Minimum Wage
Raising the minimum wage is an issue that has received renewed
attention at the local, state and national level recently. Politicians,
economists, labor unions, business owners, workers, consumers,
taxpayers, and governments all have a stake in this issue. It influences
many aspects of public and private life from employment to consumer
prices to demand for social services.
The current minimum wage in California will rise from $9 to $10 an hour in 2016. Although $10 an hour is a higher wage
than is required by the federal minimum wage laws, many state leaders are calling for further increases. Supporters of
raising the minimum wage believe it will benefit the economy and put more money in people’s pockets. Opponents
believe that raising the minimum wage will hurt the economy and people will lose their jobs. Some argue that increasing
wages will hurt the chances of employment for young workers trying to start a career. Among those who want to raise
the minimum wage, there is disagreement over how high it should go. LegiSchool hopes this guide will help you wade
through the issues and consider how minimum wage laws, and changes to those laws, might impact you.
What is the Minimum Wage?
According to Webster’s dictionary, the minimum wage is “an amount
of money that is the least amount of money per hour that workers
must be paid according to the law.” In other words, it is the
government’s way of saying that no business can pay an employee less
than a certain dollar amount. Why did the federal government
establish a minimum wage? In 1938, on the heels of the Great
Depression, President Roosevelt signed the Fair Labor Standards Act
(FLSA) into law. The act was intended to protect American workers and
ensure “the maintenance of the minimum standard of living necessary
for health, efficiency, and general well-being” (Fair Labor Standards
Act, 1938). During that time in our country’s history, many people
(including children) were working long hours, for low wages, in
conditions that many viewed as unsafe. Thus, the FLSA was written to
establish a minimum wage (of 25 cents per hour), enforce a maximum
amount of hours that laborers could work each week, and to ensure
that when young people are working, they are working in safe
conditions. This blog post from the Wall Street Journal does a great job
explaining the federal minimum wage, and a few key concepts that you
will see later in this guide.
CALIFORNIA
FACT:
California introduced its own minimum wage in
1916 – long before the federal government.
WHO SETS THE MINIMUM WAGE?
Federal, state and local governments can
all set a minimum wage. How does it
work?
Generally speaking, no one in the country
can pay their employees less than the
federal minimum wage, which is $7.25 an
hour (there are a few exceptions).
However, many state and local
governments can (and have) set their
minimum wage at a higher amount.
California will raise its minimum wage to
$10 an hour on January 1, 2016, which
would make it one of the highest state
minimum wages in the country.
Local governments, like cities, can also
raise the minimum wage. San Francisco
will raise their minimum wage to $15 by
2018, San Diego will increase to $11.50 by
2017 and Los Angeles will increase to $15
by 2020, just to name a few.
Is a Minimum Wage Different Than a Living Wage?
When researching this topic, you may come across two different terms: minimum wage and living wage. What’s the
difference? Webster’s dictionary defines the living wage as “an amount of money you are paid for a job that is large
enough to provide you with the basic things (such as food and shelter) needed to live an acceptable life.” So in simple
terms, the minimum wage sets a dollar amount that workers must be paid. A living wage is whether the amount a
person earns covers the cost of basic necessities.
Some people believe the minimum wage is a living wage. Others do not. Some argue that it makes a difference where
you live. In other words, basic things like food and shelter may be more expensive in California than in Texas, so a living
wage may be higher in California. What do you think? Does where you live make a difference?
COMMON CORE SKILL PRACTICE: Using Infographics
Reading a Thematic Map to generate compare and contrast statements.
Use information presented in
this 2014 map to indicate two
or more ways California is like
some other states regarding the
minimum wage. Can you also
indicate two or more ways
California is unlike some other
states regarding the minimum
wage? Why might these
differences exist?
INFLATION occurs when the price
of things rises and causes the
value of the money you have to go
down. For example, if the price of
goods and services becomes more
expensive, and the amount of
money you make stays the same,
then the money you make does
not buy you as much as it used to.
