Lobbyists and legislators in Sacramento are debating whether California should boost the minimum wage. Currently, it sits at $8.00 an hour, but Assemblymember Luis Alejo's (D-Salinas) AB 10 seeks staggered increases in the coming years. His plan would bump it to $8.25 in 2014, follow with two 50 cent boosts over subsequent years, then automatically index it to inflation as of 2017.
Alejo tried a similar bill last year but it failed in the face of business opposition. Groups such as the California Chamber of Commerce and the California Restaurant Association warn of the unintended consequences of a higher minimum wage. They argue employers will cut down on hiring or move out of state. The last increase was before the great recession, back on January 1, 2008. Reacting to the freeze, a handful of California cities have instituted their own wage hikes above $10.
What are the economics of a modern minimum wage? How does California compare to the rest of the country? Why doesn't California tie the minimum wage to the Consumer Price Index, as nine other states do? What does research show about how businesses react to wage hikes?
Sylvia Allegreto, PhD; Economist, Institute for Research on Labor & Employment, University of California, Berkeley
John Kabateck, Executive Director, National Federation for Independent Business in California