Minimum wage round 1.

Assembly Bill 48, which would increase the state's minimum wage rate by 15 percent in the next two years, has made it through the first legislative house and will be considered next by the Senate, before going to the governor for final approval.

The bill's passage drew sharp criticism from the 35,000-member National Federation of Independent Business/California, a chapter of the country's largest small business advocacy group.

"I hope legislators considered the full consequences of their action," said Martyn Hopper, state director of the NFIB in a news release. "If not, they have done the California economy a great disservice."

If the bill were to become law, the minimum wage would be raised by 15 percent over the next two years and future increases would be tied to the federal Consumer Price Index, which rises every year. Hopper said that a state-mandated raise in the minimum wage will wipe out any recovery that small businesses have been able to make over the last couple of years.

"Small-business owners are only now experiencing some reductions in historically high workers' compensation rates, but it still ranked first in insurance costs, according to the latest California Small Business Conditions quarterly report," Hopper said. "Boosting the minimum-wage rates will not only wipe out what long-awaited savings are occurring, but it will start driving workers' compensation premiums skyward again, because the rates are predicted on payroll. In short, businesses will have to adjust by cutting back on hiring and growth--two things the state's economy can ill afford."

The NFIB pointed to Washington State as an example of misguided minimum wage policy; the state's voters in 1998 linked the minimum wage rates to the CPI. Two Ohio University economics professors subsequently reported that because of the decision, the state had the greatest increase of poverty of any state since 1998, and that the minimum wage decision led to at least a one percentage point rise in unemployment. According to the report, unemployment was dropping around the rest of the Pacific Northwest while it rose in Washington.

In September of last year, Gov. Schwarzenegger vetoed a state bill that would have raised California's minimum wage to the highest in the nation. The governor said at the time that a wage hike would work directly against his efforts to bring more jobs into the state.