Minimum Wage for State Loses Its Luster : Labor: Once highest in the nation, $4.25 an hour will become the federal requirement on Monday. State officials are deadlocked over a hike.

A little more than three years ago California created the highest minimum wage in the nation, $4.25 an hour.

Now that superiority has ended. And prospects for another state increase, which would affect about 750,000 workers who are paid at or near the minimum, do not look good.

In January, Oregon raised its minimum wage to $4.75, becoming the nation’s highest. On Monday, Alaska will do the same. That same day, the federal minimum wage--the floor below which no employer may dip--will catch up with California, rising to $4.25 an hour from $3.80.

Meanwhile, the state commission responsible for setting the minimum wage has been deadlocked for months over whether an increase is necessary to keep up with the state’s higher cost of living or would be disastrous to the business community, particularly in a recession.

The state Industrial Welfare Commission, consisting of five gubernatorial appointees, is lacking a fifth member. At its monthly meetings it has engaged in a series of 2-2 votes on whether to begin the process of raising the minimum wage.

The vacant seat is one of two commission seats that are designated by law for representatives of organized labor.

At a number of recent commission meetings, representatives of labor groups have complained that the minimum wage is below livable standards. They claimed that a full-time minimum-wage worker living in a one-room studio apartment in Los Angeles County would spend three-quarters of his or her pretax income for rent.

A full-time worker at the current minimum wage earns $8,840 a year, which is 3% below the federal poverty level for a family of three and 26% below the poverty level for a family of four.

“Four twenty-five (an hour) won’t cut it, even if you have two minimum-wage breadwinners,” said Father John Seymour, a Catholic priest in the Los Angeles Archdiocese who participated in the successful 1987 campaign that raised the state minimum wage from $3.35.

To raise the minimum wage, the Industrial Welfare Commission must first appoint an independent study panel. In February, a motion to take that step by Commissioner Bob Hana, head of the state Council of Carpenters, died on a 2-2 vote. As a compromise, the commission voted to hold a public hearing on the issue in Sacramento in mid-April.

A spokeswoman for Gov. Pete Wilson said there is no timetable for appointing a fifth commission member to break the deadlock.

In frustration, Assemblyman Terry Friedman (D-Sherman Oaks), chairman of the Assembly Labor and Employment Committee, recently introduced a bill that would lock in the minimum wage at half the state’s hourly manufacturing wage. Friedman said that would immediately raise the minimum wage to $5.74.

“California workers are losing pace with the increasing cost of living in California,” Friedman said. “More of them are winding up dependent on welfare or Medi-Cal.”

Similar legislation was passed several years ago but vetoed by then-Gov. George Deukmejian. At issue is a chicken-and-egg-like question of social policy: Does raising the minimum wage pull people out of poverty or simply create inflationary pressures that eventually hurts all economic classes by forcing businesses to raise prices?

Wilson, for example, has defended his proposal to cut welfare payments by arguing that some poor people decide they can live better on welfare than by working. Advocates of higher minimum wages contend that raising wages encourages more people to look for work.

But in a recent interview Wilson said he opposes that thinking. He cited a traditional economic theory that businesses dependent on minimum-wage-level workers cut employment when the minimum wage is raised.

“You’re guaranteed of putting people out of work,” he said.

To counter that viewpoint, advocates of higher wages are brandishing a new Princeton University study that found minimum wage-level employment did not decrease after California last raised its minimum wage--and that teen-age employment actually increased.

Roxanne Gould, a spokeswoman on legislative affairs for the California Chamber of Commerce, said her organization would oppose any increase in the minimum wage.

“Now that the federal minimum is going to be equal to California’s, we’d like it to remain even so that businesses can remain competitive,” she said.

David Edlund, communications director of the California Manufacturers Assn., said that while most of his group’s members pay above the minimum wage, manufacturers are opposed to any increase because they believe it indirectly forces wage increases at all levels.

The last time a formal minimum-wage study was ordered by the Industrial Welfare Commission was 1986. The study concluded that a wage of $5.01 an hour was necessary to allow minimum-wage workers to keep up with the cost of living.

In 1987, in an attempt to prod the commission into raising the wage, the Legislature passed a bill raising the minimum wage to $4.25, but Deukmejian vetoed it. Several months later, the commission voted 3 to 2 to raise the wage.

The federal minimum wage, which had been $3.35 an hour since 1981, was raised in a two-step process beginning last year after Congress and President Bush agreed on compromise legislation. The second increase occurs Monday.

Some Democratic leaders in Congress have said they will push to raise the federal minimum again by 1992. The AFL-CIO’s executive council passed a resolution in February calling on Congress to set a formula that would keep the minimum wage at 50% of the average hourly wage, resulting in a minimum of $5.75 by 1994.

Sen. Dale Bumpers (D-Ark.), chairman of the Senate Committee on Small Business, recently introduced a bill to exempt businesses grossing less than $500,000 a year from the current minimum-wage law.