California Gov. Gavin Newsom signed into law Friday a bill that raises the minimum wage for healthcare workers to $25 per hour across the state over the next several years.
The bill passed through both chambers of the state’s Democrat-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 California 2023 legislative session’s gubernatorial signing deadline.
“Today California is putting a stop to the hemorrhaging of our care 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,” Tia Orr, executive director of Service Employees International Union California, said in a statement given to reporters. “We applaud Governor Newsom for signing this bill and making history for California as the first state to lift the floor on health care worker wages to $25.”
SB 525 was initially supported by labor groups and opposed by healthcare industry employers, the latter of which had formed advocacy groups such as the No SB 525 coalition warning of the additional $8 billion it estimated the increase would bring.
However, the two sides struck a deal and came out in joint support of the new law within the past couple of months. On one side, labor groups agreed to end their support for a ballot measure that could have imposed new regulations for dialysis clinics. Employers like the California Hospital Association settled for the bill’s gradual increases in minimum wages as an alternative to local measures requiring an immediate jump to $25 per 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,” California Hospital Association President and CEO Carmela Coyle said last month upon SB 525’s passage through the legislature. “The bill creates a pathway to improving wages for our lower-wage healthcare workers, while also recognizing the needs of our state’s most troubled hospitals. And, by preempting local ballot measures on minimum wage and compensation, all healthcare workers will be paid equitably regardless of where they work.
The road map for wage increases outlined in the new law differs by facility type and size.
For California’s 12 largest provider organizations, as well as county-run 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, like those with a high governmental payer mix or county facilities serving smaller communities, will have as long as until June 2033 to hit the $25-per-hour mark.
The bill’s full text 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 from the UC Berkeley Labor Center estimated that the law will translate to 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. That analysis also noted that nearly half of the workers set to 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 specifying a higher minimum wage for healthcare workers. It comes as rising wages and other inflationary costs are weighing down healthcare provider organizations’ finances and spurring tight contract negotiations with labor groups.