Minimum wage increase would hurt, not help poor people

SAN FRANCISCO (AP) - Increasing the minimum wage does not help California's poorest families - in fact, it may only increase their cost of living, according to a new study released Friday by the Public Policy Institute of California.

California's minimum wage is currently $5.75 an hour, and members of Congress are calling for a federal increase, which would raise the state minimum to $6.15.

But only 11 percent of additional income generated from a minimum wage increase would go to low-income families who need it most, researcher Margaret O'Brien-Strain said.

It's much more effective to specifically target low income families with tax credits and transportation or child care subsidies, she said.

When the study looked at the poorest 20 percent of California families, it found that three out of four families do not have a minimum wage worker in the family. Either all employment-age members are unemployed and the family receives public assistance, or family members work part-time at non-minimum wage jobs, the study found.

Raising the state's minimum wage from $5.75 to $6.15 an hour would not exceed what a family on public assistance receives, according to the study.

''Raising the minimum wage has more of an unemployment effect,'' O'Brien-Strain said. ''It puts more people out than it pulls in.''

A so-called living wage, such as the $11 per hour rate proposed by San Francisco Board of Supervisors President Tom Ammiano, is an expensive option, O'Brien-Strain said.

''You're starting to get big numbers. Everything gets inflated,'' she said.

While the issue has not been fully examined, living wages impact fewer people and often result in job losses when employers cannot afford to pay, she said.

At a public hearing Wednesday, Ammiano got an earful from small businesses, restaurateurs, and nonprofit organizations who say they cannot afford to pay higher wages.

But organized labor, religious leaders and many low-paid workers are in favor of the living wage, and promised to fight for Ammiano's measure before it heads to the full board for consideration.

Jennifer Hernandez, 20, of Oakland, used to work for $5.50 an hour at a flower shop, and says it was difficult to make ends meet.

''It was impossible for me and I don't have children, I'm not married. So how do people who support their children do it?'' she said through a translator. ''Both the wife and the husband have to have two jobs and work 16 hours a day to do it. It's the only way that they can survive.''

Hernandez now earns $8.04 an hour as a janitor and belongs to the Service Employees International Union, which is fighting for a dollar-an-hour wage increase.

The study also found that when the minimum wage went up, so did costs.

Californians pay $1.4 billion annually to fund a minimum wage increase - from $4.25 to $5.15 an hour - that went into effect in 1996. For the average family, this translates to $133 per year spent on household goods and services because of higher prices, the study said.

''There's no perfect solution. You pick your demon,'' O'Brien-Strain said. ''Our issue with the minimum wage is that people have started to ignore that there's a price you have to pay.''