HomeBudget & Tax NewsCalifornia Wage Hike Would Raise Pay, Cost Government Billions Annually—Report

California Wage Hike Would Raise Pay, Cost Government Billions Annually—Report

(The Center Square) – A proposal to raise California’s minimum wage to $18 an hour is likely to result in a range of economic impacts for workers and businesses, a review by the Legislative Analyst’s Office revealed January 24.

The LAO’s review of the proposal, which would incrementally raise the minimum wage annually until it reached $18 in 2025 for larger businesses and 2026 for smaller businesses, found that the measure would result in higher wages for many workers but likely fewer job opportunities.

Analysts determined that a higher minimum wage would likely reduce business profits, making workers more expensive to pay. This would ultimately result in fewer job openings, with the LAO estimating the state would have “between 0-1% fewer jobs” than it otherwise would if voters approve the proposal.

The LAO also determined that businesses would likely see lower profits from increasing the minimum wage and expect consumers to see the price of goods and services rise as a result.

The review by independent analysts comes months before California voters could see this initiative appear on the November ballot. For it to qualify as a ballot initiative, supporters must collect enough signatures from registered voters that must be certified months ahead of the election.

The proposal was initially submitted by investor Joe Sanberg in December, who argued that workers need a raise as the cost of living continues to increase. Sanberg has pledged to fund the signature-gathering process for the initiative to make it to the ballot.

“Raising CA’s minimum wage to $18 will bring financial stability to millions of hardworking families, empowering them to spend more money in their communities and give small businesses a much-needed boost,” Sanberg tweeted in December, days after filing the initiative. “A wage increase isn’t just good for people – it’s good for business.”

The LAO’s analysis also found that the minimum wage proposal would increase the costs for state and local governments to pay their workers by a “few billion dollars” per year. According to the LAO, state and local governments spent around $500 billion during the latest fiscal year.

The LAO did note that there would likely be some savings from lower enrollment in Health and Human Services programs since the proposal would change some workers’ incomes.

“Many people would have higher incomes due to wage increases, but some likely would have lower incomes due to job losses,” the LAO said. “Overall, these enrollment changes likely would reduce state and local costs by hundreds of millions of dollars to over $1 billion annually.”

The initiative could also impact tax revenues, though the LAO said it’s “unclear” whether the proposal would make revenues go up or down. The LAO noted that the measure would change income tax and sales tax revenues because of the measure’s impact on wages and prices.

“Revenue changes likely would be between a loss of a couple billion dollars and a gain of a few hundred million dollars,” the LAO said.

The initiative is still pending an official review and will need about 623,200 valid signatures to qualify for the November ballot, according to Ballotpedia.

Originally published by The Center Square. Republished with permission.

Madison Hirneisen
Madison Hirneisen
Madison Hirneisen is a staff reporter for The Center Square.


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