Gov. Brown hails deal to raise minimum wage to $15 as 'matter of economic justice'

Gov. Jerry Brown on Monday sent the Legislature a proposal to boost the state's minimum wage, defending the idea of $15 hourly pay as one that furthers economic equality and one that he hopes other states will follow.

“I'm hoping that what happens in California will not stay in California, but spread all across the country,” Brown said a news conference at the state Capitol, surrounded by Democrats and labor union leaders. “It's a matter of economic justice. It makes sense.”

The governor's plan, crafted through weeks of private negotiations among a small group of lawmakers and labor officials, increases the current $10 statewide minimum wage by 50 cents on Jan. 1 to $10.50 an hour. From there, it would rise to $11 in 2018 and subsequent dollar-a-year increases ending at $15 on Jan. 1, 2022.

Senate President Pro Tem Kevin de León (D-Los Angeles) said 5.6 million people, or one in three California workers, would get a raise. The measure, which is expected to win approval in both chambers of the Democratic-controlled Legislature, would not change any local laws providing for higher wages, such as those in the city of Los Angeles and L.A. County.

The brokered deal, now on an expedited timetable for a vote before the end of the week, is expected to cancel two separate labor-sponsored efforts to place a wage increase initiative on the November ballot. The phased series of increases in the minimum wage is on a slower timetable than union leaders had proposed in their ballot measure efforts, but they said the agreement represents real progress.

Business leaders complained they were shut out of the negotiations and predicted that increasing the minimum wage would force businesses to raise prices.

“Everyone wants higher wages for folks, but if you can only raise prices so much ... you're going to be forced to cut hours, cut employees, change your business model and frankly, automate,” said Ruben Gonzalez, senior advisor for strategic affairs at the Los Angeles Area Chamber of Commerce.

The agreement, first reported by The Times on Saturday, would reinforce California's position as having the highest minimum wage of any state. The federal minimum wage is $7.25 per hour and was last increased in 2009. States can exceed the federal minimum but cannot go below it.

“This agreement puts a better future in the grasp of average Californians,” said Laphonza Butler, president of the statewide council of the Service Employees International Union.

For Brown, the deal represents an admission that one or both of the ballot measures had a good chance of passing — even though they offered no respite in economic downturns. The governor signed the last statewide increase in 2013, but had suggested any additional increases would be a significant burden on the state as the employer of low-wage care workers for the disabled.

Brown had also previously rejected demands to “index” the minimum wage — linking future automatic increases to the rate of inflation.

Under this proposal, starting in 2024, the wage would go up to reflect increases in the Consumer Price Index, but by no more than 3.5% in a given year.

Even so, Brown did insist on including ways to stop wage increases if the economy falters. The agreement allows for a temporary pause in the first few years of boosted salaries if California's unemployment rate rises or if a deficit is projected in future state budgets.

The plan raises the wage “in a way that takes into account the vagaries of the capitalistic economy,” Brown said. “This thing is the result of a lot of thinking.”

Key to its passage may be the backing of business-friendly Democrats in the Assembly who have spiked big Brown-supported measures in the past, including a major effort last year to reduce the state's use of oil and gas as part of a broad climate change bill.

Assembly Speaker Anthony Rendon (D-Paramount) said that during a brief closed-door meeting Monday afternoon, his colleagues questioned many aspects of the plan, including the cost-of-living increases and difficulties that nonprofits might have complying with the new rules, given their financial models.

He said a few moderate Democrats already have committed their support, but declined to name them. “There does seem to be significant support,” Rendon said.

Assemblyman Jim Cooper (D-Elk Grove), a leader of the business-aligned Democrats, was undecided on the proposal Monday. He said members were concerned about any unintended consequences and its possible effect on nonprofits.

Similarly, Assemblyman Ken Cooley (D-Rancho Cordova) said he needed to see the actual language of the bill before he could decide whether to support it. He said he had never previously backed a minimum wage deal that included automatic cost-of-living increases.

“I'm just trying to understand personally how the pieces fit together,” he said.

Rendon, who supports the deal, said the plan will have its first hearing in the Assembly Appropriations Committee on Wednesday.

News of the minimum wage agreement is already reverberating across the United States, with both Democratic presidential candidates Hillary Clinton and Sen. Bernie Sanders hailing the deal Monday.

“There are absolutely going to be national implications,” said Chris Tilly, director of the UCLA Institute for Research on Labor and Employment. “I expect other states to follow suit, and I expect pressure to build for a federal minimum wage increase.”

He said New York will probably be the next state to jump in on $15 hourly minimum wage legislation, based on the state's “rivalry” with California for being “forward-thinking.” New York is considering a minimum wage increase proposal ahead of an April 1 budget deadline.

The governor told reporters that his weekslong talks with legislators and labor leaders were sparked by the “specter” of the initiatives that were headed to the fall ballot.

A coalition of business groups that formed a campaign committee to oppose a statewide $15 minimum wage ballot initiative said the proposed deal was “overreaching.” The committee includes groups such as the California Restaurant Assn., the L.A. Area Chamber of Commerce, the California Hotel and Lodging Assn. and the California Retailers Assn.

“While voters may favor a reasonable minimum wage increase, $15 turns those numbers on their head,” the California Consumers Against Higher Prices coalition said in a statement.

Gonzalez of the local chamber complained that business was left out of the talks. “What it comes down to is we had some late-night deal brokered, unknown, not necessarily all stakeholders in the room,” he said.

He added that because service industries have small margins, it would be difficult for them to absorb the cost of a large minimum wage increase.

Tom Scott, state executive director of the National Federation of Independent Business California, said there has been a frustrating “lack of information” about the deal, which broke over the Easter holiday weekend.

The legislative wage proposal makes one concession to small businesses, by allowing those with fewer than 26 workers an additional year to raise wages. The $15-an-hour minimum wage wouldn't apply to those employers until Jan. 1, 2023.

As part of the deal, labor unions successfully won as many as three additional paid sick days for their members who work as in-home care providers.

Although the agreement allows some possible delays in the rollout of those extra sick days, it represents a significant victory for the unions in their negotiations with Brown and legislative leaders.

But the effect of the minimum wage raise will go much further. The Capitol news conference announcing the deal included a fast-food minimum wage worker, Holly Dias of Humboldt County, who said the boost in her take-home pay would help her raise her 5-month-old son.

“I just want to say thank you,” she said tearfully, getting a hug from Brown as she walked away from the podium.

 

Samantha Masunaga contributed to this report.

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Updates from Sacramento

Copyright © 2016, Los Angeles Times

UPDATE

4:45 p.m.: This story was updated with additional details and context.

4:30 p.m.: This story was updated with the correct spelling of Holly Dias' name. The governor's office provided incorrect information. 

4:05 p.m.: This story was updated to include quotes from Assembly Speaker Anthony Rendon.

3:45 p.m.: This story was updated to reflect a correction issued by the governor's office regarding the number of employees small businesses would need to have to get the additional year to raise wages. Brown initially said it was fewer than 25 workers; his office corrected that to fewer than 26.

2:55 p.m.: This story has been updated with additional details and context. 

This article was originally published at 1:49 p.m.

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