Wednesday, October 19, 2005

Schwarzenegger Vetoes Minimum Wage Bill

On September 29, 2005, Governor Arnold Schwarzenegger vetoed Assembly Bill 48 which would have raised the minimum wage in California to $7.75. This bill would have increased the minimum wage to $7.25 effective July 1, 2006 and to $7.75 effective July 1, 2007. Beginning January 1, 2008 and each January 1 thereafter, the minimum wage would have been automatically adjusted to keep pace with the rate of inflation.

In his veto message to the legislature, Gov. Schwarzenegger expressed support for increasing the minimum wage. However, he also stated that automatic increases to adjust for inflation failed to "account for changes in the economy which could have deleterious effects on the economic health of the state." Gov. Schwarzenegger also called the automatic increases an abdication of the legislature's duty "to consider all of the impacts each increase to the wage will have on workers and businesses."

I agree with Gov. Schwarzenegger's sentiments on the issue of automatic increases. The vast majority of economists believe the minimum wage law already costs the economy thousands of jobs. When you force American companies to pay a certain wage, you increase the likelihood that those companies will outsource jobs to foreign workers, where labor is much cheaper. Non-profit charitable organizations are hurt by the minimum wage. Increasing the minimum wage can drive some small companies out of business.

While vetoing the minimum wage law may seem heartless to some, it will likely preserve the jobs of many who might have been put out of work had the law passed.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.


Anonymous said...

Oh please... Companies that have to worry about minimum wage (currently 5.25 here in michigan) are not about to outsource jobs to other countries. We're talking, mcdonalds, other fast food places, secretarial type jobs, cleaning jobs... you name it. Companies that WOULD have any reason to outsource their work, are not paying their current employees minimum wage. That is a rediculous claim indeed.

How many times have you gone to a mall and seen a person working behind the counter who was flown in from other countries to work for that company because the american people they hired wanted more than $5.25?

I would suggest that you seriously reconsider your statement. It makes no sense at all.

Carl Starrett said...

My wife works in the HR department at the corporate headquarters of a national fast food chain, so I have a pretty good idea of what impact increasing the minimum was would be on the business community. The impact isn't limited to the kid punching in your order on the cash register.

If you give your lowest employees a government-mandated rase of 50 cents an hour, it creates pressure on your other salary costs such as their immediate hourly supervisors. The employer will also compensate by decreasing or eliminating that person's next raise. Other salary increases are tied to the minimum wage, not just the drive through order taker.

And you know what? You won't be needing to bring in someone from overseas to take your order. McDonald's has been experimenting with using overseas order centers. Have you ever called Dell for tech support? You end up talking with soneone from India. Someday, you might be giving your Big Mac order to some college student in New Dehli. And I won't even get into the discussion of the impact this could have on inflation.

The minimum wage was ever intended to be a life sustaining salary and should not be looked upon as such.