California’s Not-So-Minimum Wage
By Devin Lavelle
California is one of 21 states that saw its minimum wage increase as of January 1, 2025:
- Fourteen states, including California, increased the minimum wage based on a formula designed to track inflation.
- Seven states passed new legislation or ballot measures that went into effect.
- Nine others states made no changes but have minimum wages that are higher than the U.S. minimum wage of $7.25 an hour.
At $16.50, California’s minimum is the second highest among the states, narrowly behind Washington state ($16.66), which also trails Washington, D.C. ($17.50). New York state matches California’s minimum in New York City area counties but is $15.50 upstate.
To help better understand how the current minimum wage compares historically, the California Research Bureau developed a Minimum Wage Interactive tool, which allows users to compare the current minimum wage to historic minimum wages throughout history from California, the federal minimum wage, and California’s cities, optionally adjusting for inflation.
We have included several observations made while using this tool and through prior research projects and invite California policymakers and their staff to seek more in-depth answers on the questions raised, or to find inspiration for new applications for these tools that will support the Governor and the Legislature in developing better public policy for the people of California.
How High Is the Minimum Wage?
Nominally, at $16.50, California’s minimum wage is higher than it has been throughout history, having more than double since 2013. Following 2016’s SB 3, the minimum wage began increasing with a target of $15 in 2022 and set to increase based on inflation each year after.
Adjusting for inflation, however, tells a somewhat different story. The tool provides two options for accounting for inflation, the Consumer Price Index (CPI) from the Bureau of Labor Statistics and the California Consumer Price Index from the California Department of Industrial Relations (CA-CPI). CA-CPI is calculated back to 1955. For most of its history, it tracked the national CPI closely, but since 2000, it has found costs increasing in California more quickly than the nation. One dollar in 1999 would be worth 55 cents in 2023, according to the national CPI, bust just 51 cents in California, according to the CA-CPI.
In real (inflation-adjusted) terms, prior to the recent increases, the value of both the state and federal minimum wages picked in 1968. California’s $1.65 minimum wage in 1968 would be worth about $14.98 today, according to the CPI, or $16.89, according to the CA-CPI. As such, using the CA-CPI, 1968’s minimum wage provided modestly more purchasing power than today’s.
Notably, California’s annual minimum wage adjustments are based on the national CPI, so if recent trends continued, local purchasing power would continue to slip further behind the 1968 level.
The national minimum wage has been fixed at $7.25 since 2009 and in current purchasing power, that has dwindled to just $4.81 today, based on national CPI.
Where Is It Higher?
State laws set higher wage floors for fast food employees and certain healthcare workers.
Many cities also set higher minimum wages. San Francisco became the first municipality in California to pass a higher minimum wage in 2003 (Proposition L, November 2003), going into effect in February 2004. This followed Santa Fe, New Mexico, which passed its law in the spring of 2003, effective January 2004.
San Francisco remained alone in California until 2015, when El Cerrito, Emeryville, Mountain View, Oakland, Richmond, and Sunnyvale each saw their municipal minimum wages increase above the state’s $9.00 floor, a trend that continued over the next several years.
Today, 38 cities and 2 counties have minimum wages higher than $16.50, ranging from $16.89 in Oakland to $19.65 in West Hollywood.
These areas are concentrated in the state’s largest population centers, in the San Francisco Bay Area, Los Angeles County, and the City of San Diego, and collectively are home to over 11 million Californians.
In addition to Washington, D.C., the cities with the highest minimum wages are in Washington state, including Bellingham ($17.66, $18.66 effective May 1), Burien ($21.16), Everett ($20.24, effective July 1), King County ($20.29), Renton ($20.90), inflation adjusted, Seattle ($20.76), and Tukwila ($21.10). Many Washington cities continue to have a lower minimum wage for smaller businesses, a practice that has generally been phased on in California. While most cities follow a similar pattern to California, selecting a set amount in a target year and increasing based on inflation, thereafter, Bellingham and Burien take a unique approach, setting the minimum to be a fixed amount higher than the state average.
How Many People Earn the Minimum?
According to Oxfam America, an advocacy group, 15.8% of California’s workers, about 3 million people, earn the minimum wage or very close to it. About 22.9% of Hispanic/Latino workers and 18.3% of Black workers earn approximately the minimum, compared to 14.4% of White workers. Women (19.0%), especially working mothers (20.2%), single parents (29.8%), and younger workers (16-24; 45.4%) are more likely than average to earn approximately the minimum wage. Most groups in California compare favorably to the overall national average of 23.2%.
How Did We Get Here?
The first California minimum wage law was passed in 1913 and went into effect in 1916. It predates the first federal law by more than two decades (1938). It was limited to women and children and set at a fairly low level ($0.16 — $3.15 CPI adjusted). This was targeted at stopping sweatshop conditions, rather than creating a broader wage floor. This followed shortly after the first minimum wage was passed in Massachusetts (1912). California was one of several states passing minimum wage laws in 1913, following the growth of basic wages over the previous several decades in New Zealand, Australia, and Great Britain.
The law created a commission to study and decide the wage “to be paid to women and minors … which shall not be less than a wage adequate to supply such women and minors the necessary cost of living and to maintain the health and welfare of such women and minors.”
California’s minimum wage did not apply to men until 1974 (passed in 1972 in response to lawsuits alleging existing laws discriminated based on sex), though the federal minimum wage applied once it was instituted in 1938.
From the end of WWII until 1988, the California minimum wage was generally set by the Industrial Welfare Commission (IWC), approximately matching the federal minimum wage (with some delays and slight adjustments related to that). In 1976, the process was streamlined to allow the IWC to more quickly change the state minimum wage to match the federal minimum wage.
Through 1997, the only significant increase over the federal minimum was in 1988 and by 1991 the federal wage matched that level and California returned to its process of matching the federal wage for the next several years.
Prop 210 (1996) began California’s long-term divergence in 1998, prescribing specific increases in 1997 and 1998.
Increases in 2001 and 2002 were instituted by the IWC before it was defunded as part of 2004 budget cuts.
Subsequently, AB 1835 (2006) increasing the minimum to $8; AB 10 (2013) to $10; and SB 3 (2016) to $15 and thereafter tying it to inflation.
Data
State of California minimum wage data is retried from the California Department of Industrial Relations: recent minimum wage data & historical minimum wage data.
Federal minimum wage data is retrieved from the U.S. Department of Labor.
Municipal data for the tool leans heavily on the UC Berkeley Labor Center Inventory of US City and County Minimum Wage Ordinances. Whenever possible, however, the data is validated from and cites the original source. In some additional cases, the original source was not identified, and the UC Berkeley Labor Center Inventory does not have specific amounts for those years, so third party sources are used and cited in the tool.
Consumer Price Index data is retrieved from the U.S. Bureau of Labor Statistics, U.S. city average for Urban Wage Earners and Clerical Workers (CPI-W) from 1984 – 2024 and All Urban Consumers for prior years.
California Consumer Price Index data is retrieved from the California Department of Industrial Relations, using Urban Wage Earners and Clerical Workers. National CPI is used for the years not included in its estimates.
CPI-W and CA-CPI are estimated using recent monthly inflation data.
Population data is retrieved from the California Department of Finance.