Businesses Across California Brace For Minimum Wage Increase January 1

A looming statewide minimum wage increase from $15 an hour to $15.50 on January 1st has caused many employers throughout California to reconsider staffing levels, new hirings, and other important factors as economic concerns grow.

The statewide minimum wage has been steadily increasing since the mid 2010s. Between 2017 and 2022, a state law had the minimum wage increase by $1 every year, with smaller businesses of 25 and fewer employees only getting a one year delay each year to have more time to adjust to the new levels. Under SB 3, signed into law by then-Governor Jerry Brown in 2016, the minimum wage would be capped off at $15 an hour, which it hit on January 1st of this year and which smaller employers were scheduled to come to on January 1, 2023.

However, due to the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers going above a 7% increase, an automatic minimum wage increase was initiated, with the California Department of Finance setting it at $15.50 an hour, or an increase of 3.5%, beginning January 1, 2023, regardless of employer size.

With higher costs, inflation, and economic worry already fueling businesses in California, a sudden jump up of $1.50 for many employers have led to many foregoing major raises and planned hirings, with layoffs expected to get worse amongst companies with minimum wage workers in early 2023 as a result. Many employment experts even compare the likely wave of minimum-wage jobs going away next year to the current mass layoff situation currently going on in the tech industry.

“They weren’t exactly blindsided, as they knew in June that the minimum wage would be going up,” Emily Huston, a San Diego-based financial advisor for small businesses, told the Globe Thursday. “But inflation going up exponentially in the latter half of 2022 and other growing costs for businesses have had many to rethink their 2023 plans. No to low overhead companies are fine, and those that are remote or don’t rely on having a large inventory of goods are in decent shape, but any company with a lot of minimum wage workers? They’re scared.”

“Many have been going more and more automated, with many restaurants changing to a model where you pay for everything up front, then have your meal served to you, rather than rely on a waitstaff. Fast food restaurants are also relying more on digital boards in stores and apps rather than cashiers. Here in California, businesses have really been adding that in more and more since the pandemic, and it is staying strong due to this scary $1.50 an hour rise.”

Minimum wage increase in California

However, impacted employers have said that it is a choice between layoffs, a freeze on hiring, or raising the costs for customers.

Jim Pualski Jr., a restaurant owner in Mendocino County, told the Globe on Thursday that “Prices now have to go up. There’s no real way I can stay in the black other than firing some good people. Since COVID, we’ve had to do both, and this latest increase is murder.”

San Jose flower delivery company manager Diane Powe also told the Globe of not only her present concerns, but future concerns going into the 2020s.

“Ask anyone who has minimum wage employees,” Powe said. “It is hard to make decisions on staffing when everything but your number of customers is going up. Customer-wise, we’re now back at pre-pandemic levels. But every cost seems to have gone way up since then, and that includes minimum wage. And it’s even worse in cities. The California rise of $15 to $15.50 is bad, but in San Jose, we’re going from $16.20 to $17. You have to raise prices. I mean, that’s how economics works, but its also something that makes us less appealing to customers, as they’re getting squeezed more too. These minimum wage increases really could not have come at a worse time. We all feel for our employees, but we also want to keep our business so that we can have employees to begin with, you know?”

Compounding future woes is not only a likely minimum wage for 2024 coming next year as well due to the rising inflation triggering another increase, but a new ballot measure coming as well. A ballot initiative, slated to be voted on in 2024, would raise the state’s minimum wage to $18 an hour by 2026, two years faster than the current automatic raise law that would have it reach $18 an hour by 2028 at the soonest.

“That’s the tidal wave we see on the horizon,” added Huston. “Businesses are feeling the burn from this 2023 increase, 50 cents for big employers, $1.50 for smaller ones. This wave would capsize more businesses as a result. We can still vote it down, but even if we do, that California law giving there Consumer price index increases just adds more worry to businesses in California.”

The 50 cent/$1.50 minimum wage increase is due to be official on January 1, 2023.