I'm heartened to see national attention on the challenges facing working women and men. For example, Monday's national Working Families Summit addressed how hard it is for women and families to make ends meet, while national and local battles are fueling a critical conversation about the need to raise the minimum wage. It's about time. Today's federal minimum wage feeds poverty and income inequality because today's federal minimum wage is worth less than it was in 1968. According to T. William Lester, assistant professor at UNC, if the federal minimum wage of $7.35 had kept pace with inflation, it would now be worth about $10.77.
California is ahead of many other states because last year, Governor Brown signed AB 10 (Alejo), which increased the state minimum wage. Yes, that was a step in the right direction, but don't forget that California is one of the most expensive states in our country. As of July 1, California's minimum wage will go from $8/hour to $9/hour. And by 2016, that wage will be $10. But here's the thing: inflation. We all know inflation erodes our purchasing power. Because of inflation, in 2016, that $10/hour minimum wage will only be worth $9.32 in 2013 dollars. AB 10 will never move families of three or four above the federal poverty line. We're going backwards. But we don't have to.
On Wednesday, June 25, the Assembly Labor and Employment committee will discuss SB 935 (Leno), which proposes to do two things -- gradually raise the minimum wage to $13/hour by 2017, AND index the minimum wage to inflation. This trailblazing bill is very important because it will actually lift families out of poverty. If SB 935 goes into effect, by 2015, families of three will be earning 127 percent of the federal poverty level. And by 2017, SB 935 could lift hundreds of thousands of Californians out of poverty as well as allow workers and employers the predictability offered by small but reliable raises. In addition, indexing the minimum wage to inflation means that we won't have to keep going back to legislators to ask for increases to the minimum wage. In one fell swoop, we can do something that will help break the cycle of poverty for generations.
When I think of why it's so critical that we act now, I think of people like Jessica from Carlsbad, who has two children that she's raising alone because of a divorce. She's working for minimum wage, and unfortunately, $8.00/hour isn't cutting it -- and $9/hour won't either. She ends up having to make hard decisions between necessities like groceries and medical care. Although Jessica and her family are working hard, they're making poverty wages. It wasn't always this way. Minimum wage jobs used to be enough to support a family. That's because the thinking behind the minimum wage was that it should be enough for people who work full-time to earn enough to make ends meet.
Raising the minimum wage does more than simply increase the incomes of families like Jessica's. It has a powerful health effect. Raising the minimum wage to $13 by 2017 would result in 7.5 million Californians experiencing less chronic disease; less hunger, smoking and obesity; and lower rates of depression and bipolar illness. In fact, it would prevent the premature deaths of 389 lower-income Californians each year.
The ripple effect of raising the minimum wage goes beyond individuals and families. It benefits our state -- in real dollars and cents. Because people will earn more, they will pay higher taxes. SB 935 will raise the incomes of 5 million Californians who will in turn pump $23.5 billion in additional income into our state economy each year, testified Lester to a California Senate Labor and Industrial Relations Committee. Plus increasing California's minimum wage from $8 dollars to $13 dollars would reduce enrollment in the Supplemental Nutrition Assistance Program (SNAP), formerly the food stamps program, by an estimated 740,000 to 891,000 people. This would allow policymakers to reinvest in other critical areas such as education and safety net programs, like subsidized childcare -- which help low-wage workers stay in the workforce.
To be sure, there's opposition to raising the minimum wage in California. A lot of it is coming from organizations like the National Federation of Independent Businesses (NFIB), and the California Chamber of Commerce which have called the bill a job killer. But that is an overly simplistic perspective. Studies show that there has been almost no job loss with an increase in the minimum wage. Furthermore, research shows that employers benefit from a higher minimum wage because it reduces employee turnover and strengthens worker productivity. Turnover is expensive. According to the US Department of Labor, it costs one-third of a new hire's annual salary to replace her or him. For an $8/hour employee, that's more than $5,000. Companies such as Costco (which pays its workers on average more than double the current minimum wage) show that having a higher base salary translates directly into increased employee retention and higher levels of productivity.
Ultimately, raising the minimum wage to $13/hour by 2017 and indexing the minimum wage to inflation sets a fair wage standard that will help families to do more than live paycheck to paycheck, and help our nation reduce inequality. It will show that Californians believe that people who work hard should make enough money to both enjoy their lives and provide for their children to do even better. So let's join together and encourage our legislature to vote for a minimum wage that helps us build a California that works for all.