Help small businesses recover by pausing the annual minimum wage hike

Loren Kaye
President of the California Foundation for Commerce and Education

Small businesses have suffered a severe setback from the recent, understandable public health actions by state and local leaders to reimpose restrictions on commerce involving public gathering. These small businesses, especially restaurants, hospitality, tourism, entertainment and personal services, also employ many low-skilled, low-wage workers, often in entry-level jobs on the lower rungs of the economic ladder. Their jobs will not reappear until their employers are again healthy. 

Small businesses are already facing increased costs and burdens as a result of the pandemic and the related recession including higher workers compensation rates and unemployment insurance taxes.  Recovery of smaller firms will depend in large part on affirmative efforts by elected state leaders to reduce employer costs to offset these businesses’ loss of economic production.

The good news is that the Governor has an opportunity by August 1 to help distressed businesses get back on their feet and rehire their workers by using his existing authority to postpone for one year the automatic increase in the minimum wage. 

The 2016 legislation established a schedule to raise the minimum wage to $15/hour, but enabled the Governor to postpone by a year any of the annual step increases in the event of a major economic recession or state budget crisis. This temporary offramp was touted by sponsors as an improvement upon the then-proposed ballot measure, and its inclusion likely made the difference in the bill’s passage.  

The measure called out the purpose of assessing the economy, “to ensure that economic conditions can support a minimum wage increase.” Not only do the current conditions meet the criteria for postponement, they are likely far worse than the sponsors ever imagined the economy and budget situation could reach. This is how it works:

  • Is total seasonally adjusted nonfarm employment in June, 2020, less than in March, 2020, 


  • Is total seasonally adjusted nonfarm employment in June, 2020, less than in December, 2019,


  • Are retail sales and use tax revenues for 2019-20 less than those revenues for 2018-19?

Check, check and check. Indeed, the most conspicuous characteristics of this recession are massive unemployment and crashing retail sales. 

The minimum wage law is designed with economic sensitivity; if postponement is not indicated under this dire economic circumstance, then just when would this offramp apply? 

The fiscal analysis by Department of Finance should be completed by the end of this month. If it concludes that economic conditions meet the statute’s standards for a suspension, then the Governor would be justified in using his authority to postpone the 2021 increase in the minimum wage until 2022. The jobs of thousands of low wage workers may hang in the balance.

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