This means your “purchasing
power” has decreased. Watch this
video for a more detailed
explanation of inflation.
What are California’s Minimum Wage Laws?
As we noted before, states and local governments can set a higher minimum wage than the federal government if they
wish. In 2013, Assembly Bill 10 was passed by the California Legislature and signed by Governor Brown. This bill
approved raising the state’s minimum wage from $8 an hour to $9 in 2014, and again to $10 an hour in 2016.
However, some state leaders believe the minimum wage should be raised even further. So, there are a couple of ideas
that people are considering (outlined in greater detail in the chart below).
Senate Bill 3 was introduced in the Legislature this year. It proposes raising the minimum wage to $11 an hour in 2016,
and then to $13 an hour in 2017. It would then set the minimum wage to be automatically adjusted to inflation starting
in 2019.
In addition to Senate Bill 3, there is an initiative that is being
Inflation is the rising of prices relative to
circulated for signatures. If it gets enough signatures, then the
how much money you have.
public will vote on it in the next election. The initiative proposes
raising the minimum wage to $11 in 2017, and then would raise
the wage another $1 per hour each year, until it reaches $15 an hour in 2021. After that, the minimum wage would be
adjusted each year to keep up with inflation.
Law
AB 10 (current law)
SB 3 (proposed law)
Today
$9/hr
$9/hr
2016
$10/hr
$11/hr
2017
-$13/hr
2018
---
2019
-set to
inflation
2020
-set to
inflation
2021
-set to
inflation
2022
-set to
inflation
Proposed Initiative
$9/hr
--
$11/hr
$12/hr
$13/hr
$14/hr
$15/hr
set to
inflation
What is the difference between the bill described above, and the initiative? A bill is a proposed law on which the
Legislature votes. If they pass the bill, the Governor must approve it before it becomes law. An initiative is a law
that the people vote on directly during an election. In California, if the people pass the initiative, it becomes law
without the Legislature’s or the Governor’s approval.
How Does California Compare to Other States?
Currently, 29 states and Washington DC have minimum wages that exceed
the federal rate of $7.25/hour, and many states have recently passed laws
that will raise their minimum wage even further. As of today, Washington
DC has the highest minimum wage, at $10.50 per hour. California and
Connecticut will be tied for second at $10 an hour starting January 1, 2016.
By 2018, seven states will have a minimum wage above $10 an hour. For a
full listing of state minimum wage laws, check out the National Conference
of State Legislatures webpage.
Who Earns Minimum Wage?
According to an article by the Pew Research
Center, the US restaurant/food service industry
employs the most minimum-wage and nearminimum-wage workers in the country (see
the graph at the right). Grocery stores,
department stores, the construction industry
and schools also employ many minimum wage
and near-minimum wage employees. When
you see statistics like this, don’t forget that
many restaurant industry workers earn tips,
which may push their actual hourly earnings
above minimum wage.
In California, the Legislative Analyst’s Office
estimates that around 4 million people earn
less than $13 an hour (that is how many people
would earn a raise by 2017 if Senate Bill 3
passes the Legislature). For a great break down
on who earns minimum wage, and many other points covered by this guide, check out the PBS article “Undisputed Facts
about the Minimum Wage”.
The Debate
The topic of whether to raise the minimum wage has sparked an intense debate around the country and in California.
Most conversation about raising the minimum wage revolves around whether it will help or hurt the economy. Take a
moment to research this point and you will likely find many different stories – on both sides of the argument. Why isn’t
there a consensus? Much of the impact of raising the minimum wage will be determined by how businesses and
individuals react – and that can be nearly impossible to gauge. While there are many nuances to each side of the
argument, here is an overview of some of the ideas. For more detailed information check out the analysis by the
Legislative Analyst’s Office on the initiative seeking to raise California’s minimum wage.
Lost Jobs - A general rule in economics is that if something gets more expensive, then demand for that item will go
down. Thus, people argue that if you make employing people more expensive, employers will hire fewer people.
