Gov. Vetoes Minimum Wage Hike

Aligning himself with business leaders in perhaps his most unambiguous way yet, Gov. Arnold Schwarzenegger on Saturday vetoed a measure to boost California’s minimum wage to the nation’s highest, instead leaving it at the lowest level on the West Coast.

Schwarzenegger also rejected legislation that would have required giant retailers such as Wal-Mart that wanted to open colossal stores to first finance studies showing whether they would hurt the neighborhood economy and affect traffic.

Together, the two vetoes and accompanying explanations were some of Schwarzenegger’s clearest articulations of where his views lie in disputes between business and labor.

“In recent years, the high cost of doing business in California has driven away jobs, businesses, and opportunity,” Schwarzenegger wrote in his veto of the minimum-wage bill, AB 2832. “Now is not the time to create barriers to our economic recovery or reverse the momentum we have generated. I want to create more jobs and make every California job more secure.”

California’s minimum wage has been $6.75 an hour since 2002. The bill passed by the Democratic-controlled Legislature would have raised it by 50 cents on July 1, 2005 and then to $7.75 a year later. The federal minimum wage is $5.15 an hour.

Assemblywoman Sally Lieber, the author of the minimum-wage bill, said Schwarzenegger’s veto was disappointing. “The state minimum wage is under the federal poverty line,” said Lieber (D-Mountain View). “This veto is evidence that you can’t serve two masters. You either side with the corporate interests or the people. Schwarzenegger sided with the corporate interests.”

More than 1.4 million Californians earn the minimum wage, according to the California Budget Project, a Sacramento-based nonprofit group. A report it released earlier this month rebutted the presumption that most minimum-wage earners are teens and part-time employees. The report said that 83.1% are adults and 60.7% work full time to support themselves and their families.

Five states have higher minimum wages than California: Alaska ($7.15), Connecticut ($7.10), Oregon ($7.05), Vermont ($7 starting in January) and Washington state ($7.16), according to the U.S. Department of Labor. California’s rate is the same as Massachusetts’ and Rhode Island’s.

The effects of raising California’s wage are the subject of much disagreement. A study by the Employment Policy Institute, a Washington nonprofit group, predicted that increasing the minimum wage would lead to the elimination of 18,600 jobs. Schwarzenegger’s economic development agency said it would increase costs to businesses by between $3 billion and $4.4 billion.

But Stephen Levy, director of the Center for Continuing Study of the California Economy, a Palo Alto-based nonprofit organization, said that the minimum wage has not kept pace with inflation over the last 25 years. Adjusted for inflation, California’s minimum wage is 22% below what it was in 1969, he said.

Levy disputed the notion that raising the wage would drive businesses out of California. “If you’re talking about the sectors where most of the minimum-wage workers work -- restaurants, dry cleaners -- those are not in industries that compete internationally,” he said Saturday. “The impact is going to be on prices. Your burger is going to cost another nickel. All the restaurants aren’t going to go to Nevada, because their customers are here.”

Levy said that under Schwarzenegger’s logic, the minimum wage should be scrapped altogether. “We have a lot of governmental policies that meet objective values but also raise costs,” he said. “Somebody should ask the governor if he’s going to roll back environmental standards because they raise costs, or roll back plant-safety standards because they raise costs, or take away smog controls.”

But Alan Zaremberg, president of the California Chamber of Commerce, which opposed both measures, said that many California businesses that rely on minimum-wage workers, such as those in agriculture, did not have the luxury of raising prices because they sold their products internationally. He also noted that retail stores must compete with goods sold on the Internet.

“You can’t always pass those costs on,” he said. “It’s important to keep California competitive and there are always entry-level jobs in mobile manufacturing, and there may be nonprofits that are impacted by this.”

During his year in office, Schwarzenegger has taken sides before on major economic battles. He ruled out tax increases in solving the state’s budget crisis and pressed for business-friendly changes in the state workers’ compensation laws. But both of those allowed the governor to make concessions to liberals, by agreeing to compromises on the compensation rules and signing off on spending increases on education and healthcare in his budget pact.

The legislative dilemmas, by contrast, left him with only stark choices.

“The Chamber of Commerce is into not paying people a decent wage,” said Senate President Pro Tem John Burton (D-San Francisco). “They’re the ones that backed him in the recall and they’re the ones that are getting the benefit.

“How can anyone live on $6.75 and no healthcare? It’s absolutely shameful,” Burton said. “This is the type of stuff we’d expect out of George Bush and not California’s governor. We’re seeing what kind of values they share.”

Schwarzenegger also sided with big business in vetoing a bill that would have required local governments to prepare reports on the economic impact of giant retail superstores before approving new construction. The reports would have been financed by the corporate applicants and would have applied to stores larger than 130,000 square feet and with more than 20,000 units in stock.

The Los Angeles City Council last month passed a similar law designed out of concerns that the presence of Wal-Mart and other gargantuan retailers drives out existing businesses, depresses wages and overloads roads with traffic. The economic impact reports required by the bill Schwarzenegger vetoed, SB 1056, would have assessed how proposed superstores would affect all of those areas.

“Local communities are already free to decide between rejecting or embracing any retail development,” Schwarzenegger wrote. “By requiring the approval of an economic impact report prior to approval of a development project that includes a ‘superstore retailer,’ this bill would create a system of costly hurdles that these retailers would need to overcome before opening a new facility in a city or county.”

Schwarzenegger also vetoed a bill, SB 1386, that would have banned schools from subjecting students to random drug or alcohol tests in most cases.