Gov. to Propose $1 Hike in State Minimum Wage

After two years of rejecting increases in the minimum wage at the behest of California businesses, Gov. Arnold Schwarzenegger next week will propose raising the basic hourly pay $1 over 18 months, administration officials said Friday.

In his State of the State address Thursday, the governor will ask the Legislature to boost the current $6.75-an-hour wage in two phases: 50 cents in September and 50 cents in July 2007. At $7.75 an hour, California would have one of the highest minimum wages in the country if other states’ remained unchanged.

Democrats who control the Legislature quickly greeted the plan with skepticism and viewed it as an election-year attempt by Schwarzenegger to appear more moderate to voters.

Union leaders were outright dismissive because the governor’s proposal does not include automatic cost-of-living increases, as do wage laws in Washington state and Oregon.

Assembly Speaker Fabian Nunez (D-Los Angeles) said he was happy Schwarzenegger wanted to raise wages. But without a regular cost-of-living increase, he said, the plan “doesn’t make up for the ground that some of the state’s hardest workers lost when the governor vetoed two previous attempts to raise the minimum wage.”

“It’s not enough,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, which represents 2.1 million workers. “He knows it’s very popular among voters, and he’s trying to improve his record for reelection.”

The business community has only lately begun calling for an increase in the minimum wage.

Restaurants and retail businesses that rely on unskilled, low-wage workers have maintained that a higher mandatory wage slows economic growth by driving up costs and discouraging them from hiring more employees.

But in California, business owners are facing a ballot initiative that would increase the minimum wage to $8.75 an hour and require cost-of-living increases after that. With internal polling showing widespread public support for an increase, some business groups said Friday that they were inclined to support the governor’s plan.

“I think a minimum wage increase is inevitable,” said Bill Dombrowski, president of the California Retailers Assn. “The governor has come up with the best compromise the business community can get.”

In general, business groups have argued that mandatory increases force employers to hire fewer people -- leading to bad service, slower production and longer lines -- or to outsource jobs to countries and states where labor is cheaper.

However, the chief executive of Wal-Mart, Lee Scott, said recently that he would encourage Congress to raise the federal minimum wage because the current figure is “out of date with the times.” Scott, who presides over the largest retail business in the world, said in an October speech to Wal-Mart executives that many of their customers “simply don’t have the money to buy basic necessities between paychecks.”

Rusty Hammer, president and chief executive of the Los Angeles Area Chamber of Commerce, said the Schwarzenegger plan looks reasonable given the threat of a ballot initiative and pressure to institute cost-of-living increases, which he said would devastate business. The Los Angeles chamber has not taken a position on the new proposal.

“Let face it, it’s very difficult to argue against an increase in the minimum wage for someone who is making such a small amount of money. You want to argue something reasonable and rational, which is what this is,” Hammer said Friday about the Schwarzenegger plan.

Congress has not changed the federal minimum wage, currently $5.15 an hour, since 1997. But U.S. law allows individual states to set their own higher wages. Sixteen states and the District of Columbia have rates above the federal minimum, with Washington and Oregon requiring the nation’s highest such wages, at $7.63 and $7.50 respectively.

Currently California ranks eighth in the nation. The estimated 2 million full-time workers who receive the $6.75 minimum wage each earn the equivalent of $14,000 a year. A dollar increase would boost that to $16,000.

The Republican governor has said for months that he wants a boost in California’s minimum wage, which has held steady since 2002. But he has twice rejected proposals by the Legislature’s Democratic majority.

This year, Schwarzenegger vetoed a proposed $1 increase because it included a provision linking hourly wages with the previous year’s inflation rate. The governor said the Legislature should not sidestep its own duty to set the minimum wage based on a host of economic factors, not just the inflation rate.

“Minimum-wage increases must not be put on autopilot or examined in a vacuum but reviewed in conjunction with other wage and hour issues that impact workers and businesses,” the governor said in his September veto message.

San Francisco -- one of the most expensive areas of the world -- has its own ordinance that requires an increase in the minimum wage based on inflation. That city’s wage is now $8.62 an hour, among the highest in the nation -- and it rises to $8.82 on New Year’s Day.

The Schwarzenegger proposal, administration officials said, would not have such an escalator. Future increases beyond July 2007 would have to be approved by the Legislature.

The governor’s office declined to comment on the new plan. But an administration official outlined it for reporters Friday, on the condition he not be identified because most lawmakers have not been fully briefed. Key lawmakers and business leaders were told of the plan.

By unveiling his own proposal, Schwarzenegger is attempting to take the lead on a populist issue instead of waiting for Democrats to once again hand him legislation that he would be forced to accept or reject, lawmakers said.

Schwarzenegger’s popularity has waned dramatically since last January, and he is facing reelection in 2006.

“The fact is he was wrong to twice veto the minimum wage bill, and now he is trying to cover his tracks,” said state Treasurer Phil Angelides, a Democrat who is running for governor himself next year.

Nunez said that in the November special election “voters spoke loud and clear that the governor was moving too far to the right. Now he’s shifting back to the center and trying to address legislation embraced by Democratic leaders.” That includes, he said, the governor’s proposal this week to stop a boost in California State University and University of California fees that had been approved for next year.

Schwarzenegger’s plan comes as a group called the Coalition for Fair Wages is preparing two initiatives that would increase California’s hourly minimum more than the governor seeks.

The more ambitious of the proposals would be a three-step increase to $8.75 by 2009. Every year thereafter, the wage would rise to keep pace with inflation, although it would never drop even if the economy fell into deflation. The second initiative would increase the wage in two steps to $7.75 by the start of 2008 and then link it to inflation.

The chief proponent of both initiatives is Barry Hermanson, a Green Party activist who helped pass the local increase in San Francisco in 2003.

Times staff writer Jordan Rau contributed to this report.

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Hourly rates

The federal government’s $5.15-an-hour minimum wage prevails in more than two-thirds of the states. The top minimum wage levels so far for 2006:

*--* Rank State Min. Wage 1. Washington* $7.63 2. Oregon* 7.50 3. Connecticut 7.40 4. Vermont 7.25 5. Alaska 7.15 New Jersey 7.15 6. Dist. of Columbia 7.00 7. California 6.75 Hawaii 6.75 Massachusetts 6.75 New York 6.75 Rhode Island 6.75

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Sources: U.S. Department of Labor and Times reporting

*Tied to Consumer Price Index for Urban Wage Earners and Clerical Workers

Note: Some states vary the amount of the minimum wage by the company’s size or number of employees. Data reflect top minimum wages.