More California Workers to Get Raises

Gov. Gavin Newsom signs the fast-food wage bill surrounded by fast-food workers at the SEIU Local 721 in Los Angeles on Sept. 28, 2023. Damian Dovarganes/AP Photo

Minimum wages are on the rise in California this year, with employees of larger health care systems getting paid more starting Oct. 16, after fast-food workers’ pay increased in April.

Health Care

Higher pay for certain health care providers was established with the passage of Senate Bill 525—which set a tiered schedule for wages that increase annually up to $25 per hour for some health care systems based on a complicated list of requirements determined partly by the number of employees.

Employees of the largest hospital systems will earn at least $23 per hour, with annual raises of at least $1 an hour in 2025 and 2026.

Workers at rural hospitals and those designated as safety-net facilities by the state will have the lowest wages, increasing to $18 per hour in October and $25 an hour by June 2033.

SB 525 was set to take effect June 1 but was initially delayed by legislative action until July 1.

The start date was paused again by the passage of Senate Bill 159—which set the wage increase implementation for 15 days after state revenues increased to certain levels.

California Gov. Gavin Newsom’s office told The Epoch Times delaying the implementation was “responsible fiscal policy.”

“It was prudent to watch the state’s revenues to make sure we were in a good position,” a spokesperson for the governor’s office said Oct. 14.

Recent monthly reports from the state’s Department of Finance show tax revenues slightly exceeding forecasts, clearing the way for the raises.

Some providers, including the University of California, chose to increase wages earlier this year.

Supporters, including the Service Employees International Union, said the law is needed to help support workers in the industry.

“Raising wages for the lowest paid frontline health care workers is critical to addressing the staffing shortages in our hospitals and medical facilities that are leading to a patient care crisis,” the group said on its website.

Lawmakers in the Assembly’s Appropriations Committee estimated in legislative analyses annual costs of at least $1 billion, with the state’s Department of Finance forecasting costs at approximately $1.4 billion.

Critics said that the wage increase law creates financial distress for the state and certain health care employers and that costs will ultimately be borne by taxpayers.

“This is just bad policy,” Sen. Roger Niello told The Epoch Times in May.

Fast Food

While it remains to be seen how the wage law will impact the industry and the state’s finances, higher pay in the fast-food industry is the topic of two newly released studies.

A study published by the Harvard Kennedy School in October found no “significant effects” of the law.

“If anything, the evidence is suggestive of less understaffing as a consequence of the law,” the researchers wrote.

Newsom’s office said the study is evidence that the law is beneficial.

“That means the new law’s impact in the initial months has helped pull people out of poverty and no impact on their benefits or hours, while thousands more jobs have been added to the industry,” a spokesperson from the governor’s office told The Epoch Times Oct. 9. “[This offers] significant benefits for workers, without the devastating consequences that critics predicted.”

The study also noted challenges facing the industry, with approximately one-third of employees at some of the largest chains involuntarily working fewer than 35 hours per week—which the report said could “lead to economic hardships, work-life conflict, and diminished health and well-being.”

“Even more commonly, fast-food workers at large chains in California face unstable and unpredictable schedules,” the report said. “These issues of hours insufficiency and schedule instability are likely to hamper the ability of a higher minimum wage to transform the lives of fast-food workers in terms of economic security and health and well-being.”

The report did not link the schedule issues to the wage hike.

Managers at several fast-food restaurants in Northern California told The Epoch Times in April after the law took effect that they were limiting hours to mitigate higher labor costs.

“We already raised prices, and we’re ... reducing hours and the amount of people working,” said Kevin Cortez, general manager of a Wendy’s location in the Bay Area.

A Sept. 30 study by the University of California–Berkeley’s Institute for Research on Labor and Employment found that while menu prices increased and profit margins decreased, parent companies and workers benefited from the wage increase.

“We find that a carefully implemented sectoral wage floor can raise worker pay without reducing the number of jobs or substantial consumer cost burdens,” said Michael Reich, report co-author and Berkeley economics professor.

Researchers found that pay for workers rose by 18 percent for 90 percent of nonmanagerial employees, and no significant job cuts were observed. The study did not mention whether hours were cut.

Menu prices increased by slightly less than 4 percent, according to the study.

While profit margins shrank due to higher labor costs, the report found that margins were high enough in the industry to absorb “a substantial share of the cost increase.”

And with higher prices leading to greater revenues, fees paid to parent companies increased because the amounts are calculated based on gross sales.

The governor said the report’s conclusions show that the policies are helping the state’s economy.

“This study reaffirms that our commitment to fair wages for fast-food workers is not only lifting up working families but also strengthening our economy,” Newsom said in an Oct. 3 press release.

He points to U.S. Bureau of Labor Statistics data—which show the industry has gained about 7,400 jobs since the law took effect—as proof of positive impacts.

Assembly Bill 1228—which set the minimum wage at $20 an hour for chains that had at least 60 restaurants nationwide—became effective April 1 after being passed and signed in 2023.

California’s hourly minimum wage for other industries—other than health care—is currently $16.50. Voters will decide in November if the rate should increase to $18 per hour.