The Impact of Raising Minimum Wage In California in 2024

The state of California is continuing a trend of upholding a higher minimum wage than the national average, and several changes will be effective in 2024. In September of 2023, California Governor Gavin Newsom signed California Assembly Bill 1287, which included a provision that raises the minimum wage for fast food workers to $20 per hour. This law became effective on April 1, 2024. Additionally, many healthcare workers will see a bump in their pay due to AB 1287, which increases healthcare wages to $18, $21, or $23 per hour, depending upon the type of facility that employs them.

On top of AB 1287, which impacts only two industries, the overall statewide minimum wage will be $16, effective January 1, 2024. The increase in the minimum wage in California may seem significant. Still, prior to AB’s passage, many business owners cited that they had already raised wages due to recent inflation, meaning the increase may not be as substantial as it would seem in many areas.

Beyond the immediate impact on the industries specified in AB 1287, the laws that raised the minimum wage are expected to have widespread ramifications for the entire labor market in California. Since the minimum wage for fast food workers is higher than the state’s general minimum wage of $16 per hour, many speculate that those working in lower-paying jobs, such as retail, may attempt to move over to fast food as an easy way to boost their earnings. Of course, this may be hard to do in a job market where many restaurants are cutting jobs.

But, the fight to keep workers will likely result in many other industries being forced to raise their starting wage to match what is offered at fast-food restaurants. After all, why would workers accept a lower-paying job when they could easily earn more? Thus, the $20 minimum wage for fast food workers will likely create the market rate for all entry-level positions.

Further, scheduled increases are planned so that higher wages can be gradually introduced, lessening the financial ‘shock’ to business owners and aligning with inflation and the high cost of living in major urban areas. As you can see, there are some anticipated impacts on business owners with this bill.

Despite these concerns, studies suggest that this bill will have minimal long-term impacts on employment in the overall labor market. Additionally, an increased minimum wage has many benefits for workers. An increased income means more funds are available for necessities, such as housing and healthcare. This increase could also reduce poverty and the need for government aid for some individuals and families.

However, according to a calculator developed by MIT, $20 is still not a living wage. When projected over a year, a $20-hour wage barely moves a person above the poverty line. With the ever-rising cost of living in California, even a higher minimum wage of $20 will likely mean living in poverty or near-poverty conditions.

In addition to raising the minimum wage In California, salaried workers in the state must earn at least double the minimum wage. Therefore, salaried workers may be impacted as well. This change may prompt industry-wide adjustments to workplace dynamics and job classifications.

With these changes, AB 1287 and the general $16 per hour minimum wage will have some implications that will impact the state’s broader labor market. Overall economic effects could include increased consumer spending and growth, although consumer concerns related to inflation and competition remain.

The impacted businesses and employees can prepare for the change by analyzing and optimizing their current financial strategies, fine-tuning operations to optimize efficiency, and reevaluating – and potentially renegotiating – compensation packages. These changes can help many businesses brace themselves for the changes so that they can withstand the higher labor costs. This type of planning can minimize business disruptions and ensure your company has a balanced approach to employee support and economic growth. To learn more about how AB1287 and the $16 per hour minimum wage may impact your company and develop strategies to aid with these changes, contact CA HR Services today!