A First-place Tie

California now has the highest minimum-wage in the nation. Well, technically it's a tie; California joins Massachusetts with the highest minimum wage in the Union, with entry-level earners making $8-an-hour as of January, 2008. The Governator signed the compromise in Los Angeles on Tuesday:

Gov. Arnold Schwarzenegger ended three years of tussling with Democrats over the minimum wage by signing a bill on Tuesday that will raise the earnings of the state's 1 million lowest-paid workers by $1.25 over the next 15 months.

On Jan. 1, California's hourly minimum wage-- now $6.75--will become $7.50. And a year later, it goes up to $8.

Politically speaking, this deal is admirable. It's almost a text-book example of political compromise. The Democrats in the legislature wanted an increase with automatic future increases built in; the Governator wanted a $1.00 increase right out of the gate. What they got was an added $1.25 phased in over time.

While it is helpful, I can't help but wonder when such things go through if it's not an example of self-defeating maneuvering and triumph of politics over economics. First some facts from the LA Times:

Annual full-time pay will hit $16,640 and cost employers an additional $2.6 billion a year when the new wage is fully in place.

And business owners around the State groan audibly as the cost of doing business goes up. Not everywhere, not every business. But $2.6 billion dollars in additional capital outlays is not a small number.

Arguably the increase will help some, if not all, it's targets: "Thank God, this is going to help a lot," said Eder Barrios, 34, who supports his family of five with the minimum wage he earns selling clothes in a small shop in downtown Los Angeles. "This can help us get a bigger apartment and is going to improve the quality of our lives."

The problem however, is this. Mr. Barrios knows that a minimum-wage job is inadequate for meeting his family's needs. Why else the need for a higher wage?

The solution is one of three things: Mr. Barrios works his way up the ladder until he's running that clothing store, or another like it; Mr. Barrios trains himself til he's qualified for higher-paying work or someone (the State or Federal Government) raises his wages via statute high enough that they provide an actual living wage. If we were honest about this situation, we'd all be arguing for one of the three.

Arnold's November opponent, Phil Angelides is at least semi-honest about his approach:

On Tuesday, Schwarzenegger's Democratic opponent State Treasurer Phil Angelides said he supported the bill but would back automatic annual cost-of-living increases next year, if elected.

"I will stand up for hardworking families, not special interests," Angelides said. He vowed to protect minimum wage earners from being "pushed into poverty by inflation."

In an AP version of the signing-story (that I've hunted for high-and-low online to no avail), Angelides specifically supported an approach that directly ties increases to inflation. That isn't a plan that raises Mr. Barrios' income to a comfortable $30-$40,000 a year but it at least doesn't mask the real intent: ensuring that nobody gets forced to live under a certain income level.

A wonderfully idealistic thought, it is something that cannot exist in any real world where economic markets work.

Earlier I said "And business owners around the State groan audibly as the cost of doing business goes up." As this added cost works into the economy, it will inevitably increase the cost of your purchases, whether it occurs in two months or two years.

At the end of the day, will anybody notice that the people who weren't making it at $6.75-an-hour aren't making it at $8.