California Governor Gavin Newsom signed a bill on Friday that will raise the minimum wage for healthcare workers to $25 an hour statewide over the next several years.
The bill passed both chambers of the state’s Democratic-controlled legislature last month and follows other efforts in major cities to establish similar wage requirements in their markets.
The governor, whose administration had previously raised concerns about the bill’s impact on the state budget, gave his approval just hours before the deadline for the governor to sign the bill into law.
“Today, California is stopping the bleeding of our caregiver workforce by ensuring health care workers can do the work they love and pay their bills – a huge win for workers and patients seeking care,” said Tia Orr, executive director of Service Employees International Union California, in a statement released to reporters. “We applaud Governor Newsom for signing this bill and making history for California as the first state to raise the minimum wage for health care workers to $25.”
SB 525 was initially supported by labour groups and opposed by healthcare employers, who had formed lobby groups such as the No SB 525 coalition, warning of the estimated $8 billion the increase would cost.
However, the two sides reached an agreement in recent months to jointly support the new law. On the one hand, labour groups agreed to end their support for a ballot measure that could have imposed new regulations on dialysis clinics. Employers, such as the California Hospital Association, agreed to the bill’s gradual minimum wage increases as an alternative to local measures requiring an immediate jump to $25 an hour.
“SB 525 now strikes an important balance between supporting workers and protecting jobs and access to care in some of our most vulnerable communities,” said Carmela Coyle, president and CEO of the California Hospital Association, when SB 525 passed the legislature last month. “The bill creates a pathway to better pay for our low-wage health care workers while recognizing the needs of our state’s most struggling hospitals. And by preempting local ballot measures on minimum wage and compensation, all healthcare workers will be paid fairly, regardless of where they work.
The timeline for wage increases outlined in the new law varies by facility type and size.
For California’s 12 largest provider organisations, as well as county facilities serving large populations and dialysis clinics, SB 525 requires minimum wages to be at least $23 per hour by June 2024, $24 per hour by June 2025 and $25 per hour by June 2026.
Other hospitals, such as those with a high government payer mix or county facilities serving smaller communities, will have until June 2033 to reach the $25 per hour mark.
The full text of the bill outlines the incremental increases required for these and other covered healthcare facilities, including skilled nursing facilities. It also includes language outlining which types of contract workers the requirements would apply to.
California’s current statewide minimum wage is $15.50 per hour. An analysis by the UC Berkeley Labor Center estimates that the bill will result in more than $10,000 per year in wage increases for about 450,000 of the Golden State’s low-wage healthcare workers once the $25 per hour mark is reached. The analysis also noted that nearly half of the workers who will benefit from the law are currently enrolled in public safety net programs, suggesting potential net savings to the state budget “depending on the extent to which the state increases Medi-Cal provider payments and how many workers and dependents experience a change in health insurance eligibility.”
Newsom’s signature makes California the first state in the nation with a law setting a higher minimum wage for healthcare workers. It comes at a time when rising wages and other inflationary costs are straining the finances of health care providers and leading to tough contract negotiations with unions.