FINANCE
New minimum wage in California: how much will it increase and when does it go into effect?
Slight increases to the minimum wage in California will impact hundreds of thousands of workers in early 2024. Who will see an increase in their paycheck?
In 2016, California became the first state in the country to pledge to increase the minimum wage to $15 an hour. To achieve this, the state adopted an incremental approach, which culminated this year. All businesses, irrespective of their size, are required to pay their employees a minimum of $15 per hour. However, the law states that if inflation increases beyond seven percent in a single year, the state’s minimum wage must be adjusted to account for extreme decreases in purchasing power. This was the case last year, which triggered an increase in the minimum wage to $15.50 for all companies, and next year, the lowest possible wage will increase once again.
Why is the minimum wage increasing again in 2024?
The 2016 law mandates that the state’s Director of Finance “determine if the minimum wage must be adjusted for inflation” by 1 August each year. With consumers facing the continued pressure from inflation, the decision was made to increase the minimum wage in accordance with the federal consumer price data.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used by the Social Security Administration to determine the cost-of-living adjustment. From July 1, 2022, to June 30, 2023, prices increased by 6.16% compared to the previous 12-month period. However, as the increase is lower than seven percent, the minimum wage will only rise by 3.5%. From January 1, 2024, the minimum wage for all employers will be $16 per hour.
Increases for workers in precarious industries
Earlier this year, California’s legislature passed a new law that requires fast-food companies to pay their workers a minimum of $20 per hour. According to the Bureau of Labor Statistics, there were approximately 540,000 fast-food workers in California who earned an average hourly wage of just above $16 in May of 2022. The new law will increase the wages for all workers in the industry since even the highest earners in the top ten percent were only making $18.53 per hour.
When will the increase go into effect?
A new law will go into effect on 1 April 2024. During a celebration to mark the law’s passage, California Governor Gavin Newsom acknowledged the decades-long struggle of fast-food workers for improved working conditions and higher wages.
Increases for healthcare workers
Furthermore, Governor Newsom has signed a bill that will increase wages for certain healthcare workers who work in hospitals, dialysis clinics, and other facilities. The wage increase will benefit more than 400,000 employees. However, doctors and nurses are not included. Most of these salary increases will begin on June 1, as per the law. Here’s what the increases will look like:
- Dialysis clinics and large health systems with more than 10,000 workers will pay a minimum wage of $23 an hour in 2024, $24 in 2025 and $25 in 2026.
- Hospitals with a high mix of Medi-Cal and Medicare patients, as well as independent rural hospitals, will have to pay workers $18 an hour in 2024. That rate will increase 3.5% annually until reaching $25 in 2033.
- Community clinics will begin the wage increase at $21 per hour in 2024, increasing to $22 in 2026 and $25 in 2027.
Other healthcare employers will increase their minimum wage to $21 per hour in 2024, $23 in 2026, and $25 by 2028.