California lawmakers approved late Thursday an increase in the state’s minimum wage from $8 per hour to $10 per hour by 2016.

The bill, AB10, was approved in a late-night 50-to-25 vote by the state Assembly following earlier approval by the state Senate. It is California's first minimum-wage increase in five years.

Gov. Jerry Brown, who has argued that the minimum wage has not kept pace with rising costs, is expected to sign the bill.

“This legislation is overdue and will help families that are struggling in this harsh economy,” he said in a statement.

The $2-per-hour increase will occur in stages over 18 months. AB10 will raise the current minimum wage of $8 per hour to $9 per hour on July 1, 2014. On Jan. 1, 2016, the wage will go up another dollar to $10 per hour.

The federal minimum wage is $7.25 per hour, and California is reportedly among 19 states and the District of Columbia that have exceeded that level. At $9.19 per hour, Washington state has the highest minimum wage in the country.

In recent months, quick-service workers across the country have been staging strikes and protests in an effort to pressure restaurant chains to set minimum pay at $15 per hour and to give workers the ability to form unions.
In California, the sponsors of AB10, including Assembly member Luis Alejo (D-Watsonville), argued that the minimum wage has not kept pace with the cost of living and that it has resulted in a decrease in purchasing power.

“We have created a system where we pay workers less but need them to spend more,” the bill’s authors contended. “That causes middle-class families to fall down the economic ladder. It’s the reason our middle class is shrinking and our income gap is now wider than ever.”

The bill, however, was vehemently opposed by the California Restaurant Association, or CRA, and other business lobbying groups, saying a 25-percent wage hike will be the largest in state history and will cause “immense damage” to thousands of small businesses across the state.

“The state mandating a 25-percent pay increase over an 18-month period is a back-breaker for many in our industry,” said Jot Condie, CRA’s president and chief executive, in a statement. “Contrast that to the state negotiating with its largest union a 4.5-percent increase over three years that the governor called a ‘fair proposal.’ The private sector is no different. Given the economics in our industry, where restaurants operate at very thin profit margins, a 25-percent increase in labor costs will result in fewer job opportunities for Californians looking to get back on their feet.”

In an interview Friday, Condie said several factors fueled support for the pay increase, including the “growing narrative nationwide about the working poor, fomented by labor groups.”

In addition, neighboring states tie minimum wage hikes to the Consumer Price Index, or CPI, he noted. In a small victory for the CRA, an attempt to link California’s minimum wage to the CPI was stripped from AB 10 earlier in the legislative session.

According to the CRA, the vast majority of workers in the restaurant industry earning minimum wage are either teenagers or servers who also earn tips. The association pointed to Bureau of Labor Statistics data indicating that 46 percent of restaurant workers are younger than age 20, and 80 percent work part time.

The increase also hits employers just as they are preparing for costs associated with implementing the federal Affordable Care Act, the association added.

Assembly speaker John Perez, however, argued that a pay hike is just what the state’s economy needs.

“A $10-per-hour minimum wage boosts earnings by $4,000 a year and will put $2.6 billion back into the hands of workers,” said Perez in a statement. “This is money that will be spent at grocery stores, on school supplies and invested in education, and that ultimately strengthens the recovery and ensures California’s job market continues growing faster than the rest of the nation.”

Update: Sept. 13, 2013 This story was updated with additional information from Jot Condie, CRA’s president and chief executive.

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