Opponents of raising the minimum wage speculate that it would mean fewer jobs and higher unemployment, both of
which hurt the economy. Businesses may also look to technological advances to replace people in jobs. For example, a
grocery store may decide to rely on self-checkout stands or a restaurant may install ordering kiosks on tables. Some
small businesses that rely mostly on low-wage workers may end up going out of business. Other companies may simply
shift their business practices to cater to the changes.
CRITICAL THINKING: The Impact on Young Workers
This graph shows the
distribution by age of
minimum wage workers
in the United States in
2012. One impact of
raising the minimum
wage may be that fewer
employers are willing
and able to hire
teenagers or other young
people looking to enter
the workforce. Explain
the argument that it is
the least skilled or
experienced workers
who are likely to suffer
negative consequences
as a result of raising the
minimum wage.
Do you agree or disagree with this argument?
Increased Spending - Another economic principle says that if
people have more money, they may demand more goods or
services. If we raise the minimum wage, proponents speculate that
people will have more discretionary income and they will spend
more money on items that will help grow the economy.
Discretionary income is the money left over
after you have paid for your basic needs.
Price Increases – On the other hand, if businesses are paying their employees more, the cost of doing business can go
up too. This may result in businesses raising the price of their good or service to make up for their losses. Economists call
this “passing costs on to consumers”. Check out this LA Times article for a good example of this point. The article looks at
what impact raising the minimum wage might have on the prices in the fast-food industry.
Inflation – You have already heard the term inflation, and here it is again! Many people point out that over the past
several decades, the minimum wage has not kept pace with inflation – in other words the price of goods and services is
going up faster than what we pay our workers. As a result, $1 today does not buy as much as it has in the past. The
Atlantic published the graph below to illustrate this point, in the article “Should We Raise the Minimum Wage? 11
Questions and Answers” . The blue line shows the minimum
Purchasing power is your ability to buy
wage as it would be worth today, and this shows that the
goods and services.
minimum wage had the most purchasing power in 1968.
CLASSROOM ACTIVITY: Understanding Inflation
California's Minimum Wage History, 1981 - Present
Effective Date
Jan. 1, 2016
July 1, 2014
Jan. 1, 2008
Jan. 1, 2007
Jan 1., 2002
Jan. 1, 2001
March 1, 1998
Sept. 1, 1997
March 1, 1997
Oct. 1, 1996
July 1, 1988
Jan. 1, 1981
Wage Increase
$10 11.10%
$9 12.50%
$8
6.70%
$7.50 11.10%
$6.75
8.00%
$6.25
8.70%
$5.75 11.70%
$5.15
3.00%
$5
5.30%
$4.75 11.80%
$4.25 26.90%
$3.35
8.10%
Adjusted for Inflation
Data from Dept. of Industrial Relations, as compiled by the Sacramento Bee
Compare the table at the left, with the
graph above. The key concept depicted
in the graph is that the purchasing
power of the minimum wage changes
over time, as a result of inflation. The
chart at the left shows the amount of
the minimum wage in CA and how much
it has increased. Use the inflation
calculator tool
http://www.bls.gov/data/inflation_calcu
lator.htm to determine the buying
power of the California minimum wage
today, adjusted for inflation. Does
adding this data to the chart add
meaning? Why or why not?
Regional Variation - The federal minimum wage sets the lowest price that a worker can make in the United States.
However, the cost of living varies greatly from place to place in our country. So, some people argue that regional or local
approaches to addressing the minimum wage are best. Let’s use an example to illustrate this point. According to a
report by the Legislative Analyst’s Office, the average cost of a home in Texas is around $150,000. In California, the
average price is nearly $450,000. So making $7.25 an hour in Texas may buy you more than it does in California. These
differences do not just happen across states, they can happen between cities as well. In California, zillow.com shows the
average home price in Marysville, located in northern California, is $176,700. The average price in Fremont, located in
the bay area, is $840,400. Because of these regional differences, some people argue that raising the minimum wage
should be a regional decision. The Washington Post does a great job summing up this point in “What Raising the
Minimum Wage to $15 Would Actually Mean in Every State”.
