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Will Other States Follow California’s Lead on Industry-Specific Minimum Wage Hikes?

November 05, 2023 (5 min read)

With inflation cooling, thousands of Californians got a double dose of good news in the last month with Gov. Gavin Newsom’s (D) signing of two high-profile bills raising the minimum wage of health care and fast-food workers.

SB 525, by Sen. Maria Elena Durazo (D), increases the minimum wage for health care workers to $25 an hour over the coming years. Meanwhile, AB 1228, by Assemblyman Chris Holden (D), raises the minimum wage for fast food workers to $20 per hour beginning April 1, 2024. (See Wage and Hour (CA).)

“California is home to more than 500,000 fast-food workers who—for decades—have been fighting for higher wages and better working conditions,” Newsom said in a press release touting the enactment of AB 1228. “Today, we take one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast-food workers a stronger voice and seat at the table.”

There’s an old saying among observers of state-level legislation that says where California goes, so goes the nation. Will these recent moves to raise the minimum wage in the Golden State spark a trend across the country?

Overall Minimum Wages vs Industry-Specific Ones

The federal minimum wage is $7.25 per hour, while some states set their minimum wages higher, up to $15.74 in Washington State and $17 per hour in Washington, D.C. (See Minimum Wage State Law Survey and Minimum Wage State and Local Law Survey).

The recent California legislation is a bit different, however, as the bills Newsom signed do not affect the state’s overall minimum wage, but instead focus on raising industry-specific wages.

While that may sound novel, it’s actually a common practice in some countries like India and South Africa, and some cities and counties across the United States have also started enacting their own industry-specific minimum wages.

For instance, the Long Beach City Council recently directed its city attorney to draft a ballot measure asking voters there to consider a minimum wage hike for hotel workers. If passed, the industry-specific wage increase would see hotel workers’ pay rate increase to $29.50 per hour by the 2028 Olympics—but only if the Long Beach hotels where they work have 100 or more guest rooms.

So, industry-specific minimum wages create a complexity to the labor market that an overall minimum wage avoids. But as Newsom’s comments about fast-food workers make clear, supporters of industry-specific minimum wages see them as vehicles to ensure equity in our communities.

“More complex minimum wage systems set multiple wage floors. By doing so, they not only determine an absolute wage floor, but also a relative wage structure between different rates,” writes the International Labour Organization, a United Nation’s agency that sets labor standards, in a guide on minimum wage policy. “In the absence of collective bargaining, complex systems may provide an opportunity to set higher wage floors in sectors or industries which have a higher ‘capacity to Pay’.” 

Local Minimum Wage Ordinances Passed in Nine States

More than 60 local governments in nine states have set their own minimum wages, although most of them were enacted in California, according to the U.C. Berkeley Labor Center’s Inventory of U.S. City and County Minimum Wage Ordinances. The minimum wages in several of these localities have been surpassed by their respective state’s minimum wage, and one city, Tacoma, Washington, repealed its minimum wage ordinance for that reason.


Opposition to Local Minimum Wage Laws in Some GOP-Led States

Some Republican-dominated state legislatures have targeted local minimum wage laws. (See Preemption of Local Employment Laws State Law Survey.)

For example, the GOP-controlled legislature in North Carolina recently approved a state budget bill (HB 259) that includes a provision (the "Wage and Hour Act in N.C. General Statute § 95-25.1) that bars local governments from setting their own minimum wages. (North Carolina's Democratic governor, Roy Cooper, announced he’d let the budget become law without his signature because it also included Medicaid expansion, a cause he and other Old North State Democrats had sought for a long time.)

Meanwhile, the Texas Legislature approved, and Gov. Greg Abbott (R) signed, HB 2127, the Super Preemption Bill, aka the “Death Star Law,” which seeks to restrict many things local governments can do in the Lone Star State, including setting their own minimum wages.

In late August, Texas District Judge Maya Guerra Gamble ruled the bill unconstitutional. The state attorney general’s office appealed, which allowed the law to go into effect.

“State preemption has increased in recent years, and the pandemic served as an accelerant,” wrote David J. Toscano in Harvard's Advanced Leadership Initiative Social Impact Review. “Convinced that local officials were overstepping their authority by enacting mask mandates, business closures, and limitations of public gatherings, conservative lawmakers in almost one-half of the states enacted prohibitions to stop them.”

Toscano makes clear, however, that mask mandates were just the preemption flavor of the month. Legislation preempting minimum wage ordinances, he said, has been a target of conservatives for a decade.

Recent Labor Trends Could Entice Other States to Follow California

Two national trends, however, may encourage actions similar to California’s elsewhere.

One is the resurgence in popularity of organized labor. In late August, Gallop reported that 67% of Americans approve of labor unions. That's down a little from 2022, when union approval was at 71%. But Gallop has now reported five straight years that labor’s approval has exceeded “its long-term average of 62%.”

The other trend is the national healthcare workforce crisis, which we wrote about back in June. It was a lack of health care workers that propelled California to pass SB 525 – and that problem is not limited to the Golden State.

Lawyer Elias Kahn, senior product manager for labor and employment, tax, and employee benefits and executive compensation on the Practical Guidance Team at LexisNexis®, said California is certainly a “trailblazer” in progressive policy-making, and he wouldn’t be surprised to see other Democrat-led governments follow its lead in carving out minimum wages for underappreciated workers or workers who labor under difficult circumstances.

“I could see this happening in blue cities or blue states,” he said. “I could not see this happening in red cities or red states.”

In fact, at least two other states, Maine (SB 55) and Massachusetts (HB 1877 and SB 1203) have introduced legislation this year aimed at establishing a minimum wage for healthcare workers, according to the National Conference of State Legislatures' Minimum Wage Legislative Database. Both of those states are governed by Democrats.

—By SNCJ Correspondent BRIAN JOSEPH

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