(July 26, 2004) California Chamber-opposed legislation increasing California’s minimum wage will be heard by the Senate Appropriations Committee on August 2.

AB 2832  (Lieber; D-Mountain View) increases the state minimum wage from the current $6.75 per hour to $7.25 per hour in 2005 and to $7.75 per hour in 2006.

The Chamber considers AB 2832 a 'job killer' that will give California the highest minimum wage in the nation and increase employer costs by at least $2.08 billion annually, raising costs for consumers and driving employers to other states.

“California currently has the nation's highest energy costs and unemployment insurance tax rates, among other things,” said Julianne Broyles, director of employee relations and small business. “An increase to the minimum wage would be yet another cost driver forcing more employers out of the state or causing them to simply close their doors.”

For a business with 20 workers, the 50-cent-an hour increase would boost payroll costs at least $20,800 per year. The second increase would add at least $41,600 annually to that same small firm's base payroll costs.

Other business costs, such as workers' compensation, health care premiums and other employment-related taxes, also increase whenever payroll costs increase. If AB 2832 becomes law, the Workers' Compensation Insurance Rating Bureau has estimated that workers' compensation costs would rise by an additional $120 million annually.

Case Study
The chief executive officer of a Napa company that manufactures pet care products recently described for the Napa Chamber of Commerce the impact of the minimum wage hike that AB 2832 would mandate.

'We're cooked,' said Linda Parks, chief executive officer of Lixit Corporation. 'That would be the straw that breaks our back. I don't think we could stay in town. Each dollar translates to $120,000 to $130,000 to us.'

Lixit employs 80 to 100 workers, including about 40 developmentally disabled employees. Most of the employees also are shareholders in the company, which has done business in Napa for more than 30 years.

Pinched by rising costs that already have driven two of her major suppliers from California to Nevada, Parks has been forced to compress wages to stay competitive. Increasing prices has not been an option.

'Our customers are huge, they control the pet industry and they dictate the terms. When I talk to my customers, they say, 'If you're stupid enough to have a business in California, that's not my problem,'' Parks reported.

'Every year our employees lose a benefit,' Parks said. 'It used to be that we'd give stock for performance. As business got better, they were paid more. Now, we take things away…It's not that we're losing sales, but we're losing money. Our expenses are higher and where else can I cut?'

If Lixit leaves Napa, Parks estimates that the company would lose at least half its employees, while the temporary employment agency for which Lixit is the biggest client probably would go out of business.

'California government has just about buried us,' Parks said in expressing her frustration about the impending minimum wage hike. 'We've always kept our head above water, but this will do it, we'll go under. They don't seem to understand that you can't beat a horse to death, because then he can't pull the cart any more.'

Action Needed
Contact your senator and members of Senate Appropriations to urge a 'no' vote on AB 2832.

For more information and links to an easy-to-edit position letter to use as a template for correspondence to legislators, visit www.calchamber.com.