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California poised to pass $10 minimum wage. Is now the right time?

California legislative leaders and Gov. Jerry Brown are set to raise the state’s minimum wage to $10 an hour, which would be the highest in the country. Critics say it could harm a recovering economy.

California is on track to raise its minimum wage to the highest in the nation.

A bill which passed the Assembly in May is expected to win approval in the state Senate by a Friday deadline. Gov. Jerry Brown says he will sign the measure, which would raise the minimum wage in California from $8.00 an hour to $10.00 an hour in two steps: to $9 by July 2014 and to $10 by January 2016.

But debate is still raging on whether the move will endanger California’s economic recovery, with some arguing that the recovery has created the best opportunity to provide low income people with a more livable wage.

“The minimum wage has not kept pace with rising costs,” Gov. Brown said in a statement. “This legislation is overdue and will help families that are struggling in this harsh economy.” The last hike in minimum wage was 50 cents to $8 in 2008.

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Yet the California Chamber of Commerce and others have described the bill as a “job killer,” arguing that increased wages would drive up costs for business owners.

“Supporters claim this bill will help low-wage earners, but I believe it will actually hurt workers,” said Assembly Republican Leader Connie Conway.

“To cover the costs of this increase, employers will have to cut hours and hire fewer workers,” she says. “Our state unemployment is still higher than the national average – the Legislature should be taking steps to create more high-paying jobs, not penalizing the people who need the help the most.”

Academics agree this is a fragile time for the action, but some say the opportunity shouldn’t be missed.

“There never is a good time to raise living wage issues but this is as good a time as any,” says Barbara O’Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento. “The budget is balanced, we have a rainy day fund, and workers have not seen an increase to compensate for the recession and rising costs. It is time to make this part of the fiscally prudent grand bargain.”

David McCuan, a political scientist at Sonoma State University, agrees.

“Given the long economic recession, the stagnation of wages for lower wage workers, and the vulnerabilities of those workers to circumstances beyond their control, a minimum wage boost like this is more likely to help on balance than hurt the overall state economy,” he says.

Advocates of living wages agree with Senate President Pro Tem Daryl Steinberg, that the high minimum wage will help fuel the recovery because minimum-wage workers will have more money to spend.

“What increases in wages do is twofold. They lift hard-working Americans out of poverty, and are the only sustainable way of growing the economy,” says Roxana Tynan, Executive Director of the Los Angeles Alliance for a New Economy (LAANE), an advocacy organization.

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She says two LAANE studies show no evidence of job loss as a result of living wage increases much higher than what the state is proposing. “Our study of the impact of a living wage increase on the airport hotels in LA showed that in the years following the increase, hotels near the airport increased revenue by every measure: overall profits, room rates, and occupancy – all without layoffs.”

“What is astonishing,” Ms. Tynan says, “is the number of times over the last 100 years that some in the business community have gotten away with making these claims and being quoted in the press without a shred of evidence.” 

Still some academics think the timing is not optimal.

“There is never a good time in the middle of a lukewarm recovery to raise the minimum wage,” says Michael Shires, a professor of public policy at Pepperdine University. “If there was a strong and sustained recovery, where there was high demand for even low-skilled labor, then the effects would be mitigated by overall rising wages,”

“Today, however, California is in the midst of a slow recovery and the low-skill, low-wage part of the economy is languishing the most,” says Professor Shires. “Stack on top of that the ambiguities of the Affordable Care Act [Obamacare] and its prospective impacts on low-wage jobs, and the timing is even worse.”

But the timing appears right for now. Assemblyman Luis Alejo introduced similar bills in 2011 and 2012, but both died because of opposition by Republican members and business lobbyists, who apparently made the “job killer” tag stick with legislators.

The current federal minimum wage is $7.25. The state with the highest current minimum wage ($9.19) is Washington State.