California will be raising its minimum wage rate over the next several years, from its current $6.75 per hour to $8.00. In January 2007 workers will receive a 75-cent increase, which is to be followed by a 50-cent increase in January 2008.
A lot of controversy is surrounding this decision on both sides. First, if you look at the cost of living out here (for instance, 2-3 bedroom rentals for a family in a safe and clean neighborhood can easily run up and over the $1200 mark per month-and many hit the $2000 range) you can quickly understand the need for a higher rate of pay. If two adults are working to support a family and are making minimum wage for a full time job, they are grossing $2160 per month. A single mother earning minimum wage is grossing half of this; and keep in mind, this is not what she is bringing home each month-this is before taxes and other deductions.
Articles run in the local papers about families who are working full time jobs but still living in dangerous neighborhoods or in their vehicles because they can´t afford to rent an apartment in a safer neighborhood. One man in Santa Barbara is living with his son in his van because they cannot afford housing on his salary. Another lady in Los Angeles has been living in a dangerous section of town for years though she has been working with the same company for that same amount of time. She just can´t afford to move into a better home. Unfortunately in this state, the haves have so much to the point of being ridiculous at times while the have-nots can have very, very little; and they struggle to move up even if they are working full time jobs.
So while some are happy with the increase, many small business owners are worried. They are talking about needing to cut back on the number of employees that they have and turning full time employees into part time employees. They are also discussing raising prices to compensate for the increase in pay.
And of course, another fear is that with this increase, layoffs will occur. While the increase will be good for those that remain employed in the jobs, it could actually negatively impact a portion of workers if businesses can´t afford to pay the new rate.
Consider the numbers. An employee now making $270 per week at $6.75 an hour will make $320 per week with the increase. That´s costing the owner of the business an additional $50 per week per full time employee, so $200 per month per worker. Multiply that by just two employees and you can see that the small business owner would need to cover an additional $400 per month in payroll. This is a big chunk of money for business owners who might already be struggling.
Yet the increase in pay will give the worker an additional $200 a month to help with bills. If two adults in the home are affected, that brings in an additional $400 per month. This amount might be what it takes to keep the family from falling behind each month, as it can cover groceries or electric and additional monthly bills.
But according to Maria Elena Durazo, an executive secretary-treasurer with the Los Angeles County Federation of Labor, a single parent with one child needs to make $12.50 per hour to support her family. So even with the increase, the hourly wage is not even close to what it should be for those single mothers and fathers trying to raise children.
For now we will keep a close watch and see if the increase will be the answer for the families that are struggling on minimum wage. We´ll also have to see if it creates a problem for the small business owner.