The proposal would require future increases of the state's minimum wage to keep pace with the rate of inflation, the Los Angeles Times reported.
The bill's author, Assemblyman Luis Alejo, D-Watsonville, said higher wages would "allow our families to provide for their children, pay their bills and give them dignity and respect."
The measure would increase to $8.25 an hour next year, $8.75 in 2015 and reach $9.25 by 2016. The federal minimum wage is $7.25.
The vote was 42-24. Only Assemblyman Ken Cooley, D-Rancho Cordova, crossed party lines in the vote.
The California Chamber of Congress argued the increase in minimum wage would be a "job killer" and would prevent companies from being able to afford to hire new employees.
"You have to legislate in the real world," said Assemblyman Donald P. Wagner, R-Irvine. "You're not doing that if you support this bill."
The proposal advances to consideration by the state Senate.
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