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California Strikes a Deal for a $15 Minimum Wage by 2022

The state will have to make other adjustments to ensure a positive transition to the new wage, which stands to raise incomes for hundreds of thousands of workers.
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A rally to demand an increase of the minimum wage to in Los Angeles on December 4, 2014. (Photo: Robyn Beck/AFP/Getty Images)

A rally to demand an increase of the minimum wage to in Los Angeles on December 4, 2014. (Photo: Robyn Beck/AFP/Getty Images)

Lawmakers and labor unions agreed this weekend to raise California's minimum wage to $15 by 2022, in a deal California Governor Jerry Brown may officially announce as early as today, the Los Angeles Times reports.

California would be joining 14 cities and states—including its own Los Angeles—that approved a $15 minimum wage last year, more than doubling the $7.25 federal limit and topping the minimum increase to $10.10 called for by President Barack Obama.

Like most states, California looks to adopt a staggered increase: a jump from $10 to $10.50 at the start of 2017, followed by a 50 percent increase the next year, and then $1-per-year increases until 2022.

This move answers nationwide momentum for minimum wage increases, riding in part on the Fight for 15 and other citizen-led movements. Some concerns persist that the increase will hurt the economy by requiring rapid price hikes and eliminating jobs within businesses that can't afford to increase their salaries at the gradual rate. To reduce this risk among vulnerable organizations, California's law will reportedly give businesses with fewer than 25 employees an extra year to comply with the change, meaning they won't have to hit the $15 cap until 2023.

The staggered system may also buffer potential downsides to the increase by giving states time to implement what some economists call "channels of adjustment"—such as decreased job turnover, increased organizational efficiency, reductions in the wages of the highest earners, and small price increases—to offset potential costs.

Minimum wage increases have not been found to have any negative impact in San Francisco and Sante Fe, according to multiple studies. Separate analyses have found equally promising results for the overall impact on the restaurant business, which employs many of the nation's minimum wage workers. But the key to a successful wage hike may be a prolonged staggering. California's initial $0.50 increase falls in the middle range of proposed changes, compared to a 2015-to-2016 raise of $1 in Massachusetts and a corresponding five-cent hike in South Dakota.

Another major factor that varies by state is the purchasing power of $15, given differences in costs of living. This latest development in America's "wage experiment" will likely play out uniquely in the West Coast's economic hub, where huge financial output still translates into a mixed bag for quality-of-life across the state.