LOS ANGELES, Aug. 22 — Gov. Arnold Schwarzenegger and California lawmakers said Tuesday that they had agreed to raise the state’s minimum wage to $8 an hour over the next two years, making it among the highest in the nation. þþThe governor had vetoed previous minimum wage bills, and had hoped to nudge this wage increase to $7.75, just $1 more than the current $6.75-an-hour minimum, which was passed in 2002. But under pressure from labor unions and the Democratically controlled Legislature, and facing re-election in November, Mr. Schwarzenegger, a Republican, reconsidered. þþUnder the deal worked out between the governor and the state’s Democratic leaders, minimum-wage workers would receive a 75-cent increase on Jan. 1, and an additional 50 cents in 2008. The bill needs to be approved by the full Legislature, which lawmakers of both parties said would happen by the end of the month. þþ“I am very happy that we have made the decision together that we increase the minimum wage,” Mr. Schwarzenegger said at a news conference in Sacramento. “We have to make tough decisions, but to me this is the right decision to make.”þþ“This is an election year,” he added. “To get this stuff done with Democrats and Republicans just really shows a lot.”þþThe states with the highest minimum wages are Washington, $7.63 an hour, and Oregon, $7.50 an hour. Both are likely to top California again in 2008 because each has set its minimum wage to rise with inflation. þþThe hourly wage that low-income workers ought to earn has become a hot-button issue around the nation as the midterm elections approach. Seven states have ballot initiatives aimed at bolstering the minimum wage, and the legislatures in several other states are contemplating increases. Congress has not raised the federal minimum wage, $5.15 an hour, since 1997. þþSome economists said Tuesday that the California increase could have implications for the rest of the nation, but they differed on just what its effect might be.þþ“Here you have a state that is an economic powerhouse and that is economically diverse. A place that is extremely diverse is ground zero in the debate for whether state minimum wage increases are helpful or hurtful,” said Jared Bernstein, senior economist at the Economic Policy Institute. þþIn terms of sheer buying power, the wage increase announced Tuesday is by no means the highest in the state’s history. In the late 1960’s, the hourly minimum wage peaked at almost $10 when adjusted to 2006 dollars. Three decades later, in the mid-1990’s, it fell to a 50-year low when adjusted for inflation.þþConservative lawmakers and policy analysts suggest that raising the minimum wage leads to less lucrative employment for low-income workers. þþ“At the federal level, when we increase the minimum wage, it always increases the number of people working for less than minimum wage,” said Alan Reynolds, a senior fellow at the Cato Institute.þþMr. Reynolds cited federal figures showing that in 1995, 3 percent of the working population nationwide earned less than the minimum, while 4 percent earned less after the federal minimum wage was raised in 1997. “You get people marginalized and competing for second-rate jobs,” he said.þþ
Source: NY Times
