, it can be paused at the discretion of the governor, according to the California Department of Industrial Relations. However, support for an initiative to increase the minimum wage even higher is taking hold across the state.

After beginning to collect signatures in February, a petition to raise the state’s minimum wage to $18 per hour has begun the process of submitting signatures to counties across California to qualify the measure for the November 2022 ballot. The measure, known as the Living Wage Act, is being advocated by entrepreneur and anti-poverty activist Joe Sanberg with support from unions and labor advocates across the state.

Sample polling conducted by Tulchin Research found that over three-quarters of likely general election voters in California support raising the minimum wage. Tulchin surveyed a sample of 1,200 adult-aged likely voters in California between April 5 and April 11, 2022.

If the campaign successfully collects 623,212 signatures or more, it will be on the ballot for voter consideration in November, according to the California Secretary of State’s initiative guide.  

“California voters have been clear: People working full time should be able to afford life’s basic needs,” Sanberg said in a written statement.

“Californians simply cannot afford to support a family on the current minimum wage — which amounts to just $31,200 a year for someone working full time. Raising the minimum wage in the Golden State is a moral imperative.” 

Reece can be reached at [email protected] and @ReeceNations

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