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Friday, Mar 29, 2024

Minimum Wage Hike to $8 Makes It Nation’s Highest

As the New Year rang in, California became the state with the highest minimum wage. Effective January 1, minimum wage rose from $7.50 to $8 after rising from $6.75 to $7.50 last year following Gov. Arnold Schwarzenegger’s September 2006 signing of AB 1835, which mandated the wage hike. Although California may now lead the nation in the amount of minimum wage it offers to workers, labor advocates question the adequacy of the pay increase, while those in the business community wonder what effect the new minimum wage will have on certain kinds of companies. Scott Hauge, founder and president of Small Business California, discussed with Schwarzenegger the response both businesses and the public would likely have to AB 1835 before it was made into law. Prior to January 2007, the minimum wage had not been raised in the state since 2002. “When the Governor put forth this bill, the unions had recently done a survey poll and found that over 70 percent of the population supported an increase in minimum wage, along with an indexing or COLA [Cost of Living Adjustment] provision.” Hauge’s group agreed to support AB 1835 without the indexing provision. However, even without a cost of living adjustment, he believes that it is possible certain industries could be adversely affected by the legislation. “As far as how is small business going to be impacted , the industries that will be affected the biggest would be the restaurant industry, especially because, in California, restaurants don’t give a tip-credit,” Hauge said. “Restaurants will be disproportionately hit.” Restaurants have a large number of minimum wage workers. Moreover, in this state, they are not given a tip credit, which would allow them to pay workers less than the minimum wage under the assumption that the tips such employees receive would compensate for the lesser wage. On the other hand, Hauge said that many industries will not feel the impact of the minimum wage hike because it is already standard practice to pay above the minimum wage. David Russell, director of the Family Business Center at California State University, Northridge, agreed. “An increase in the minimum wage may simply replace raises that businesses might have otherwise given,” he said. “Rather than give voluntary raises, some business may be forced to give raises. The government is forcing businesses to do what some small businesses would do anyway.” Most businesses, said Russell, would have preferred to decide on their own to give raises instead of having the government make that decision for them, particularly in a weak economic environment. For businesses with a significant number of employees at or just above the minimum wage level that are likely operating on relatively thin margins, Russell said, “An increase in the minimum wage is likely to put additional pressure on those margins and may force a price increase.” However, because the marketplace is so competitive, many small businesses won’t be able to raise prices, Russell went on. For those who advocate for laborers, this year’s rise in the minimum wage brings up a different set of issues. Before she described what her concerns are with AB 1835, however, Anastasia Ordonez, communications director for the California Labor Federation, discussed what she liked about the legislation. “We are very pleased that minimum wage is going to go up to $8 an hour,” she said. “That means 1.5 million workers in California are going to benefit from this increase. A lot of unions, low-wage workers and advocates helped make this a reality a couple of years ago.” But, Ordonez stressed, CLF doesn’t believe California’s minimum wage hike is sufficient. That’s because, according to Ordonez, a single adult who works full time would need to earn $13 per hour simply to cover basic expenses in California. “This is an important first step, but we think there is still a long way to go,” Ordonez said. “We hope a more long-term solution gets passed at some point linked to cost of living We still have a long way to go before people are able to get out of poverty.” Echoing Hauge and Russell, Ordonez acknowledged that many businesses have long paid above the minimum wage. But she said that many such employers are union employers. Greg Good of the Los Angeles Alliance for a New Economy, an organization that strives to better the lives and working conditions of area workers, expressed thoughts about the minimum wage rise that are in line with Ordonez’s. “There’s no question that an increase in the minimum wage is certainly a good thing for working people in this city or across the state, but it may be as or more indicative of how far we have to go rather than being indicative of any grand achievement,” he said. “We should be under no illusions or delusions about the adequacy of $8 an hour. Because $8 an hour is not a middle class income or even a livable wage, it underscores how far we have to go to ensure that this economy serves all working people.”

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