UPDATE: The California State Assembly approved a plan to raise the state’s minimum wage for all businesses to $15 an hour by 2023, and the bill goes to Gov. Jerry Brown, who is expected to sign it.
UPDATE: Also on Thursday, New York Gov. Andrew M. Cuomo and state lawmakers announced a budget agreement that would raise the minimum wage in New York City to $15 by the end of 2018, and slower increases elsewhere in the state.
Under California's proposal, the minimum wage would rise incrementally each year, from the $10 per hour effective Jan. 1 this year, until it reaches $15 per hour by 2022 for large businesses and 2023 for smaller ones. The governor can opt out if the economy runs into trouble.
Last May, Los Angeles became the latest city to raise the minimum wage for hourly workers— to $15 per hour by 2020, and after that the hourly rate is indexed to the rate of inflation.
The city joins Maryland, Nebraska, Alaska, South Dakota, and Illinois, as well as cities San Francisco and Seattle, in raising the minimum hourly wage to some extent in the last year or so. Officially, the National Retail Federation opposes legislating a national rate for hourly workers, while workers' advocates say that current rates fail to provide a living wage. Some businesses warn that higher wages make lay-offs more likely.
Retailers have also been unilaterally raising their starting pay in recent years, and the NRF prefers the option to stay with retailers. Wal-Mart Stores Inc., TJ Maxx, and Gap Inc. have all announced within the past two years that they would bump their hourly to $10. Ikea has made the bold move of tying its hourly pay to a location-based living wage calculator developed by the Massachusetts Institute of Technology that determines the wage needed in a given area to stay out of poverty.
But the gold standard of hourly pay and benefits remains in Costco’s court. It’s no accident that Costco is also a retailer that consistently reports happy workers, lower turnover, and financial success even in a bumpy economy, experts say. Costco CEO Craig Jelinek endorses Obama’s proposal for a national wage hike, and the company’s own hourly rate, as of earlier this month, starts at $13. Perhaps most telling, the retailer’s average employee wage is $21 an hour, without overtime.
“Costco keeps making money because they load those aisles with really high value merchandise and pay their associates a lot of money,” Columbia University business school professor of retail studies Mark Cohen has told Retail Dive. “And Costco’s associates are helpful and informed, as opposed to nasty, hostile, or absent.”
Retailers, a major cohort of employers in the U.S., also benefit when wages are higher because consumers are able to spend more freely. In fact, Cowen & Co. retail analysts expect that a $15-per-hour minimum could stimulate spending among lower income and millennial consumers. Cowen's Oliver Chen says lower-income shoppers with a bit more money could boost traffic and spending this year for the likes of Target and Wal-Mart Stores.