Minimum Wage and the California Economy

The Economic Impact of AB 48

California policymakers are considering raising the statewide minimum wage, which has remained at $6.75 since January 1, 2002. Assembly Bill 48 would increase California’s minimum wage from $6.75 per hour to $7.25 per hour, effective January 1, 2006, and to $7.75 per hour, effective January 1, 2007. AB 48 would also require the state to adjust its minimum wage annually for inflation, effective January 1, 2008.

The real minimum wage (corrected for inflation) has decreased by more than 30 percent since 1968. In 2004, California’s minimum wage was 32 percent of its average wage. This ratio has also declined by nearly 30 percent over the last 35 years and is hovering at historic lows.

The Institute of Industrial Relations at UC Berkeley conducts a policy-oriented research program on California labor markets, including the collection of new survey data from the state’s businesses — the UCB California Establishment Survey. The survey provides a more detailed picture of company policies on work and pay than was previously available. Using this survey and other data sets, IIR recently completed a series of studies on the potential economic impacts of AB 48 on California’s workers, employers and taxpayers.