South-Western - Management  
Minimum Wage Hike Vetoed
Topic Human Resources Management
Key Words Minimum wage, California Budget Project
News Story 

Governor Arnold Schwarzenegger vetoed a bill this week that would increase the minimum wage by a dollar over the next two years to $7.75. The bill would have also required that the minimum wage be adjusted upward each year to keep up with inflation. The minimum wage has not been increased since 2002 and Schwarzenegger said that although he believes it is time for the minimum wage to be adjusted, he does not support the proposed annual increases to keep up with inflation.

Detractors say that Schwarzenegger is overly influenced by corporate campaign contributors who oppose the bill like the Restaurant Association and others who feel that the bill will just drive up their costs of doing business.

Research seems to indicate that the increase is needed. A study released this week from the nonpartisan California Budget Project found that the average family of four would need to earn at least three times the hourly wage in order to meet very basic needs. They estimate the bare bones cost of living for a family comes in at $42,928 with one parent working, and $57,325 with both parents working. This estimate does not include any dollars for vacations, savings, or emergencies. In contrast, a minimum wage earner makes $14,040 annually. Another study by the national Economic Policy Institute shows that the minimum wage is about one-third of the average private sector pay and has the lowest purchasing power it has had in 50 years.

Some say that the report points out that work needs to be done on creating a better business environment and to keep living costs down for families.

Questions
1.

Why are organizations like the National Restaurant Association opposed to the minimum wage increase legislation?

2.

Typically, high-turnover employers like grocery stores, fast-food chains, and retailers hire at the minimum wage level. However, some organizations like Costco and Trader Joe's believe in paying their employees at a level that is significantly above that paid by competitive businesses. Name at least three benefits to the business of the strategy of paying above the minimum wage.

3.

The argument for raising the minimum wage to keep up with inflation seems clear. What is the argument against raising the minimum wage?

Source "Minimum Wage Hike Vetoed," Ukiah Daily Journal Oct. 1, 2005, p. NA.
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