San Diego Business Journal

Real-Life Costs of an Unrealistic Political Bill

by Martyn Hopper

Assembly Bill 181 promises the ultimate high , a permanent one.

No longer will that legislative equivalent of the drug Ecstasy , the state's minimum wage rate , be a quick fix for lawmakers imagining themselves to be at the vanguard on the war on poverty, but a long-lasting, beautiful trip into a utopia of egalitarianism. Or so its author seems to promise.

To give some credit to Assemblyman Paul Koretz, D-West Hollywood, he is at least offering a novel , albeit flawed , proposal. It is one that seeks to end the yearly battle over how high to post California's mandatory hourly wage, which is now at $6.75. By tying future rises in the state's minimum-wage rate to increases in the cost of living, Koretz says he hopes to bridge the decades-long gulf between management and labor.

Leaving aside for a moment the unlikelihood of Koretz, union backers of his bill, and various charitable organizations also in support of it ever cottoning to a drop in the minimum-wage rate should the cost of living dip, AB 181 is full of structural flaws in addition to being terribly timed during the most troublesome economic period in the past 10 years.

Most importantly, does anyone seriously believe that, should AB 181 become law, the forces supporting it will ever settle for simple cost-of-living adjustments to the minimum-wage rate, or, as is much more likely, will future legislatures demands enhancements to it?

It is important that any discussion of the minimum wage begin by throwing back the curtain , Oz-like , to expose the little man behind the fearsome visage.

The minimum wage is not a salary that the great majority of people receiving it raise a family on. Sure, Koretz's committee can round up a usual suspect in a manner reminiscent of Captain Renault commanding his underlings, tongue in cheek, to find the culprit in Casablanca.

Entry-Level Wage

But the truth of the matter is that the minimum wage is an entry-level wage for youths seeking their first job, people looking to make some extra money at a second job, or seniors with time on their hands and a desire to remain active.

In its January 2000 Employment and Earnings Report, the U.S. Bureau of Labor Statistics found 51 percent of minimum-wage earners were between the ages of 16 and 24, and 60 percent of minimum-wage earners worked only part-time. An NFIB Education Foundation study found only 12 percent of minimum-wage earners could be considered sole "bread winners."

In other words, families are seldom dependent on the minimum wage. What they are dependent on is a job for their little Johnny looking for his first foray into working life, or a place for the spouse to earn a few extra bucks for Christmas, or a place for grandma or grandpa to work at to stay active. Jobs, it should be emphasized, that become scarce as minimum-wage rates increase.

Union workers are definitely not dependent on the minimum wage, unless they have a particularly ineffective union. Unions, however, always want to see boosts in the minimum wage because it gives them the power to negotiate higher salaries over that base rate.

That stratum of minimum-wage workers such as the young adult, the retired senior, or the family member looking for some extra spending cash is the group that suffers when the rate increases. But then they don't have lobbies in Sacramento.

'Living Wage' Movement

AB 181 may come to be seen as chump change, however, if the so-called "living wage" movement ever takes off. Currently confined to putatively "progressive" enclaves of Santa Monica, San Francisco and Santa Cruz, this movement simply wants the minimum wage doubled.

The California economy right now is picking up the pieces from a terrible intersection accident it received from broadside and rear-end hits from energy deregulation, a recession and Sept. 11. Now, more than ever, is not the time for the misnomer living wage or a jump in the minimum wage. Now is the time for job creation, and that can only come from keeping the costs of creating the job low.

Curiously, the first to suffer should Koretz's legislation become law are many of the fine restaurants in his district. It will come in the form of that 50-cent to $1 boost in an entr & #233;e, a little slower service from the cut-back in staff, a little less business from retirees who live tightly on the margins, elimination of a lunch business, and maybe the shuttering of an eatery or two.

These are the real-life consequences of an unrealistic political bill.

Hopper is California state director for the National Federation of Independent Business.