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CA
Prop 32
$18 Minimum Wage
Initiative Statute
Raises Minimum Wage

Increases the state minimum wage to $18 per hour by 2026 for all employers and then adjusts for inflation.

No Recommendation

Jump to SPUR’s Recommendation

What the Measure Would Do

The current minimum wage in California is $16 per hour. Proposition 32 would increase minimum hourly pay to $18 an hour for all workers in the state by 2026.

For employers with 26 or more workers, the minimum wage would reach $18 an hour on January 1, 2025. For employers with 25 or fewer workers, the minimum wage would reach $17 per hour on January 1, 2025, and $18 per hour on January 1, 2026. After that, minimum wage would continue to adjust for inflation, up to 3.5% per year.

Prop. 32 would make changes to the inflation adjustments called for by current law. See “The Backstory” for more information. Prop. 32 would not impact the minimum wage in industries where state or local law mandates higher minimums.

The Backstory

Nationally, the minimum wage stands at $7.25, and Congress hasn’t raised it since 2009. Over much of the last decade, state and municipal governments have taken the lead to increase wages on their own.

The last time California’s minimum wage was increased was in 2016, when legislation incrementally boosted the minimum wage to $15 an hour by 2023. The law included an annual inflation adjustment, which brought the California minimum wage to $16 an hour in 2024.

If Prop. 32 passes, it would pause the inflation adjustments until 2027 and fix the rate of increases until the minimum wage reaches $18 an hour in 2026. In 2027, the inflation adjustments would resume. If Prop. 32 fails, increases would continue but be based on inflation, with each adjustment matching U.S. inflation up to 3.5%. The California Legislative Analyst’s Office estimates that the increases based on inflation would result in a minimum wage of about $16.50 per hour in 2025 and $17 per hour in 2026.

This proposition comes amid several changes to minimum wage laws in the state. In 2023, two bills raised the minimum wage in certain industries. Senate Bill 525 set a minimum wage of $25 an hour for health care workers, and Assembly Bill 1228 set a minimum wage of $20 an hour for fast-food workers. Many Bay Area cities, including Mountain View, Sunnyvale, San Francisco, and Berkeley, have moved ahead of the state minimum wage and already pay more than $18 an hour.1 San Jose and Oakland have local minimum wages that are higher than the state’s minimum wage but currently lower than $18 per hour.

In the first quarter of 2023, approximately 1.3 million California workers were living in poverty,2 demonstrating that current wage levels do not meet even basic needs for many households. Studies have found that California’s minimum wage increases from $8 an hour in 2014 to $15 (and higher in some cities) in 2022 have had a noticeable impact on wage gains at the lower end of the income spectrum, while having minimal negative effects on the reported number of jobs and the number of people employed in the state.3 The Legislative Analyst’s Office estimates that the number of jobs statewide is not likely to fall more than a quarter of a percent with the passing of this measure.

Many business groups, including the California Chamber of Commerce and the California Restaurant Association, have opposed the measure, arguing that employers already face increased supply and labor costs from inflation and that many small, independently owned businesses haven’t fully bounced back since the COVID-19 pandemic. Nationally, there is growing momentum behind bolder policies, such as guaranteed income programs and expanded child tax credits, as better ways to reduce poverty and tackle growing income inequality.

The Yes on California Living Wage Act, also known as the Working Hero Action for the Living Wage Act PAC, is leading the campaign in support of the ballot initiative. Signatures were collected to put this measure on the ballot in 2022, but a missed deadline pushed it to the November 2024 ballot instead. It requires a simple majority (50% plus one vote) to pass.

Equity Impacts

Latinx and Black workers are the most likely to benefit from a minimum wage increase since they have the highest prevalence of low-wage work in California, with 48.7% of all Latinx workers and 37.2% of all Black workers in the state making low wages, compared to 23.9% of white workers.4 Studies have shown that past increases to the minimum wage have reduced the overall racial wage gap by 10%.5

Pros

  • Studies have found that California’s minimum wage increases have had a noticeable impact on wage gains at the lower end of the income spectrum.
  • Minimum wage increases can reduce the racial wage gap, especially for low-wage Black and Latinx workers, while having minimal negative effects on the number of jobs in the state.
  • Higher wages can stimulate local economies and encourage consumer spending.

Cons

  • A minimum wage increase would result in higher costs for small businesses that are struggling to recover from the pandemic.
  • Minimum wage increases can lead to consumers paying more money for products and services.
  • Bolder moves, such as guaranteed income programs, could be more effective ways to alleviate poverty and tackle growing income inequality and should be part of the statewide conversation.
SPUR's Recommendation

Raising the minimum wage is an effective strategy to create broader economic benefits and narrow the racial wealth gap, especially for low-wage Black and Latinx workers. In California, the state minimum wage is higher than the federal minimum wage but is also far below the cost of living for much of the Bay Area. While SPUR has generally supported minimum wage increases in the past, this measure raises concerns that, without exemptions for small businesses, the law could lead to unintended negative impacts for those small businesses that are struggling to recover from the pandemic. SPUR believes that interventions that don’t raise costs for small businesses, such as guaranteed income programs, should be under serious consideration for addressing poverty in California. The SPUR Board of Directors was divided and could not reach a 60% majority to support or oppose this measure.

No Recommendation on Prop 32 - $18 Minimum Wage
Footnotes

1. The Legislative Analyst’s Office lists the cities that have created local legislation to increase the minimum wage. See California Legislative Analyst’s Office, “California’s Minimum Wage,” March 11, 2024, https://lao.ca.gov/Publications/Report/4878.

2. Public Policy Institute of California, The Working Poor in California, October 2023, https://www.ppic.org/publication/the-working-poor-in-california/.

3. Michael Reich, An $18 Minimum Wage for California, Center on Wage and Employment Dynamics, June 2022, https://irle.berkeley.edu/wp-content/uploads/2022/11/An-18-Minimum-Wage-for-California-06-28-2022.pdf.

4. California Legislative Analyst’s Office, “Who Are California’s Low-Wage Workers?” March 11, 2024, https://lao.ca.gov/Publications/Report/4878/1.

5. Jesse Wursten and Michael Reich, Racial Inequality and Minimum Wages in Frictional Labor Markets, Institute for Research on Labor and Employment, IRLE Working Paper No. 101-21, February 2021 (updated December 2022), https://irle.berkeley.edu/publications/working-papers/racial-inequality-and-minimum-wages-in-frictional-labor-markets/.