How low can they go?

As elected reps’ salaries soar, minimum wage stays in limbo

They say you must love yourself before you can give unto others. However, while there’s been a whole lot of lovin’ among elected officials lately, it remains to be seen if any rubs off on America’s neediest workers. Two weeks ago, the U.S. Senate voted itself its seventh pay increase since 1997; a week later, Republican senators, in the name of fighting inflation, shot down a Democratic attempt to raise the $5.15-an-hour federal minimum wage. Had it passed, the raise for America’s lowest-wage earners would have been the first such since, ironically, 1997. In California, where an independent citizens panel has just awarded 18-percent pay raises to the state’s top elected officers, and where legislators’ pay has gone up 14 percent over the last year, signs are promising that the state minimum wage could increase by a dollar over the next two years. Governor Arnold Schwarzenegger, after all, called for such a raise in his January State of the State speech.

However, our millionaire governor may end up vetoing two minimum-wage bills sponsored by state Senator Gil Cedillo and Assemblywoman Sally Lieber because they contain provisions that, beginning in 2009, will let the minimum float upward annually with the Consumer Price Index. (The CPI, based on the changing costs of specific consumer goods and services, allows the federal government to gauge inflation.)

“Indexing,” as the two bills’ cost-of-living mechanism is called, has become the newest political chew toy fought over by the Democratic-controlled Legislature and Schwarzenegger, who claims indexing will make California a less-attractive business environment. (The governor has used his Terminator pen on two previous minimum-wage hikes.)

Indexing proponents point to two studies refuting this prediction. One, from the Fiscal Policy Institute, shows that states with minimum wages higher than the federal level boast faster growth rates for small businesses than do states without. (At $6.75, California’s ranks above the federal hourly minimum, while red state Kansas boasts a $2.65 hourly minimum.) A second research paper, produced by Florida International University and the Research Institute on Social and Economic Policy, looks at Florida, a state that has had its minimum wage indexed for about a year. This study unambiguously shows that, far from scaring away investors and causing unemployment, Florida’s economy continues to grow, and the state remains the nation’s prime destination for “insourced” jobs from overseas.

Not everyone is convinced that the Florida model is pertinent to California. Jack Kyser, the Los Angeles County Economic Development Corp.’s chief economist, asks, “What CPI would you use? There isn’t a statewide one. There’s a five-county CPI for Southern California and a Bay Area one. There’s also a national CPI, which is lower than the five-county CPI. A lot of people say indexing is about fairness, but you generally find young people and females working minimal-wage jobs for some reason. You have to ask, ‘Are these people heads of households?’”

The more the minimum wage has remained the same, the more it has become a public issue, thanks to some compelling figures. A worker earning the federal minimum (which by default is the minimum for many states) grosses about $10,700 a year. According to a joint study by the Economic Policy Institute and the Center on Budget and Policy Priorities, these workers’ buying power stands at a 51-year low. With Washington, Nevada, Oregon and Florida already indexing their states’ minimum wage, voters in Arizona, Missouri, Ohio and Colorado will decide the issue this November.

“If you do raise the minimum,” Kyser says, “will there be job loss? No, there won’t be, but firms will anticipate you will see brand-new menus with higher prices and there will be a bigger push for automation. At the end of the day, you should raise the minimum, and talk about indexing later.”

Not mentioned in the debate, however, are the uncounted thousands of Californian workers who are not even paid minimum wage. Kimi Lee, director of Los Angeles’ Garment Worker Center, says her group surveyed apparel workers who passed through the center from 2001 to 2004.

“We found that workers here earn an average of $3.18 an hour,” Lee said.

Schwarzenegger risks being cast as Scrooge this election year should he veto the Cedillo and Lieber bills. He may have found a way, however, to outsource his discomfort by resurrecting the moribund Industrial Welfare Commission (IWC), a state panel that in the past has regulated workplace issues such as overtime and wages. Under former Governor George Deukmejian, the IWC became a kind of bouncer for the state Chamber of Commerce and was de-funded in 2004. If chwarzenegger’s newly appointed panel approves the $1 raise without indexing, he will have gotten his way while being able to claim credit for the raise as well.