A Multitude of Minimum Wages

Loren KayeCalifornia no longer has a minimum wage. Instead, the state has 50 minimum wages, differing depending on where you work or what you do.

California was an early adopter of the minimum wage, in 1916 requiring a 16-cent per hour wage for women and children. The California wage floor was extended to men in 1974; it had risen to $2/hour by then.

For the past 25 years, California’s minimum wage has been higher than the federal wage floor. Today, California’s $16 hourly base wage (annually adjusted for inflation) is more than double the federal hourly minimum wage.

Local Minimum Wages

But this is only the start. More than a quarter of the state’s population lives in localities with even higher minimum wages: 33 cities in the San Francisco Bay Area, plus Los Angeles, the unincorporated parts of Los Angeles County, San Diego, Pasadena and Santa Monica.

These cities and communities have wage floors that range from three cents to $3.67/hour higher than the state’s minimum wage. Some cities even have wage tiers depending on the size of the business.

But the current municipal champion is the city of West Hollywood, where the $19.08/hour minimum wage is 23% higher than the wage floor in neighboring Beverly Hills. Depending on your perspective, for now West Hollywood has either the glorious or ignominious distinction of having the highest minimum wage in the nation.

Merchants in the city have apparently had enough. Recent reporting found that the minimum wage in West Hollywood climbed by more than $6/hour for small businesses and $5 for larger ones in a span of just 2½ years. Full-time workers get 12 paid days off per year, with part-timers getting prorated time off, and everyone able to cash out unused time upon separation.

The result: desperate employers marching in protest and more than 175 shuttered businesses since 2021. “For God’s sake, give us a break,” said Genevieve Morrill, president of the West Hollywood Chamber of Commerce.

Some local governments under pressure from labor advocates have adopted wage floors for workers in large hotels. Los Angeles, Glendale and Santa Monica have a $19.73/hour wage for covered hotel workers, Long Beach has $17.55 and Anaheim has a wage ordinance aimed at the Disneyland resort area.

Last summer, as strikes engulfed the hospitality industry in Southern California, the Los Angeles City Council considered a $30/hour minimum wage for travel and tourism industry workers. A study conducted for the industry found such an increase would potentially cause job losses, increase homelessness as vulnerable workers are priced out of the labor market, and increase costs for working families and businesses when the full range of affected workers is considered.

But wait, there’s more.

Targeted Industries

In 2023 the Legislature passed and the Governor approved two laws governing wages in targeted industries, a quantum step insinuating the state deeply inside a company’s balance sheet. The new minimum wages will set an aggressive compensation floor for quick service restaurants and health care providers.

The law aimed at quick service restaurants took a circuitous route. First passed in 2022 to empower a “Fast Food Council” to set wages and impose other working conditions, with few guardrails, it was stymied as opponents qualified a referendum measure for the 2024 ballot. More negotiations followed in 2023, with an agreement that enacts a statewide hourly minimum wage for workers in quick service restaurants of $20/hour beginning in April 2024. A new fast food council would revisit the wage annually beginning in January 2025 through 2029, and the statewide wage mandate would supersede any local minimum wages that apply to quick service restaurant workers.

On a separate track, the Legislature in 2023 also adopted first-ever bespoke minimum wages for health care facilities, ranging from $18 to $23/hour beginning in 2024, depending on the type of facility, topping out at $25 to $28 hourly later this decade, with inflation adjustments to follow. These wage mandates will cover hospitals, skilled nursing facilities, dialysis centers, urgent care and surgical centers, community clinics, county facilities, and physicians’ offices. The wage mandate covers not just health care workers, but anyone working any job in those facilities. The wage tiers are based on facility type, size and proportion of patients in rural areas, or participation in government programs.

Fiscal Impacts

The inevitable costs of the measures have begun to take shape: the Newsom administration has estimated the first-year fiscal impact of the health care minimum wages will be $4 billion, a hefty sum at any time, much less when the state is facing a $68 billion budget deficit.

In December 2023, Pizza Hut franchises filed notices with the state Employment Development Department that more than 1,100 delivery driver positions would be eliminated, starting in February 2024. News reports attributed the planned layoffs to the upcoming minimum wage hike. Most of the canceled positions were in Los Angeles, Orange and Inland Empire counties with the remaining posts scattered in the Central Valley.

It is notable that the quick service and health care wage floors were exhaustively negotiated with affected industries, in order to avoid more aggressive increases without any protections. Industries and impacted companies negotiated compromises on these two measures that included numerous guard rails like sunset dates, adjustment to exempt salary thresholds, prohibition on additional wage mandates for these industries from local governments, and costly ballot initiatives targeting these industries.

2024 Ballot Measure

The ambition to ratchet up the statewide minimum wage for workers seems to have no limiting principle: the establishment of a new floor simply means another floor must be built atop it. Just so, a measure has qualified for the 2024 ballot to re-bench the statewide minimum wage from the current $16/hour to a new floor of $18/hour by 2025. (It is unclear if the higher wage floors for quick service and health care workers would be preempted by this measure.)

California is a costly state, and affordability obviously hits harder lower-income workers and families. But mandated wage increases at any level exacerbate affordability and limit opportunities for potential workers who don’t get jobs or hours in industries hamstrung by high wage mandates.

Loren Kaye is president of the California Foundation for Commerce and Education, a think tank affiliated with the California Chamber of Commerce.

Loren Kaye was appointed president of the California Foundation for Commerce and Education in January 2006. He has devoted his career to developing, analyzing and implementing public policy issues in California, with a special emphasis on improving the state's business and economic climate. He also was a gubernatorial appointee to the state's Little Hoover Commission, charged with evaluating the efficiency and effectiveness of state agencies and programs. Kaye served in senior policy positions for Governors Pete Wilson and George Deukmejian, including Cabinet Secretary to the Governor and Undersecretary of the California Trade and Commerce Agency. See full bio.