By Anita Hamilton

A California measure aimed at raising wages of the lowest-paid hourly workers to $18 an hour has narrowly failed, signaling a backlash over recent pay hikes for those in the lowest income tier in a state with one of the highest costs of living.

Proposition 32 would have raised the minimum hourly wage in the nation's most populous state where 1 in 8 Americans reside by $2 in 2025. At its current $16 an hour, the Golden State already has one of the highest minimum wages in the country, second only to Washington state. The statewide minimum wage is also adjusted annually for inflation.

California's minimum wage has doubled since 2008. In some places, the minimum is even higher, clocking in at $19.36 in the Bay Area city of Emeryville and at $19.61 for hotel workers in West Hollywood, with non-hotel workers earning $19.08 per hour.

Fast-food and healthcare employees in the Golden State also have higher wages. Fast-food workers now earn a minimum of $20 as of April. Healthcare workers' base pay rose to between $18 and $23 an hour in October, with a path to $25 an hour by 2026 or later.

The measure failed by a margin of 51% to 49%, with deep divides across the state. In San Francisco county, for example, 71% of voters supported the wage increase, while in Modoc County, in the state's northeast corner, 75% of voters opposed it. The vote was more evenly split in Sacramento, Santa Barbara, and Humboldt counties.

Opponents of Proposition 32, including the Chamber of Commerce as well as the state's grocers and restaurant associations, said the increase would raise the cost of living and eliminate jobs.

The proposition "would have resulted in higher costs for small business employers and consumers," said Jennifer Barrera, president of the California Chamber of Commerce. "With the economy and costs top of mind for many voters this election, that message appears to have resonated."

"Labor is already our biggest expense, and we can't afford the financial burdens of Proposition 32. This measure threatens our livelihoods and the future of agriculture in our state," the California Farm Bureau wrote in an ad posted on X before the election.

When the higher wages for fast food workers went into effect last spring, large chains adapted by increasing efficiencies and raising prices. At Starbucks, for example, that included a new system aimed at helping baristas work faster. El Pollo Loco was already making changes like adding in-store kiosks and new dishwashers.

The state is known for its high price of living. According to the Living Wage Calculation by the Massachusetts Institute of Technology, a single adult in California with no children would need to earn $27.32 working full time to support themselves. A couple with two kids would each need to make $33.26 an hour to support their family, or twice the current minimum wage.

The current federal minimum wage is $7.25, although 30 states have higher minimums. The District of Columbia and Washington state have the highest hourly minimums, $17.50 and $16.28, respectively.

Write to Anita Hamilton at anita.hamilton@barrons.com

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November 20, 2024 11:23 ET (16:23 GMT)

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