Wage Wars : Raising Minimum Stirs Debate at Grass Roots

Ever since the Clinton Administration proposed raising the federal minimum wage from $4.25 to $5.15 an hour, the issue has produced a rhetorical feast in Washington. But for a true taste of how the President’s beleaguered plan plays with the people it would directly affect, belly up to the gleaming glass takeout counter at Solley’s Delicatessen.

See that $8.10 corned beef sandwich on the menu? Well, expect to pay $8.5O for it if the minimum-wage hike goes through, said Sol Zide, owner of the popular Woodland Hills eatery and its sister restaurant in Sherman Oaks. Zide, 52, estimates that with a staff of nearly 200, the hourly increase and its accompanying taxes would add about $7,000 to his weekly payroll. “That’s a lot of bagels,” he said, making higher prices at the two Solley’s inevitable.

From her regular station in the restaurant, however, waitress Jacquolyn O’Neill has done some math of her own. On a good day, O’Neill, 47, a veteran hash slinger with a gritty, no-nonsense attitude, can make as much as $125 in tips. During her five years at Solley’s, that income has helped her maintain many of the accouterments of a middle-class life: a VCR, car payments and a $900-a-month condominium in Canoga Park she shares with her 25-year-old twin daughters.

But based on her meager hourly wages, her woefully thin W-2 statements present serious obstacles. Excluding tips, her gross earnings for a workweek of slightly less than 30 hours are $115.66, which means she cannot qualify for a home mortgage. If illness or injury forced her to stop working for an extended time, her disability payments would be based on her minimum wage, barely enough to cover the cost of a Band-Aid after the regular bills are paid. And health insurance? Zide says he can’t provide it and O’Neill says she can’t afford to buy it.

Welcome to the world of Southern California’s low-wage workers and their employers, a world where performance raises are dished out in 25-cent increments, where paid sick days, job satisfaction and security are in short supply and where the faces are in constant flux. It is a world far removed from free-spending Hollywood and the high-tech economy that experts say will drive America’s future.

From this lowly rung on the labor ladder, the competing claims of politicians and pundits--that a wage hike would either help lift people out of poverty or fuel unemployment--appear equally inflated. While employers here say they would have to charge their customers more but not lay people off, workers know that a 90-cent hourly increase, translating into $36 more a week, won’t do much to ease their financial worries.

“If they raise the minimum wage, it won’t matter, because we will be paying more for everything anyway,” Michele Geotes said with a laugh. Geotes, 40, earns $5 an hour as a gas station cashier in Oxnard.

“Either my car will break down or I will have to renew my (car) tags. I’ll have to go to the dentist. The money will be gone before I can count it.”

The popular image of those earning near the minimum wage is one of teen-agers serving up hamburgers. The reality is much more complicated in California, where 1.3 million people, or 11% of the state’s labor force, earned no more than $5.15 an hour in 1993, the last year for which statistics are available, according to the Economic Policy Institute, a Washington think tank.

They are single mothers struggling to make ends meet, twentysomethings just starting out and grown men whose bad fortune has required them to start over. They sell CDs at Tower Records, shoes at Payless and $60 flower arrangements at Conroy’s. They clean office buildings after hours and are already on duty dishing out doughnuts when rush hour begins at dawn.

In recognition of the state’s comparatively high cost of living, California historically has had a minimum wage that exceeds the federal rate. The state Industrial Welfare Commission adopted a minimum wage of $4.25 in 1988, three years before the federal minimum wage reached that level.

The last time the Industrial Welfare Commission considered raising the state minimum wage was three years ago, when it rejected a proposed 25-cent increase, on the grounds that California’s depressed economy could not absorb the shock. If Clinton’s proposal meets defeat in the Republican-controlled Congress, which appears likely, the state commission has promised to revisit the issue again, but a decision would not be made until next year.

In the meantime, consumer price hikes have reduced the value of 1988’s $4.25 minimum wage to $3.12, according to Jack Kyser, chief economist with the Los Angeles County Economic Development Corp.

Many low-wage jobs pay so little because they can be filled by people with no experience, poor English skills, little education or troubled job histories. But that is not always the case.

A visit to the North Hollywood office of the California Employment Development Department reveals plenty of positions demanding responsibility among the job listings: A Burbank preschool wants to hire a teacher’s aide for $5 an hour. A security company seeks unarmed guards to protect earthquake-damaged buildings for $5.50 an hour. And a Los Angeles medical firm has a receptionist’s position open at $5 an hour.

With the loss of high-paying aerospace and manufacturing jobs, “the percentage of low-wage earners is probably higher today than it was two to three years ago,” said Marvin R. Selter, chairman of the National Staff Network, an employee-leasing company based in Van Nuys. A higher minimum wage would affect more people because employers would feel pressure to raise the salaries of those who were making slightly more than $5.15 an hour, Selter said.

Whether the state’s economy has rebounded sufficiently to handle such pressure remains subject to debate. Economists offer conflicting evidence on whether minimum-wage hikes improve employment by enticing unemployed workers to return to work or sacrifice jobs by increasing salary costs to employers.

Local employers agree that if the minimum wage is raised, they will simply pass the salary costs on to customers in the form of higher prices. They disagree, however, about how much of a problem that poses for them.

Andrew Kim, 31, owner of Bell Building Maintenance, an office-cleaning company in North Hills, has about 120 workers who earn between $5 and $6 an hour. If his $5 workers make $5.15, Kim would have to raise the salaries of his other employees by the same amount. In turn, he said, he would raise prices he charges his customers by 5% to 10%, so a $300 job could end up costing $330. His clients undoubtedly wouldn’t like the higher prices, Kim said, but would probably pay them if his competitors raised their rates as well.

“Personally, I think (the minimum wage) should go up,” Kim said. “I don’t think it is enough for anyone to live off of.”

But Solley’s owner Zide, who opened his first restaurant 21 years ago, can tick off half a dozen reasons why small businesses such as his are too fragile to sustain an increase in the minimum wage.

Although his sales have jumped 35% since his Woodland Hills restaurant was remodeled and began producing its own baked goods 2 1/2 years ago, higher prices for coffee, produce and paper goods have cut into profits, as have the skyrocketing costs of business licenses and utilities, he said.

What bothers Zide, though, is not the extra 90 cents an hour his servers and dishwashers would get, but the additional 18 cents an hour he would pay to Sacramento and Washington in higher Social Security and workers’ compensation taxes.

“Government does this for one reason, and it’s not to put more money into the pockets of the workers,” Zide said. “They are so desperate for money, they sit around thinking of ways to raise it without having to do anything.”

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Minimum Wages

The federal minimum wage was established in 1938 by the Fair Labor Standards Act. The act was amended in 1961 and 1966 to cover more workers, Increases in the wage:

1938: 25 cents

1995: $5.15*

* Proposed; current is $4.25

Source: Employment Standards Administration