The Director of California's Department of Finance published a letter on July 31st stating that the state's minimum wage needed to increase by 3.5% for an inflation adjustment beginning in 2024.
According to Labor Code section 1182.12, the California Director of Finance is required to annually determine and certify to the Governor and the legislature whether an adjustment for inflation is applied to the state's minimum wage after the minimum wage reaches fifteen dollars per hour.
The director calculates the increase by applying whichever of the following two options would result in a smaller increase:
A 3.5 percent increase; or
The actual rate of change per the U.S. Consumer Price Index (CPI).
This year, the Department of Finance calculated that the Consumer Price Index increased by over 6% from July 1, 2022, to June 30, 2023, as compared to the previous 12-month period. Therefore, the agency determined that a minimum wage increase of 3.5% must be implemented for all employers regardless of size.
The current minimum wage rate for employers (including employers with 25 or fewer employees and those with 26 or more employees) is $15.50. As a result of this inflation-related minimum wage increase, the minimum wage rate for all employers with California employees will increase from $15.50 to $16.
Looking ahead, a measure that is eligible for the November 2024 ballot would, if passed by California voters, further accelerate the pace of minimum wage increases. If passed, by January 1, 2025, for employers with 26 or more employees, the statewide minimum wage would increase to $18 per hour, and employers with 25 or fewer employees would pay the same wage on January 1, 2026.
