Last Updated Apr 1, 2016 1:15 PM EDT
SACRAMENTO, Calif. -- California and New York are poised to become the highest-paid minimum-wage states in the nation after their governors each reached deals with lawmakers to raise the lowest amount a worker can be paid to a record-shattering $15 an hour.
California Gov. Jerry Brown said he will sign a new minimum-wage bill Monday after it passed the Legislature on Thursday. Across the country in New York, Gov. Andrew Cuomo reached a tentative deal late Thursday with top lawmakers to raise the state's base wage.
The actions in two of the country's most labor-friendly states come as the income divide has emerged as a key issue nationwide in a presidential election year. President Barack Obama, who first proposed an increase to the $7.25 federal minimum wage in 2013, applauded the states' actions and called on the Republican-controlled Congress to "keep up with the rest of the country."
"California takes a massive leap forward today in the fight to rebalance our nation's economy," said Art Pulaski, executive secretary-treasurer of the California Labor Federation.
California's current $10-an-hour minimum wage is tied with Massachusetts for the highest among states. Only Washington, D.C., at $10.50 per hour is higher. New York's minimum wage is $9.
Democrats who control both legislative chambers in California hailed the increase as a boon to more than 2 million workers. Brown, also a Democrat, said it proves the nation's most populous state can get things done and help people get ahead.
But Republicans echoed fears from business owners and economists that California's annual increases - eventually tied to inflation - will compound the state's image as hostile to business.
Republican Assemblyman Jim Patterson of Fresno said the increase would force small-business owners to make layoffs "with tears in their eyes."
The increases would start with a boost from $10 to $10.50 on Jan. 1. Businesses with 25 or fewer employees would have an extra year to comply. Increases of $1 an hour would come every January until 2022. The governor could delay increases in times of budgetary or economic downturns.
The tentative deal reached by New York officials would be phased in regionally in the nation's fourth-largest state. It also would eventually affect more than 2 million workers.
In New York City, the wage would increase to $15 by the end of 2018, though businesses with fewer than 10 employees would get an extra year. In the suburbs of Long Island and Westchester County, the wage would rise to $15 by the end of 2022. The increases are even more drawn out upstate, where the wage would hit $12.50 in 2021, then increase to $15 based on an undetermined schedule.
"This minimum wage increase will be of national significance," Cuomo, the Democratic governor, told reporters. "It's raising the minimum wage in a way that's responsible."
Cuomo had initially proposed a simpler phase-in: three years in New York City and six years elsewhere. The more gradual, nuanced approach was the result of negotiations with Senate Republicans who worried such a sharp increase would devastate businesses, particularly in the upstate region's more fragile economy.
Economists have long debated the impact of a higher minimum wage. Some studies have found that higher wages contributed to job cuts, while others found little effect on hiring because employers could absorb the costs or pass them along to customers.
The Congressional Budget Office conducted an analysis in 2014 finding both benefits and trade-offs with an increase. A higher minimum wage would generally raise incomes and lift people above the poverty line, but it also would lead to a wave of job losses for some low-income workers.
The non-partisan agency examined the prospect of raising the national minimum wage to $10.10 an hour from $7.25. It would raise incomes by a net of $17 billion for families below or relatively close to the poverty line. But it would cost 500,000 jobs, a 0.3 percent decline in total employment.
In California, Brown was previously reluctant to raise the base wage. He negotiated the deal with labor unions to head off competing November ballot initiatives that would have imposed swifter increases without some of the safeguards included in the legislation. The governor now says California's fast-growing economy can absorb the raises without the problems predicted by opponents.
About 2.2 million Californians now earn the minimum wage. The University of California, Berkeley, Center for Labor Research and Education projected that pay would rise for 5.6 million Californians by an average of 24 percent. More than a third of the affected workers are parents.
Latinos would benefit most because they hold a disproportionate number of low-wage jobs, the researchers said.
The right-leaning American Action Forum countered with its own projection that the increases would slow the rate of job growth, potentially costing the state nearly 700,000 jobs over the next decade.
The increases are expected to eventually cost California taxpayers an additional $3.6 billion annually for higher government employee pay.
In New York, the tentative deal also includes middle-class state income tax cuts starting in 2018. The cut would apply to New Yorkers with incomes between $40,000 and $300,000 and rates that currently range from 6.45 percent to 6.65 percent starting in 2018. The rates would gradually drop to 5.5 percent by 2025.
Cuomo administration officials estimate the lower tax rates will save more than 4 million filers nearly $6.6 billion in the first four years, with annual savings reaching $4.2 billion by 2025.