California’s minimum wage will rise to $15.50 an hour for workers at all businesses, large and small, on Jan. 1, 2023, under an automatic inflation trigger built into state law and never previously activated, the governor’s office projected on Thursday.

The announcement came a day before Governor Gavin Newsom, a first-term Democrat, was slated to present his revised budget plan to the state legislature controlled by his party, including a proposed $11.8 billion inflation-relief spending package.

The economic stimulus proposal, similar to one enacted last year to help California recover from the COVID-19 pandemic, includes a plan Newsom previewed in recent weeks offering $400 tax rebates to vehicle owners to help offset escalating gasoline costs.

Newsom said his package taps into a “historic” state budget surplus to help individuals and families cope with rising costs of living, which the state Finance Department projects will grow 7.6% between fiscal year 2021 and fiscal 2022.

Regardless of whether Newsom’s package becomes law, the Finance Department estimates that some 3 million workers stand to benefit from the first inflation-based minimum wage hike expected to take effect under a labor statute enacted in 2016.

That law requires an automatic 50-cent-per-hour increase above California’s prevailing minimum wage levels – already the highest any state requires for larger companies – whenever the U.S. consumer price index rises more than 7% from year to year.

That means the statewide minimum wage for companies employing 26 or more workers, and those with 25 or fewer workers, will both go to $15.50 in the new year. Without an inflation trigger, the minimum wage for smaller companies was due to have topped out at $15 in January, catching up with the level now required at larger firms.

Only two states — Massachusetts and Washington state — exceed California’s existing $14 minimum wage for smaller companies. They require at least $14.25 and $14.49 per hour, respectively, at businesses of all sizes, U.S. Labor Department figures show.

The District of Columbia is higher still, at $15.20 an hour. The U.S. federal minimum hourly wage is currently set at $7.25.

Other highlights of Newsom’s inflation package include $2.7 billion in emergency rental assistance for low-income tenants and $1.4 billion to help utility customers pay overdue bills.

The California Republican Party issued a statement urging the legislature to suspend state gasoline taxes as “the most effective way to relieve pain at the pump.”
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