California’s minimum wage will rise to $15.50, triggered by soaring inflation

California’s minimum wage for all employers will rise to $15.50 an hour in January, advisors to Gov. Gavin Newsom said Thursday, the first time that rising inflation has triggered a provision of a 6-year-old state law governing automatic pay increases.

The announcement came one day before Newsom unveils a revised state budget plan, a new spending proposal for state government that relies on an updated economic forecast and one that will offer rental assistance and cash rebates to struggling Californians.

Keely Martin Bosler, the governor’s budget director, said the wage increase will help low-income families struggling with the rapid rise in prices for a wide variety of items.

“They have a huge impact to those families that are living off of those lower wages and their ability to cover the cost of goods,” she said.

The state’s minimum wage for large employers is currently $15 an hour, with employers that have fewer than 26 workers paying $14 an hour. Both pay levels went up in January, the presumed final step envisioned by a 2016 state law that gradually increased wages — in most years, by one dollar an hour. Small businesses were given more time to raise their pay.

Bosler said all businesses, regardless of size, will be required to raise their base salaries based on the state’s projection that the consumer price index will have risen by 7.6% over a two-year period that ends in July. The 2016 wage law signed by then-Gov. Jerry Brown requires that any inflation growth above 7% triggers an even higher minimum wage.

“If high inflation sustains” beyond this summer, Bosler said, “it’s possible that there will be another jump by another 50 cents in the future years.”

California’s current $15 minimum hourly wage for large businesses is the nation’s highest, according to federal data. Two states currently require higher wages for small companies, though the change announced Thursday would likely vault California to the top of the list for all employment sectors. Some communities in the state already have plans for higher pay rules. In Los Angeles, the minimum wage will rise to $16.04 an hour in July.

The 2016 law was a compromise agreed to by state lawmakers after liberal activists qualified a ballot measure that called for an immediate increase to $15 an hour. The group agreed to withdraw its effort in favor of the law signed by Brown.

John Kabateck, state director of the National Federation of Independent Business California, said the unexpected change could hurt businesses that are already struggling.

“We recognize this is the law but this has the opposite effect on the people they’re trying to help,” he said. “This just adds more pain to the struggle.”

Thursday’s announcement came on the heels of another potential effort to put the salaries of low-wage workers on the ballot. Hours before state officials released their new inflation estimate, liberal activists submitted signatures on a proposed November ballot measure to raise the state’s minimum wage to $18 an hour over the next three years.

“Tacking 50 cents onto the current minimum wage doesn’t come close to making ends meet for working families,” said Joe Sanberg, the Los Angeles investor who is the proponent of the new ballot measure. “We need a living wage of $18 per hour to keep pace with inflation so that working people and their families can afford food and a place to live without having to take on second and third jobs.”

The Newsom administration’s projection was included in an announcement of an $18-billion package billed as inflation relief for Californians — a proposal that includes his plan for $400 rebates to car owners as well as expanded rental assistance and help covering past-due utility bills. Full details are expected in his release of a revised budget plan Friday.