Cities try new tactic to boost lowest wages

When San Francisco voters raised the minimum wage in this city last week to $8.50 an hour - 65 percent more than the federal standard - they helped Emma LeBoeuf inch closer to a long-held hope.

Perhaps, with the extra money, the clothing-store clerk says, she will be able to return to her native Philippines for the first time since she left 20 years ago. "I want to go home, but I can't afford it," she says.

Across town, Gwen Kaplan looks at the costs to her direct-mail company and wonders if this is finally the time to move. "My children are fifth-generation San Franciscans, and this is the life we like," she says. "But I don't know if I can continue to compete."

These are questions that might soon echo beyond the Golden Gate. The new pay scale is more than a statement of this city's liberal ideals. It is the first major marker of a movement that could spread across America.

Already, 12 states have set higher minimum wages than the federal standard, which has remained at $5.15 for the past six years. Now, San Francisco is among a handful of cities seeking to carry that idea to local levels. The template is there: During the past decade, 110 cities and counties have passed "living wage" laws, which set a minimum wage for workers in businesses contracted to do work for that locality. Raising the minimum wage for all workers, some say, is just the next logical step.

"This is the growth and evolution of the living-wage movement," says Paul Sonn, an attorney at New York's Brennan Center for Justice who has worked with cities on similar measures. "It's starting in [cities like San Francisco] because they have a particularly high cost of living."

Recently, momentum has been growing. In the past two years, eight states have either created a minimum wage higher than the federal level or increased it further. And while Washington, D.C., has had a minimum wage $1 above the federal level since 1994, Santa Fe, N.M., adopted an $8.50 minimum earlier this year. A similar measure to raise base pay in New Orleans to $6.15 passed last year, but was struck down in court.

New Orleans' example points to the legal uncertainties that surround cities' efforts to raise minimum wages. California, in fact, is the only state that has explicitly given cities that power. But it also points to the increasing interest in the issue nationwide, and the unifying theme in all these cases is the mounting sense that the federal minimum wage has lost its purpose, activists say.

"If you look back 30 years ago, it was assumed that you could support yourself and your family on minimum wage," says Barry Hermanson, a supporter of the increase. The minimum wage reached the height of its buying power in 1968 when it equaled - in today's dollars - $8.50 an hour, he adds. "It's very important that we get back to some minimum standards."

To Ms. LeBoeuf, who works part time at Ross, the pay raise could make life easier. With $1.10 more an hour, she might not need the money her daughter sometimes sends to her to help pay rent. She imagines she might be able to get cable TV to find out what's happening in the Philippines. "It would be nice," she says.

ECONOMISTS have estimated that as many as 54,000 workers in San Francisco could see their wages increase. Businesses with 10 or more workers must comply by February; smaller businesses and nonprofits won't have to pay the full $8.50 until 2006.

Proponents say the increase will help the local economy by giving the poorest residents money that they will immediately spend in the community. Opponents argue that it will force businesses to cut jobs just as the economy is showing signs of improvement.

And while studies have shown that modest minimum-wage increases have a relatively small effect, some experts suggest the magnitude of San Francisco's jump makes it unprecedented - and renders past data unreliable.

"It certainly seems to be a new frontier," says David Card, an economist at the University of California at Berkeley who has studied the issue. He expresses some surprise that the initiative didn't provide some exemption for restaurants, expected to be the hardest hit.

So does Jim Bril, owner of Fior d'Italia restaurant, who says the new system will only help the rich get richer. The only employees he pays minimum wage are waiters and busboys. But they make more money than most other employees through tips. Now they'll make a few dollars more, and Mr. Bril says he'll have to cut into employees' benefit packages - such as 401(k)s and dental plans - to pay for it.

"I'm going to have to take something away," he says.

Ms. Kaplan isn't sure what she'll do yet. She's already losing customers because of the high rents and taxes involved with doing business in San Francisco - one national healthcare company recently dropped her mailing service for a firm in the Midwest. Now, with five of her 19 workers earning below $8.50, she'll have another cost to bear.

"I don't know how businesses can stay in business like this," she says, looking anxiously though her large round glasses as an envelope-sorting machine whirs in the background. "It sounds like a dramatic thing to say, but it's true ... I'm at such a competitive disadvantage already."