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Inflation triggers California minimum wage increase in 2023

SACRAMENTO, CALIFORNIA (AP) – California’s minimum wage will jump to USD15.50 per hour next year, Governor Gavin Newsom’s administration announced on Thursday, an increase triggered by soaring inflation that will benefit about three million workers.

The increase is required by a state law passed in 2016. But it comes at a good time for Democrats in the nation’s most populous state as they rush to find ways to boost taxpayers’ bank accounts in an election year marked by rising prices that have diluted the purchasing power of consumers.

On Thursday, in a preview of his upcoming budget proposal, Newsom doubled down on his plan to send up to USD800 checks to car owners to offset this year’s record-high gas prices despite opposition from Democrats in the Legislature.

And he revealed a new proposal to send at least USD1,000 checks to 600,000 hospital and nursing home workers in recognition of their dangerous work throughout the pandemic.

It’s part of a new spending proposal to put USD18.1 billion into taxpayers’ pockets through a combination of rebates and assistance with rent, health insurance premiums and utility bills.

Starting wages are advertised on a sign on the window of a Taco Bell in Sacramento. PHOTO: AP

“We’re still overall having a very strong economic recovery in the state from the COVID-19 recession,” California Department of Finance spokesman HD Palmer said. “But it’s clear that we face a lot of headwinds: gas prices remain high, food prices are high because of inflation.”

California lawmakers voted to increase the minimum wage to USD15 per hour in 2016, but the increase was phased in over several years. Today, the minimum wage is USD15 per hour for companies with 25 or more workers and USD14 per hour for companies with 25 or fewer employees.

The law said the minimum wage must increase to USD15.50 per hour for everyone if inflation increased by more than seven per cent between the 2021 and 2022 fiscal years. On Thursday, the California Department of Finance said they project inflation for the 2022 fiscal year – which ends June 30 – will be 7.6 per cent higher than the year before, triggering the increase.

Official inflation figures won’t be final until this summer. But the Newsom administration believes the growth will be more than enough to trigger the automatic increase.

California has about three million minimum wage workers, according to a conservative estimate from the state Department of Finance. The increase in the minimum wage will be about USD3 billion, or less than 0.1 per cent of the USD3.3 trillion in personal income Californians are projected to earn.