State Expected to OK $1 Hike in Minimum Wage

A state commission is expected Monday to raise California’s minimum wage by $1 an hour over the next two years, starting with a 50-cent boost Jan. 1.

The hike would directly benefit more than 1 million California workers who now earn the minimum of $5.75 per hour or close to it.

The impact would be felt most deeply in Los Angeles, home to a large class of immigrant workers who are chronically employed in full-time minimum wage jobs, such as assembly and food processing. An increase in the state-mandated wage floor could also have a ripple effect, leading employers to raise hourly rates for other workers earning close to the minimum.

“This represents an extra $2,000 a year in the paychecks of thousands of California workers,” said Jean Ross, executive director of the nonprofit California Budget Project, a liberal research group. “For these people, it’s an extremely significant development.”

A full-time minimum-wage earner currently makes about $11,900 a year.

The proposal, debated in a series of public hearings in the past few months, takes the middle ground between organized labor, which pushed for a new minimum of $8 per hour, and some business groups, which argued against any increase.

If the proposal is adopted by the five-member Industrial Welfare Commission as expected, California would join Washington, Oregon and Massachusetts as the states with the highest minimum wage. The proposal calls for two 50-cent increases--one this January and the next in January 2002.

The commission’s decision on the wage is final, and members, who are appointed by the governor, could propose a higher or lower increase on Monday. However, sources on both sides of the issue said they expected no changes.

It would be the first commission-backed wage increase since 1988, when the panel raised the minimum from $3.85 to $4.25.

Frustrated by inaction under the administration of Gov. Pete Wilson, organized labor sought, and won, voter approval for a minimum-wage hike in 1996. Proposition 210 gradually raised California’s minimum to its current level.

“If it goes up $1, we are still below the equivalent of what people earned back in 1968,” said Art Pulaski, secretary-treasurer of the California Labor Federation. State and federal minimum wages were at historic highs that year. Since then, inflation has eroded the value of the minimum wage, while governments have been slow to increase it.

“It would take over $8 for us to catch up to that point in time,” Pulaski said. “We know we’re not going to get all of that this first time, so this is the first installment in people catching up.”

Pulaski said he was still hopeful the commission would approve more than a $1 hike, and then index the wage to the rate of inflation.

“That’s really the only way to have an effective minimum wage,” he said. “Otherwise you can end up, as we did, with no increase for eight years. That’s what sets us back and makes it so hard to recover.”

Restaurant and agricultural interests lobbied hard against any increase, saying a hike could lead to job losses or inflation. Otherwise, opposition was relatively muted, in part because of the combined effect of a strong economy and a nationwide labor shortage. Some business owners actually argued in favor of an increase at a hearing in San Francisco last month.

The California Chamber of Commerce had asked that the effective date be postponed six months, until June, to give Congress time to act on a proposed $1 hike in the lower federal minimum wage. The federal minimum is now $5.15 per hour. Action in Congress has been delayed by partisan differences, but there is still a chance the federal minimum will increase by at least 50 cents in January.

“That would cushion a bit of the blow” because the difference between the minimum in California and most other states would remain only 60 cents an hour, said Julianne Broyles of the chamber.

One recent study questioned the benefit of a minimum wage-hike to poor families. The Public Policy Institute of California last spring suggested that many minimum-wage earners live with middle-income as well as low-income families, so the effect of an increase would be diffused. Meanwhile, all the state’s poor families could feel the impact of higher costs caused by wage inflation.

“Overall, we find that increasing the minimum wage does not efficiently target the poor,” said economist Margaret O’Brien-Strain, who wrote the report.

However, a study by the Washington-based Economic Policy Institute on the effects of a national increase argued otherwise. That study, issued in June, claimed that more than 60% of the gains of a minimum-wage hike would be concentrated with families in the bottom 40% of the nation’s economy.

Recent research indicates that a large share of adult workers remain at or close to the minimum wage for years, undercutting the argument that it is a starting wage, said Ross, of the California Budget Project.

According to an analysis of 1999 statistics by the Economic Policy Institute, about 11% of Los Angeles workers earned the minimum wage or were within 40 cents of it. Statewide, minimum-wage earners accounted for 8.6% of the work force.

In Los Angeles, nearly all minimum-wage earners were adults, and three-fourths were Latinos. Statewide, about 70% of the minimum-wage earners were adults and about half were Latinos. Nationally, minimum-wage earners were more likely to be teenagers and non-Latinos.