State's minimum wage hits $8

California's minimum wage joined the ranks of the nation's highest this year, increasing 50 cents to $8 an hour.

Depending on whom you ask, the increase can be chalked up as a boost to low-wage workers or a blow to the state's business community.

Meanwhile, those at the bottom of the pay scale wonder whether the raise will actually help workers keep pace with the Golden State's high cost of living.

"The more they pay you, the costs keep going up," said Anita Crawford of Natomas, a 26-year-old restaurant shift leader. "It's still going to be the same."

California's cost of living continues to far outpace purchasing power, but the state's $8 minimum wage will be significant for low-wage earners, said one local analyst.

"Purchasing power hasn't kept pace, but this will make an impact," said Jean Ross, executive director of the Sacramento-based California Budget Project, a group of fiscal and policy analysts who focus on low- and middle-income Californians. "That's a significant increase."

The wage boost is the second of a two-step increase triggered by 2006 legislation that raised California's minimum wage to $7.50 last January.

The hike will put the state's minimum wage on par with Massachusetts, and the two fall into the No. 2 spot just behind Washington state's $8.07. The federal minimum wage is $5.85 an hour.

"With this increase, we are demonstrating the value we attach to the work these employees provide," said John Duncan, director of the Department of Industrial Relations, in prepared remarks.

While trade unions and organizations such as the California Budget Project hail the wage increase as "an important boost to low-wage workers' earnings," it has also raised new concerns from traditional wage hike foes such as business organizations and the restaurant industry.

The California Chamber of Commerce has been especially vocal, saying the hikes would lead to soaring employer wage costs that will be passed to consumers and chase smaller businesses out of the state. All too often, business owners fret, pay increases at the lowest level simply give higher-wage workers the feeling that they should share in the bump.

According to the chamber, the two-step increase has so far raised overall wage costs by $2.6 billion.

"Instead of working to make California less competitive by mandating that the state's minimum wage be the highest in the nation, the California chamber believes the focus should be on removing the barriers to productivity and wage growth," chamber officials said in a prepared statement.

California restaurateurs, expected to bring in $56 billion in sales this year, said they will have to raise menu prices and trim staff to maintain or grow profit in the face of the wage increase.

"The restaurant industry (operates) on a small profit margin – there's a lot of overhead. The restaurateur can only raise (wages) so much," said Lara Dunbar, the senior vice president of government affairs with the California Restaurant Association, a trade group that represents the state's restaurateurs.

She called for so-called "tip credits" allowing restaurateurs to pay workers who receive tips less than minimum wage.

"We anticipate people having to make tough labor decisions," Dunbar said. "People may have to be laid off."

Manager Vu Le of Burger Xpress, a small family-owned hamburger stand on 47th Avenue in south Sacramento, was of two minds.

"I'm kind of in the middle," he said. "It hurts the employer a little bit, but it's good for the employee."

The increase will also be good because employees will pump the money back into neighborhood businesses, Ross said.

"A modest increase in the minimum wage has a minimal impact on employment," Ross said. "Employees spend their paychecks in the local community in ways that create more jobs."

One business group, San Francisco-based advocates Small Business California, endorsed the hike with provisions that it not be indexed to keep up with cost-of-living increases and that it come with "tip credits." The group won on the indexes, but not tip credits.

Although the group supported the increase, the issue is still problematic for employers, said executive director Scott Hauge. He cited challenges that San Francisco-based businesses face in paying that city's $9.14 hourly minimum wage.

"Business can only pay what a job is worth," Hauge said. "Yes, the cost of living is very high, but I don't think it's business's responsibility to pay cost of living if the job doesn't justify it."

The 50-cents-an-hour raise translates to $2,600 more in annual earnings for full-time workers than two years ago.

It's enough to pay for nearly three months' rent on the average one-bedroom unit, but it will raise the average worker's annual pay to $16,640. That falls roughly $250 below the federal poverty line for a family of three, according to the California Budget Project.

"This will be able to help people raise their families. It's necessary, and we should be looking at raising the standard," said Jeanine Meyer Rodriguez, spokeswoman for the Service Employees International Union, which represents public service workers.

Meanwhile, Crawford is nervous. She makes more than minimum wage, but after seven months at a Natomas restaurant, she worries that she'll have to look for another job.

"A lot of small businesses are not pulling enough to pay (an increased) minimum wage," she said. "A wage increase might bump jobs."

Other low-wage workers like barista Donna Ponenala of Sacramento, were happy but wary. She figured any wage increase would be canceled by higher costs for gas, rent and food.

"If the other stuff is going up – gas is going up," Ponenala said, pouring coffee on a chilly Friday morning at a parking lot coffee stand in the Fruitridge Shopping Center. "It's probably going to even out."

"People are feeling very squeezed. People begin to feel a little helpless," said the SEIU's Rodriguez.

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