In the legislative session’s waning days, California lawmakers and Gov. Gavin Newsom approved deals for two major pay increases for healthcare and fast food employees. But the cost to employers and the impact on the broader economy is only now starting to become clearer.

The minimum wage hike for healthcare workers won passage without a firm cost estimate, writes CalMatters’ healthcare reporting intern Shreya Agrawal.

Now, the Newsom administration is releasing projections that the $25 hourly wage that will eventually cover more than 500,000 employees will cost government agencies $4 billion in 2024-25 (with about half coming from the state’s general fund and the other half paid from the federal government).

In the private sector, hospitals estimated that the original bill, which would have immediately increased wages to $25, would cost them $8 billion. The final version — agreed to by unions and the hospitals association — gradually raises pay, with most workers earning $25 in 2027 or 2028.

The recent cost estimate from Newsom’s office isn’t surprising to Republican legislators who opposed the bill. Expressing concerns for reduced services and job opportunities, Republican Assemblymember Vince Fong of Bakersfield said the measure “places astronomical labor costs on health care providers when hospitals across the state deal with financial losses.”

But Sen. María Elena Durazo, the Los Angeles Democrat who wrote the bill, points to data from the UC Berkeley Labor Center that anticipates how the new law could save money by helping workers avoid using public assistance. Better pay also means some relief with staffing issues, healthcare workers argue, which would benefit patients too.

Says Gabriela Guevara, a Clinica Sierra Vista medical receptionist: “It is going to better serve all the patients. The more staff we have, we are going to be able to give that quality of care for all the patients that are coming in.”

Fast Food Restaurants Already Raising Wages

As for fast food workers, their minimum wage goes up to $20 an hour in April. Businesses and franchise owners say that restaurants have already raised wages during a period of record inflation. Last December, the average hourly wage of California fast food workers was about $19.

Some experts predict that customers will “immediately” bear the brunt of the hike through increased menu prices, and McDonald’s CEO Chris Kempczinski said during an October earnings call that the measure will hurt California franchisees in particular.

But for the more than half a million fast food workers who will get the wage increase — a majority of them minorities and women — $20 still isn’t a living wage, according to a calculator from the Massachusetts Institute of Technology. Projected over the course of a year, $20 an hour is just barely above the poverty line, per the California Public Policy Institute.

While the hike will help with basic bills and rent, given California’s rising cost of living, it won’t cover much more than that.

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