US inflation triggers California minimum wage rise to $15.50

Automatic trigger law never before activated in state's history

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

California's minimum wage will rise to $15.50 an hour for all workers on January 1, 2023, under a never-before-used automatic inflation trigger built into state law, the governor's office said on Thursday.

The announcement came a day before Governor Gavin Newsom was scheduled to present his revised budget plan to the state legislature, including a proposed $11.8 billion inflation relief spending package.

The economic stimulus proposal, similar to one enacted last year to help California recover from the Covid-19 pandemic, includes a plan Mr Newsom previewed in recent weeks which offers $400 tax rebates to vehicle owners to help offset skyrocketing petrol costs.

Shoppers buy food in Rosemead, California. AFP

Mr Newsom said his package taps into a "historic" state budget surplus to help people and families cope with rising costs of living, which the state Finance Department projects will grow 7.6 per cent between fiscal year 2021 and 2022.

Regardless of whether Mr Newsom's package becomes law, the Finance Department estimates that about three million workers stand to benefit from the first inflation-based minimum wage increase expected to take effect under a labour statute enacted in 2016.

That law requires an automatic 50-cent-per-hour increase above California's prevailing minimum wage levels - already the highest any state requires for larger companies - whenever the US consumer price index rises more than 7 per cent from year to year.

That means the statewide minimum wage for companies employing 26 or more workers, and those with 25 or fewer workers, will both go to $15.50 in the new year. Without an inflation trigger, the minimum wage for smaller companies was due to have topped out at $15 in January, catching up with the level now required at larger firms.

Only two states - Massachusetts and Washington state - exceed California's existing $14 minimum wage for smaller companies. They require at least $14.25 and $14.49 per hour, respectively, at businesses of all sizes, US Labour Department figures show.

Washington, DC, is higher still, at $15.20 an hour. The US federal minimum hourly wage is currently set at $7.25.

Other highlights of Mr Newsom's inflation package include $2.7bn in emergency rental assistance for low-income tenants and $1.4bn to help utility customers pay overdue bills.