Firms Brace for Wage Legislation By JEFF WEISS Contributing Reporter California’s business climate could possibly take another turn for the worse if a minimum wage increase bill making its way through the state legislature passes, according to legislators and businesspeople against it. Assembly Bill 2832, authored by Assemblywoman Sally Lieber (D-Mountain View) proposes to raise the state’s minimum wage to $7.25 an hour by January, then to $7.75 an hour by January of 2006. The bill easily passed the Assembly with a 45-30 vote and at presstime was expected to clear the traditionally more liberal state Senate within days. As one might expect, support for the bill has tended to stay closely along party lines, with Democrats favoring its passage and Republicans adamantly opposed. “The University of California at Berkeley released a study two weeks ago saying that people who make less than $8 an hour cost taxpayers $8 billion in additional support services. I think we need to increase the minimum wage to alleviate that tax burden,” state Senator and Los Angeles mayoral candidate Richard Alarcon (D-Van Nuys) maintained. “Obviously, the wages that business pay out would be higher but the idea is that the workers would be more stable and that they would be able to afford their bills and hopefully be more loyal. History has shown that every time the minimum wage is increased it has benefited our economy.” State Senator Tom McClintock (R-Thousand Oaks) took an opposite tack on the bill, claiming that it will further hamper the state’s already shaky business climate. “”I think it’s a bad idea. It will price the minimum wage entry level positions out of the market, removing the first rung of the economic ladder. People will lose their jobs or opportunities for jobs. If raising wages were that easy, why not go to $10 an hour or $20 or $30, the answer is because every time you raise it you cost people at the bottom their jobs,” McClintock said. “The intention of the bill might be compassionate, but it’s the most mean spirited thing you can do to workers trying to land an entry level position. The industry estimate is $2 billion in direct costs.” Trouble with governor McClintock expected the bill to fly through the Senate but have more difficulty once it reached the governor’s desk. “This is the most liberal legislature in the country. Of course it will pass the legislature,” he said. “Fortunately, we have a more sensible governor then we had in the past. I can’t speak for the governor, but I would expect him to veto it.” Indeed, the rhetoric emanating from the governor’s office would seem to point towards a veto. “The governor does not generally comment on pending legislation before it completes the legislative process. At the same, the governor’s commitment to improving the state’s business climate and making it easier for Californians to get and retain jobs is certainly well known,” Vincent Sollitto, a spokesperson for the governor said. California is one of 10 states with a minimum wage higher than the federal minimum of $5.15 an hour. The highest is Washington state, which ties minimum wage increases to inflation at $7.16 an hour. California has steadily increased its minimum wage since 1996, when state voters approved the Living Wage Proposition 210 to establish a $5.75 per hour wage. Since then, the Legislature has raised the minimum twice, leaving it at the $6.75 an hour it currently stands at. Restaurant opposition The California Restaurant Association is one of the opposition leaders to the bill, claiming that the $1 increase will cost the average small business restaurateur upward of $20,000 in new payroll costs the first year and upward of $40,000 the second year, forcing them to scale back shifts or lay off workers. However, not all small businesses feel that they will be adversely affected by the proposed increase. Ben Forat, owner of Studio City Hand Carwash is in favor of the pending legislation. “It’s fine with me. The cost of living is going up and the minimum wage should go up too. At my business, the new people get minimum wage while others get $10 an hour. As long as they lower the cost of worker’s comp, it will balance it out. If you can’t afford to pay employees one dollar extra then you shouldn’t be in business. Having happy employees is crucial to a business’ success. Keeping them happy can only make the business better,” Forat said. Jeff Arnold, chief financial officer for Burbank based Mexican-food chain Poquito Mas, believed that full-service restaurants would be affected more than quick casual restaurants like Poquito Mas. “My gut feeling is that it would put upward pressure on just about everybody in business, even though most of our people make over $7.75, there’s still a big difference between making minimum wage and making 25 cents over. Yet most of our people make significantly more than that. The issue of minimum wage will affect the full service restaurant more. The majority of people making minimum wage are servers,” Arnold said.