Quick Hits

• Starting January 1, 2026, California’s minimum wage rate will rise to $16.90 per hour, reflecting a 2.49 percent adjustment based on federal inflation data.
• Employers should prepare for the upcoming wage adjustment and remain aware of existing higher minimum wage rates for fast-food workers and various municipalities throughout California.

On August 1, 2025, California Director of Finance Joe Stephenshaw released the calculated minimum wage adjustment for 2026, which raises the state minimum wage rate by $0.40 per hour, a 2.49 percent increase from the current rate.

The increase is slightly less than the $0.50 increase from the prior year, but it could still be significant for employers, as California’s minimum wage rate has increased significantly over the past decade, more than doubling from $8.00 per hour in 2014.

Under California Labor Code section 1182.12 (c), California’s director of finance must annually calculate an adjustment to the state’s minimum wage rate before August 1 of each year, following California’s adoption of a $15.00 minimum wage rate on January 1, 2023. By law, the adjustment must be the lesser of 3.5 percent or the rate of change in the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W), which increased 2.49 percent for the period of July 1, 2024, to June 30, 2025, from the prior twelve-month period.

The 2026 increase comes after California voters in November 2024 rejected a ballot proposition that would have raised the state minimum wage rate for all employees to $18.00 per hour by January 1, 2026. Opponents of that proposition had argued that the increases would lead to higher prices for everyday products, higher costs for small businesses, and job cuts.

However, since April 2024, a higher $20.00 per hour minimum wage rate has applied to workers at most fast-food restaurants in California under the California Food Accountability and Standards Recovery Act (FAST Recovery Act). Furthermore, certain healthcare workers are subject to a higher minimum wage pursuant to Senate Bill (SB) No. 525, which became effective in October 2024. Additionally, several municipalities in California have minimum wage rates that exceed the state requirement.

The increase in the minimum wage will also cause an increase in the minimum salary payable to certain white-collar, exempt employees under California wage laws. The new minimum salary will rise to an annualized $70,304 from $68,640 per year (an increase of $1,664).

Next Steps

California employers may want to begin preparations to ensure that their compensation structures comply with the new minimum wage rate for 2026 and the higher minimum wage rates already in effect for fast-food workers and those in several California municipalities. Moreover, employers may want to note that the current minimum wage law calls for annual adjustments based on national inflation data, which has leveled out slightly since a spike during the pandemic and is closely being monitored by the Federal Reserve Board.