California Health Worker Minimum Wage Delayed in Budget Deal

(Bloomberg Government) -- A new minimum wage for California health care workers will be delayed until at least Oct. 15 under an agreement between state legislators and Democratic Gov. Gavin Newsom.

The deal announced Saturday will tie implementation of the minimum wage to the state’s finances. The wage rate had been set to take effect on July 1.

The wage law’s passage last year was a major victory for California labor unions, but Newsom raised concerns about the measure’s cost for the state government as his administration grapples with a deficit.

Under the agreement, the minimum wage would take effect Oct. 15 if state revenue between July and September is at least 3% higher than expected under current projections.

Implementation of the minimum wage increases could be pushed back to Jan. 1 if state revenue doesn’t rise to that level.

The governor has pushed for months to add an annual trigger making the minimum wage increase conditional on the status of the state’s general fund as lawmakers grappled with a deficit projected at $27 billion.

The proposal initially fell flat, however, as labor and lawmakers defended the minimum wage increase.

The legislature voted in late May to delay the minimum wage by just one month—pushing implementation to July 1 from June 1.

The move pushed the start of the law into the state government’s new fiscal year and gave legislators time to negotiate further changes while hashing out a budget.

The deal announced Saturday also includes a commitment from the Newsom administration to seek additional federal funding to help hospitals cover the cost.

The new minimum wage is expected to cost the state $1.4 billion in the next fiscal year if it is implemented in January, according to preliminary data from the administration. Approximately $600 million of the amount would come from the state’s general fund.

Dave Regan, president of SEIU-United Healthcare Workers West, said in a statement that his members were disappointed but “we also recognize and appreciate that legislative leaders and the governor listened to us as we mobilized and spoke out this year.”

The law covers not just medical staff but also workers such as janitors, groundskeepers and cooks who work at health-care facilities.

The new minimum wage will vary depending on the size, location, and type of the health-care facility, with workers at large systems and dialysis clinics set to receive no less than $23 an hour. Twelve health systems in California fall into that category, including hospitals owned by Tenet Healthcare Corp., University of California Health, and Stanford Health Care.

Health systems have adjusted wages to prepare for the higher rate, which the UC Berkeley Labor Center estimated will affect 322,000 workers employed directly by health-care facilities.

Another 76,000 workers will see indirect wage increases due to “spillover effects” on the wages of workers at the same facilities earning slightly more than the new minimum wage, the center said.

To contact the reporter on this story: Andrew Oxford in Sacramento at aoxford@bloombergindustry.com

To contact the editor responsible for this story: Bill Swindell at bswindell@bloombergindustry.com

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