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California will raise its minimum wage to $17.40 an hour from January 1, 2027, putting the state among those with the highest wage floors in the country.
Democratic Governor Gavin Newsom announced the increase last week, as several other states prepare to raise their minimum wages next year. The changes come against the backdrop of a federal minimum wage that has remained unchanged at $7.25 an hour since 2009.
On August 6, Newsom said in a post on X that the Golden State's minimum wage was double that of Texas, which currently follows the federal $7.25 floor.
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Minimum wage policy varies considerably across the United States. While federal law sets a nationwide floor, states and local governments can require employers to pay higher rates. Thirty states and Washington D.C. have wage rates above the federal minimum.
Supporters of increases have argued that the federal rate has failed to keep pace with the cost of living, particularly following the rise in inflation after the COVID-19 pandemic. Critics of higher minimum wages have argued that a raise could negatively impact businesses and lower employment.
California's Minimum Wage vs. Texas'
While California has the higher minimum floor, Texas minimum-wage workers face a lighter direct state tax burden than their counterparts in California, largely because Texas does not levy an individual state income tax. California workers, by contrast, can owe state income tax and also contribute to the state's disability insurance program.
However, those tax differences are not large enough to offset the much wider gap in minimum wages: a full-time worker earning California's $16.90 hourly minimum would still take home substantially more—approximately $29,600—each year than someone earning Texas's $7.25 minimum—approximately $13,900—even after accounting for the additional taxes. The wage gap does not necessarily translate directly into greater purchasing power as California overall has higher housing and living costs.
Newsom framed California's latest increase as part of a broader divide over wage policy, criticizing Republicans who he said have “blocked efforts to raise the federal minimum wage while handing tax breaks to billionaires and big corporations.”
“California has chosen a different path—one that rewards work, grows the economy, and puts working families first. We believe if you work hard, you deserve a decent paycheck. They think $7.25 an hour is enough. We don’t,” he wrote.
California’s minimum wage has risen steadily during Newsom’s time in office, although the initial increases were set in motion before he became governor. When he took office in 2019, the rate was $12 an hour for employers with 26 or more workers and $11 for smaller businesses.
Those increases were part of legislation signed by then-Governor Jerry Brown in 2016, which put California on a path to a $15 statewide minimum wage. Under that schedule, the rate for larger employers reached $15 in 2022, before increasing to $15.50 for all employers in 2023.
Since reaching $15, California’s statewide rate has been adjusted annually for inflation under the same law, rising to $16 in 2024, $16.50 in 2025 and $16.90 in 2026. Under Newsom’s tenure, California has also adopted higher wage floors for some industries, including legislation establishing a $20 minimum wage for covered fast-food workers beginning in April 2024, while certain health care workers are subject to separate, higher minimum-wage requirements.
Minimum Wage Across the US
The federal minimum wage last increased in 2009, rising from $6.55 to $7.25 an hour as the final stage of the Fair Minimum Wage Act of 2007, which was signed into law during George W. Bush's presidency.
Workers are generally entitled to the higher rate when state or local minimum wage requirements exceed the federal level.
Five states—Alabama, Louisiana, Mississippi, South Carolina and Tennessee—do not have their own state minimum wage laws, meaning the federal $7.25 rate applies by default. Some states have their own minimum-wage laws but set the rate at the same level as the federal minimum wage.
For 2026, Washington currently has the highest statewide minimum wage in the country, at $17.13 an hour in 2026. California is close behind at $16.90, while Connecticut's minimum wage is $16.94.
New York has a similarly high minimum wage, with workers in New York City, Long Island and Westchester County entitled to at least $17 an hour, compared with $16 across the rest of the state.
Hawaii and Rhode Island both have statewide minimum wages of $16 an hour, while New Jersey's rate is $15.92 for most workers.
Minimum Wage Increases for 2027
California's statewide minimum wage is currently $16.90 an hour. The move to $17.40 is an increase of 50 cents an hour for workers earning the state minimum in one of the country's highest cost-of-living states.
California is not alone in preparing for another increase in 2027. Connecticut has announced this week a minimum wage of $17.48 an hour from January 1, slightly above California's new rate. Rhode Island's will rise to $17, while Nebraska will increase its minimum to $15.26.
Michigan will move to $15 an hour on January 1, while Alaska will reach the same rate on July 1. Virginia's minimum wage will increase to $13.75 at the start of the year under legislation signed in April 2026, with a further increase to $15 scheduled for 2028.
Raising the Federal Minimum Wage
Support for raising the federal minimum wage crosses party lines. In June 2025, Republican Senator Josh Hawley of Missouri and Democratic Senator Peter Welch of Vermont introduced the Higher Wages for American Workers Act, which would raise the federal minimum wage from $7.25 to $15 an hour beginning on January 1 of the first year after enactment. The rate would then be adjusted annually for inflation.
Hawley said the federal minimum wage had failed to keep pace with the economic pressures facing workers. The bill remains at the introduced stage in the Senate.
Democratic Senator Chris Murphy of Connecticut has proposed going further with his Living Wage For All Act, introduced in the Senate in July 2026, which would initially increase the federal minimum wage to $12 an hour before gradually raising it to $25. Large corporate employers would be required to reach $25 by 2032, while other businesses would have until 2039. After that, the minimum wage would be tied to two-thirds of the national median wage.
“If you work full time in this country, you should be able to afford to live. But wages are so low that parents work 60 hours a week and still aren’t sure if they’ll have lunch money for their kids,” Murphy said regarding the bill. “Our economy is not working for people and we have to put forward solutions that are as big as the problems American families are facing.”
Business groups have pushed back against proposals for a nationwide increase. The National Federation of Independent Business (NFIB) opposed the Hawley-Welch legislation, arguing that a $15 floor would impose disproportionate costs on small employers and would fail to account for differences in living costs between rural and urban areas.
In a member ballot, NFIB found 92 percent opposed raising the federal minimum wage to $15. It also argued that automatically linking the rate to inflation would expose businesses to repeated increases in labor costs, while smaller firms are less able than larger competitors to absorb them.
Research from the nonpartisan Congressional Budget Office (CBO) points to potential benefits and costs on both sides of the minimum wage debate.
The CBO has concluded that raising the federal minimum wage would increase earnings for most affected low-wage workers and would generally reduce the number of people living in poverty. However, it also expects some employers to respond to higher labor costs by employing fewer workers, leaving some low-wage workers without jobs and reducing their family incomes.
Contact Newsweek editors on this story: John Fitzpatrick and Yannick Demoustier.
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