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Minimum Wage Plan Potentially Harmful to Economy

Paying state workers the federal minimum wage wouldn’t do any favors for California’s still-struggling economy. One expert says it would really hurt California’s retailers.

Governor Schwarzenegger says in the absence of a budget, California has no authority to issue full pay to state workers. Instead he says they must be paid the federal minimum wage of $7.25 an hour. Right now the average state employee earns roughly $5,400 a month.

Under the minimum wage order, that would plummet to just over $1,100. Esmael Adibi is an economist at Chapman University in Orange County. He says doing that will create more economic uncertainty as workers cut discretionary spending.

“If it is leisure hospitality, they cut it out, if they want to buy furniture, they postpone it. And all of those are extremely negative, not only to retailers are going to suffer, but also the state, because the state relies on sales tax,” said Adibi.

Richard Valle is a Kings County Supervisor. His Central Valley district includes three state prisons. He says the prospect of reducing state workers’ pay to minimum wage is affecting his budget decisions at the local level.

“If we would implement furloughs on county employees we would have many households getting the double whammy," said Valle. "They’d get the furlough and the pay cut from the county and the furlough and pay cut from the state and that would be pretty devastating.”

A spokeswoman for the state Department of Personnel Administration notes reducing pay is not a cost cutting measure, instead she says it’s to comply with the law. Once a budget is approved, state workers would receive their back pay. But in the past budget stalemates have dragged on into the fall. State Controller John Chiang is fighting the order in court.

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