Legislative Update

richard markusonAs you all know, Governor Brown while admitting the bill didn't make economic sense, signed SB 3 into law which raises California's minimum wage to $15/hr. and links it forever to the Consumer Price Index (CPI).

Not wanting to be outdone by California, New York's Governor Andrew Cuomo signed their increase into law a few hours before California's which will undoubtedly give his long-time buddy Hillary Rodham Clinton, a boost in her race for the Democratic nomination.

Of course, Brown and his Democratic supporters fell all over themselves about how great the increase will be for income inequality. Last year the Wall Street Journal observed, "An enduring theme of the Democratic presidential race has been income inequality, coupled with an enduring belief that America's affluent reached their status at the expense of the poor and the middle class."

They went on to note, "Liberals want to address income disparities through wealth redistribution--by taking money from more productive people and giving it to the less productive in the name of 'fairness' as the left defines it. They want to raise income taxes, expand the welfare state, lift minimum wages and strengthen the bargaining power of unions." California seems to be leading the race in at least three of those four efforts.

But lost in the rhetoric about the impact of SB 3 on low wage workers is the impact on everyone else.

The Business Journal wrote, "Lost in the public discussion over the new landmark minimum-wage law approved by the California Legislature this week is the subsequent dramatic raise for many white-collar professionals.

Once the law is fully implemented, professionals exempt from overtime across the state would need to receive at least $62,400 annually in compensation. State law requires employees that are exempt from overtime to earn double the minimum wage.

Under California's current minimum wage of $10, those employees must earn at least $800 a week, or $41,600 a year. But under Senate Bill 3, the new minimum-wage legislation Gov. Jerry Brown plans to sign Monday, that salary floor would rise to $1,200 a week and $62,400 a year by 2023 for many exempt employees.

Although the issue did not arise in the public floor debate in the Senate and Assembly, the California Labor Federation, a bill sponsor, confirmed that the new law did not change the current rules around exempt employees. 'The wage floor for those exempted workers will go up substantially,' said Steve Smith, a spokesman for the union." And state taxpayers?

We'll all pay about $4 billion more in taxes to support this and that doesn't include the "wage pressure" as current public employees who are currently making close the the new minimum wage will argue for more.

The AFL-CIO acknowledged it at the New York signing. President Mario Cilento said, "When we raise the floor in wages, we raise the ceiling. ... those of you making 16 or 17 or 18 dollars an hour, the next time your union goes in to negotiate, they're going to ask for 19 and 20 and 21 dollars and up!"

That will certainly be the strategy for government unions in California, said J.J. Jelincic, a CalPERS board member and former state labor union president and negotiator. "My experience is that when you raise the floor, it creates tremendous pressure for raises at least a few rungs up," he said. About 12,000 state employees from custodians to office assistants earn $15 to $20 per hour.


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