Proposition 32 would raise California’s minimum wage to $18 — but would it cost jobs or lead to higher prices?

A closely fought ballot initiative on the Nov. 5 ballot, bankrolled by a deep-pocketed anti-poverty crusader, would raise California’s state-wide minimum wage to $18 an hour.

An extra $2 an hour is alluring to those struggling to survive in a state known for its high prices, but business owners are worried about what that means for their own profitability. A survey of California adults this summer showed an even split in support for Proposition 32.

Victor Moreno, a former minimum wage restaurant worker from Oakland, now employed as an advocate for day laborers, said raising pay by a dollar or two an hour has outsized benefits for those making low wages.

“That translates into more capacity to pay the phone bill or to bring food to the table or to pay for transportation.” said Moreno, 59, who works at the Street Level Health Project. “It’s bigger than in some other instances where people make more money.”

Campbell software engineer Ron Early, 59, said even $18 an hour seems far too little in the expensive Bay Area and much of California, but an increasing minimum wage drives prices up for consumers, who may stop patronizing businesses, leading to lay offs for low-wage workers.

“I don’t know how you solve it,” Early said.

Proposition 32 would require employers with at least 26 employees to pay $17 hourly for the rest of 2024 and $18 starting on Jan. 1. Smaller employers would start paying $17 an hour on Jan. 1, then $18 a year later. Annual adjustments would begin in 2027, tied to the inflation rate, to a maximum increase of 3.5%.

The measure is sponsored by entrepreneur and anti-poverty activist Joe Sanberg, who said higher wages put more money into the economy.

“Californians who work hard, working full time or more, should not live in poverty,” Sanberg said. “But that’s exactly how millions of Californians are living because their wages are too low to afford how expensive life has become in California.”

According to state data, 6.3 million Californians lack the resources to meet their basic needs, and more than a third are living in or near poverty. According to the UC Berkeley Labor Center, 5.6 million California workers were paid less than $19.69 per hour in 2022.

Business groups opposing the measure include the California Restaurant Association, California Chamber of Commerce, and California Grocers Association. California Chamber of Commerce CEO Jennifer Barrera contended the measure would boost inflation, cut jobs and reduce work hours for employees at affected businesses.

“This job loss especially impacts our vulnerable populations the most, with young African-American, Latino, and non-college educated workers trying to find their first jobs facing the biggest burdens,” the California Restaurant Association, California Chamber of Commerce, and California Grocers Association said in a statement.

If voters reject Proposition 32, inflation adjustment under existing state law, which increases the minimum wage each year based on how fast prices rise, would mean a probable $17 an hour minimum wage by 2026, according to the California Secretary of State’s office.

Proposition 32 follows last year’s legislative passage of a $20 minimum wage for fast-food workers and some health care employees. Nationally, the federal minimum wage is $7.25, and several states including Wisconsin, Texas and Utah have set their minimums to match. Nevada’s minimum wage is $12. Arizona’s is $14.35. Oregon’s ranges from $13.70 in non-urban counties to $15.95 in the Portland metropolitan area. Washington’s is $16.28, the nation’s second-highest behind Washington, D.C.’s $17.50.

A Public Policy Institute of California survey of California adults in late August and early September showed about half supporting Proposition 32 and half opposing. Another survey, by the University of Southern California, found support and opposition to the measure corresponded with income levels, with people from households making less than $50,000 a year most likely to favor it, and people with household incomes over $100,000 most likely to oppose it.

In addition to Sanberg, supporters include the California Democratic Party, the California Labor Federation, the California Teachers Association and the League of Women Voters of California.

The vast majority of financial backing for the measure, according to state data, has come via a $10.4 million contribution from Sanberg, who filed the measure. Another $582,266 came from the campaign coffers of beleaguered Los Angeles Councilmember Kevin de León, who is caught up in a racism scandal and who also is funding two other measures on the November ballot, Proposition 3 to affirm marriage equality, and Proposition 33 to expand rent control.

The California Office of the Legislative Analyst, the legislature’s nonpartisan fiscal and policy advisor, said that if Prop 32 passes, the wage hike probably would “reduce some businesses’ profits,” and lead some employers to raise prices by less than half of 1%. Job numbers could go up or down, likely by less than a quarter of 1%, the analyst office said.

The pay increase would probably cut state and local government tax revenues by “a few hundred million dollars annually,” mostly because of lower incomes for business owners, the analyst office said, adding that in 2023, the affected taxes delivered about $200 billion in state and local revenue.

Proposition 32 is just the latest minimum wage battle in the Golden State. California state legislation previously raised the minimum wage to $20 an hour for employees of fast-food restaurants, and certain health care workers are getting their minimum hourly pay boosted to $18 to $23 between Oct. 15 and Jan. 1, with additional increases taking effect gradually, up to $25.

Gov. Gavin Newsom’s office, citing state and federal employment data, said in August that California added 11,000 fast-food jobs since the $20 minimum took effect in April.

The Stanford-based Hoover Institution said restaurants cut 9,500 fast-food jobs between last fall when Newsom signed the $20 into law, and January. Since the new wage went into effect, Wendy’s boosted prices 8%, Chipotle raised them 7.5% and Starbucks raised them 7%, the think tank said, citing news coverage that showed smaller increases at Taco Bell and Burger King.

However, UC Berkeley researchers, in a paper released in September, reported that the pay hike boosted prices only 3.7% on average, “or about 15 cents on a $4 hamburger.”

In Berkeley, the city council hiked the minimum wage to $18.07 on July 1 last year, and raised it to $18.67 this July 1. Restaurant costs are rising steeply in every other area of operations, from utilities to insurance to food products.

Amy Murray, owner of Revival Bar+Kitchen in the East Bay city, where tips are pooled and shared among staff, said minimum wage increases represent about 40% of the higher expenses that have slashed her profit margin from the 18% to 22% she made with a previous restaurant in the 1990s to around 4%.

“It’s been brutal,” Murray said.