Novato minimum wage set to increase

Novato’s minimum wage will rise by about 40 cents on Wednesday.

The city’s wage schedule outpaces state law, and is adjusted based on retail price data.

While some leaders praised the increase, others worry about the effect it could have on small businesses.

“Raising the minimum wage ahead of state law demonstrates our commitment to supporting our hardworking residents,” said Rachel Farac, a member of the Novato City Council. “This increase not only helps families make ends meet but also strengthens our local economy by putting more money into the hands of those who need it the most.”

Novato’s wage schedule sorts businesses by the number of employees. Categories include “very large” for businesses with more than 100 employees; “large” for those with 26 to 99 employees; and “small” for businesses with 25 or fewer employees.

In 2025, the city’s very large businesses will pay a minimum wage of $17.27 per hour; large businesses, $17 per hour; and small businesses, $16.42 per hour. The prior baseline was $16.86 an hour for very large businesses; $16.60 for large ones; and and $16.04 for small ones.

State law requires all businesses to pay a minimum wage of $16.50 in 2025. In 2019, the City Council passed Ordinance 1653, which accelerated the state’s wage schedule and increased the wage by $1 per hour.

The ordinance states that once $15 an hour is reached, it would be adjusted yearly by the consumer price index for urban wage earners and clerical workers. The data for the index is derived from the San Francisco-Oakland-Hayward Consolidated Metropolitan Statistical Area.

Christina Mendes, the incoming chief executive officer of the Novato Chamber of Commerce, said the organization felt the state’s minimum wage schedule was adequate when the ordinance was first introduced.

“As an organization dedicated to supporting the local business community, we understand the challenges this accelerated timeline presents, particularly for small businesses that form the backbone of our local economy,” Mendes said. “We acknowledge that adapting to these changes will be a challenge for many, but we remain committed to providing the resources and support necessary to help our businesses thrive during this transition.”

Robert Eyler, a professor of economics at Sonoma State University, said Novato’s effort is noble, but from an economic standpoint, there are two issues.

First, an effective minimum wage ordinance is a regressive tax — similar to a sales tax — with a bigger impact on smaller businesses, Eyler said. While larger businesses can bear the effects, smaller businesses might struggle.

Second, Eyler said, raising the minimum wage does not always change the labor market. He said if the wage that is set by the local supply and demand for labor — a so-called equilibrium wage — is actually higher than the minimum wage, the minimum wage ordinance won’t effectively change labor market conditions.

“So when you think about Novato’s increasing, on the one hand it’s good from the worker standpoint if it’s effective, it’s not good if it’s effective in terms for small business,” Eyler said. “Whether or not it’s effective or not is the big question.”

Eyler said many ordinances take a business size approach to raising minimum wage. The issue, though, is determining what constitutes a large, medium or small business.

Eyler said signs that a wage increase has had an impact on employers include business closures or hiring slowdowns.

Mendes said adapting to increased labor costs while keeping affordable prices for customers is a complex challenge that businesses will need to navigate. She said the organization encourages businesses to connect with the Marin Small Business Development Center, which offers free resources and guidance to help plan for wage increases and other challenges.

Novato is not alone in pursuing a higher minimum wage. According to the Economic Policy Institute, 21 states will increase minimum wages in 2025, and nearly 30 cities and counties in California are doing so.

“It’s been recognized that we need to do something for lower wage workers in the jobs that sort of carry a lower wage with them,” Eyler said. “It’s just very hard to do that without small business sort of bearing that cost.”

Marin is ranked one of the most inequitable counties in California in a number of fields, including in wages, according to the county. The Massachusetts Institute of Technology’s living-wage calculator sets a livable wage for an adult with no children in Marin County at $32.19 an hour.

“We are proud to lead by example and this is a step to give everyone in Novato an opportunity to thrive,” Farac said. “This proactive step reflects our dedication to support all residents to achieve a better quality of life.”

“By raising the minimum wage, we are not only supporting our hardworking community members, but also fostering a more robust and equitable local economy,” she said.