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Workers hail $8 wage; bosses worry
By Dorothy Korber and Mehul Srivastava -- Bee Staff Writers
Published August 23, 2006

WITH THE prospect Tuesday that California's minimum wage will rise to $8 an hour by 2008, familiar foes retreated to familiar positions: Business grumbled that it was too much while labor grumbled it was too little.

But Teresa Morales, slathering mayonnaise on submarine sandwiches in midtown Sacramento, grinned and said the pay raise would be welcome. Morales, 37, earns the current minimum wage -- $6.75 an hour -- at the Subway on P Street.

The state's proposed increase -- to $7.50 an hour in January 2007 and $8 a year later -- would be significant for the working mother. By 2008, her weekly paycheck for 30 hours of work would rise nearly 19 percent, from $202 to $240.

"It would make a big difference for me," she said. "I have two teenage kids to feed. Everything is so expensive these days -- not just food, but rent and bus fare."

The state Senate is expected to vote Thursday on the new minimum-wage plan, Assembly Bill 1835, which would then require Assembly approval before reaching the desk of Gov. Arnold Schwarzenegger, who says he will sign it.

Though $8 an hour sounds fine to Morales, she will still be poorer than if she had been making minimum wage in 1968. That was the last year that a family of three with one member earning the minimum wage came close to meeting the federal government's upper-income limit for being considered poor.

Even so, Jean Ross shares Morales' enthusiasm for the latest increase. As director of the nonprofit California Budget Project, Ross studies the impact of state policy on low-income residents.

"People who earn somewhat more might ask: What does it buy? The answer is, it buys a lot," Ross said.

Despite common perceptions, Ross said, California's 1.4 million minimum-wage workers aren't all teenagers who put in a few hours after school. Most are adults, Ross said, and 60 percent work 35 or more hours a week.

For workers like them, $1.25 an hour is meaningful.

The minimum-wage deal struck between Schwarzenegger and Democratic leaders Monday does not provide for future increases tied to inflation. That process, called indexing, would follow a model in some other states that allows for automatic increases in the minimum wage as costs go up. State Treasurer Phil Angelides, Schwarzenegger's Democratic rival in the November election, advocates indexing.

Even without automatic increases, small business owners said Tuesday they will have to make major adjustments to cover the higher costs of payroll.

"Tighten my belt, that's all I do," said Alzada Knickerbocker, owner of the Avid Reader bookstore in Davis, who has nine employees. "Changes like these are seismic."

Knickerbocker is one of about 37,000 California small-business owners represented by the National Federation of Independent Businesses, which lobbied against the increase, said NFIB spokesman Martyn Hopper. "Government mandates like these force us to do things that small businesses don't want to do, like reduce payroll or lay off people," he said. As the minimum wage increases, there is often a subsequent increase in the wages of workers who earn a dollar or two more. It's a thought that worries Reed Youmans, who runs two hotels and employs 120 people, with the lowest-paid already making about $8.25.

"We pay what the market can bear, and every time the state has raised minimum wage in the past, there was significant pressure on us to raise salaries for everybody," said Youmans, whose hotels are in Davis and Rancho Cordova.

For restaurant owners, the situation is complicated by the fact that their minimum-wage servers can reap tips triple their hourly wage. Sacramento restaurateur Randy Paragary says about 60 percent of his 600 employees fall into that category.

"Many of our servers make $20 to $30 an hour in tips, beyond their minimum wage," Paragary said.

Raising the wage, he said, inevitably will raise menu prices.

"It's a domino effect," Paragary said. "Increasing the hourly rate increases the employer's portion of payroll taxes. ? We'll have to raise prices to cover those increases so we can maintain the status quo of profitability."

In a press conference Tuesday, Schwarzenegger said he is satisfied with the current plan, the first minimum-wage hike since 2002.

"I made it very clear, three years ago, that we have to do everything we can to protect the economy and not to make any changes until the economy comes back," Schwarzenegger said. "That's why I was against signing the minimum-wage bill the first two times it came to my desk. This time, I felt very strongly that the economy has come back."

But the AFL-CIO, the biggest labor lobby in California, noted that the governor waited for an election year to pass the increase.

California's high cost of housing cancels out much of the benefit of a higher minimum wage, said John Foley, executive director of Sacramento Self-Help Housing. He said it still would be tough for anyone earning the new minimum wage to qualify as a renter in Sacramento County, where the average monthly rent for a two-bedroom apartment is $822.

"Being able to afford housing is the real driving factor between having a normal life experience and having a life of constant crises," Foley said.

James Hall, 44, sees poverty firsthand at his workplace, Loaves and Fishes, a service organization for the homeless. He says the pay increase is welcome.

He supports his pregnant wife on his minimum-wage income.

On Tuesday afternoon, Hall was walking with his wife on L Street, near the Capitol, just a few hundred yards from where legislators announced the increase.

"If I were to see a politician right now, I would say thanks," he said. "But, really, we could use some more."

Most of California's 1.4 million minimum-wage workers are adults, according to the nonprofit California Budget Project.


  • 1. Washington state, $7.63
  • 2. Oregon, $7.50
  • 3. Connecticut, $7.40
  • 4. Vermont, $7.25
  • 5. Alaska, $7.15
  • 6. Rhode Island, $7.10
  • 7. Washington, D.C., $7.00
  • 8. California, $6.75
  • 8. Hawaii, $6.75
  • 8. Massachusetts, $6.75
  • 8. New York, $6.75

    Source: U.S. Department of Labor

    About the writer:
    * The Bee's Dorothy Korber can be reached at (916) 321-1061 or dkorber@sacbee.com. Staff writer Kevin Yamamura contributed to this report.

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