Income Inequality - Proponents of the minimum wage often argue that raising it will help bring people out of
poverty, thus lessening income inequality in our country. Income inequality is a term that illustrates how evenly or
unevenly income is spread out in a population, and it is one of the main issues that spurred the “99 Percent Movement”
a few years back. Proponents of raising the minimum wage argue it will lessen the income gap and raise low-wage
workers out of poverty. If this occurs, it is possible that people who currently need services from the state (like those
that help them buy food or receive health insurance), will no longer need those services. On the other hand, opponents
cite that raising the minimum wage means people may lose their jobs, which means they may subsequently need more
services from the state.
CLASSROOM ACTIVITY:
Helping Low-Income Families
Research the Earned Income Tax Credit to understand
what it does for low-income families. Then, watch the
8-minute PBS NEWS HOUR video with two people
debating the costs and benefits of raising the minimum
wage.
Why does Thea Lee of AFL-CIO believe raising the
minimum wage is beneficial?
Summarize David Neumark’s argument that an increased
minimum wage is not a precise enough tool to help lowincome families.
What do you think will be more beneficial to low-income
families?
LEARNING WITH THE NEWS:
Exploring Income Inequality
The Learning Network is a blog hosted by the New York
Times offering rich resources to educators on current
events. They offer lesson plans, infographics, podcasts
and much more, all using New York Times content, and all
of it is free.
Use this lesson plan (which includes videos, articles, and
critical thinking questions) to help your students learn
about minimum wage. The warm-up activities offered in
the lesson will help students think through the concept of
income inequality. The main activity provides great
content to helps students understand the concept of
poverty from a variety of vantage points.
Are There Other Options?
All of the issues discussed thus far are open to debate, particularly when it comes to the relative costs and benefits of
raising the minimum wage. However, disagreement does not necessarily mean that policymakers have different goals –
they may just have different methods for achieving those goals. For example, while some people argue that the best
way to lift families out of poverty is raising the minimum wage, others argue that using economic tools like the Earned
Income Tax Credit is a more effective approach. Some people believe we should increase the money we provide to
government programs that help low-income families, while others believe investing in creating jobs is more beneficial.
And still others believe that providing equal educational opportunities is the key. In these examples, everyone has a
common goal: helping economically disadvantaged people in the community. They just have different ideas about the
best way to do it.
How High is High Enough?
Like Goldilocks and the three bears, many state leaders in California are looking for a minimum wage that is “just right”.
But what is that dollar amount? It turns out this question is just as tough to answer. Even among those who want to
raise the minimum wage, there is disagreement about how high. One dollar amount that has gained momentum in
California and around the country is $15 an hour. In California, about two-thirds of the population agree with raising the
minimum wage to this level (Sac Bee). But others believe a more modest increase would best serve the needs of our
large and very diverse state. And as we noted earlier, regional differences in cost of living make it more expensive to live
in some parts of the state than others – which further complicates finding agreement about how high is high enough. It
is a complex issue that is at the forefront of discussion by lawmakers in California and in Washington DC. We hope this
guide help you become informed on the issue so you can decide how you feel about our minimum wage laws!
REFLECTION QUESTIONS
You and your family are likely to experience at least some impact if the minimum wage changes in our state.
What changes do you think will occur in your family? How about in your community?
What did you learn in this guide that has helped you become more informed? If there is an initiative in next year’s
election seeking to raise the minimum wage, would you vote yes or no?
MORE RESOURCES
Looking for more teaching resources? Try these out:
Is the Minimum Wage Too Low? Lesson plan from The Learning Network
Minimum Wage – Political Cartoons. Teach minimum wage using political cartoons in this lesson from Columbia
University’s Understanding Fiscal Responsibility curriculum. Then, have students create their own cartoon and
submit it to LegiSchool’s political cartoon contest (Deadline December 4).