The minimum wage is a big talking point in the 2016 election. It’s being tossed around at state levels and at the national level.
California is one state that is raising its minimum wage. Under a deal worked out between the Legislature and labor unions, the raise goes to $10.50 immediately and to $15 by 2022.
The agreement avoids having the issue end up on the ballot.
The jump affects 43% of California’s workers and gives the state the highest minimum wage of any state in the country. That said San Francisco and Seattle, Washington both have $15 minimum wages.
To break down the numbers even more … the pay raise will affect 5.6 million Californians who will see a 24% — on average — increase in pay.
California Governor Jerry Brown raved about the law and said, “The plan raises the minimum wage in a careful and responsible way and provides some flexibility if economic and budgetary conditions change.”
Here’s the rub and where the increased minimum wage impacts the taxpayers as well as business. It’s in workers’ compensation rates which tend to rise with wage hikes. Or at least history says that’s the case.
Willis North America’s Joe Picone said this is particularly hard on small business and those that use more minimum wage workers. “If you’re writing a lot of business with minimum wage earners, such as in retail, you’re going to have a major concern if you’re an underwriter.”
American Insurance Association (AIA) spokesman Stephen Schneider said payroll hikes and higher indemnity benefits occur with higher hourly wages as most states base benefits on 2/3 of a worker’s average weekly wage. “Any time you increase payroll, there’s a slight uptick or a slight modification in workers’ compensation, whether it’s benefits or premiums,” Schneider said.
For the taxpayer the raise is catastrophic. The first year’s cost is $19 million but by 2022 it will costs $3.6 billion a year in higher pay for government employees.
Source links: Insurance Journal, Insurance Business America