California Governor Gavin Newsom has announced an increase in the California minimum wage, from the current $16.90 per hour to $17.40 per hour, effective Jan. 1, 2027. State law requires that the minimum wage be adjusted for inflation and is keyed to increases in the United States Consumer Price Index for Urban Wage Earners and Clerical Workers, or U.S. CPI-W. The announced minimum wage increase is nearly 3% year over year.

The state minimum wage has increased annually for employers of all sizes since 2017, in accordance with legislation signed into law by former Governor Jerry Brown. That law increased the minimum wage to $15. Employers with 26 or more employees reached this cap in January 2022; employers with fewer than 26 employees reached the $15 cap in 2023.

A provision in that law requires the minimum wage to be adjusted annually by the lesser of 3.5% (rounded to the nearest 10 cents) or the change in the U.S. CPI-W.

The increase will boost the minimum-salary requirement for exempt executive, administrative and professional employees. In 2027, the minimum weekly salary for exempt employees will be $1,392 (annual equivalent $72,384; monthly equivalent $5,986).

Expect the California Department of Industrial Relations to release a revised minimum wage regulation, also known as the Minimum Wage Order, late in 2025 or early in 2026.