The minimum wage for all San Diego employers will increase from $15 to $16.30 in January, the city announced Friday.
The expected increase comes as consumers face rising housing costs and higher gas and food prices.
“With the rising cost of living, this increase couldn’t come at a time when it’s needed more for employees and working families,” Mayor Todd Gloria said in a statement. “This increase means a better ability to get money, put food on the table and spend it in our local businesses.”
Businesses of all sizes in the City of San Diego will be required to comply with this change beginning January 1, 2023, for employees who work at least two hours on one or more calendar weeks of the year. The annual increase is part of the city’s Sick Leave and Minimum Wage Ordinance, which was passed in 2016.
Employees will continue to be entitled to sick leave, according to the ordinance. The policy applies to all industries in the city. Tips and gratuities do not count toward minimum wage.
The mandated wage increases help ensure a livable wage for San Diego workers and their families, according to the ordinance. Also, when workers are not paid a livable wage, “surrounding communities and taxpayers may face costs from increased demand for taxpayer-funded services, including homeless shelters.”
San Diego’s minimum wage has increased by $1 continuously since 2019, based on the previous year’s cost of living increase, according to the city.
Earlier this year, inflation in San Diego hit a 40-year high of 7.9 percent. But its labor market remains tight, with an unemployment rate of 3.4 percent in August.
Economist Chris Thornberg, founder of Los Angeles-based Beacon Economics, said the timing of this minimum wage increase makes no sense, with many places already offering more than $16.30 an hour to keep up with the competitive labor market.
Thornberg also noted that this minimum wage change will be most noticeable in industries that rely on minimum wage workers, such as restaurants, senior centers and non-profit organizations. Restaurants are already struggling to attract workers and labor costs are 30 to 35 percent of expenses at a typical fast-food restaurant, he said.
“It’s a solution looking for a problem,” Thornberg said.
From his perspective, raising the minimum wage has not significantly moved the needle for low-income families in this economy compared to other policy levers.
“If you really want to help low-income households, you better provide subsidized child care, earned income tax credits and make a real effort to expand the housing stock,” he said.
Alan Gin, an economist and business professor at the University of San Diego, said that every time he goes out to eat, he sees “help wanted” signs in the windows as companies face labor shortages.
While the job market currently favors job seekers, Gin said the increase could be good for workers in low-wage jobs, ensuring wages don’t slide if the employment landscape changes, as the cost of living and inflation show no signs of abating. . .
“A lot of people are stressed about their ability to live in San Diego. So for those affected by that, they’re going to get some benefit from a higher minimum wage,” he said, noting additional support from the state, such as money to fight inflation and high gas prices.
Due to the tight labor market, he does not believe that this minimum wage increase will lead to large layoffs or large price increases for consumers—two arguments that are often used against raising the minimum wage.
The current labor market has already created a surge in price and wage increases, so the impact of San Diego’s proposed increase will not be large, he said.
Next year in California, the minimum wage will increase to $15.50 an hour for all businesses, regardless of the number of workers they employ.