Sept. 5, 2006, 11:24PM
On minimum wage, the art of compromise is useful

By LOREN STEFFY

Bill Hammond speaks with defiance, but in his tone lies the inevitability of defeat.

"We would oppose any increase in the minimum wage," says Hammond, president of the Texas Association of Business, which represents 140,000 businesses statewide. "We think it's a bad idea."

Businesses, quite naturally, are quick to oppose raising the minimum wage. Higher wages directly affect their costs, and a higher starting salary escalates the entire wage scale, requiring businesses to pay all employees more.

Many business people also resent the idea of state or local officials telling them what they should pay employees.

"It's a matter of Congress or the Legislature interfering in the free market," Hammond says.

All of which are sound arguments that ultimately won't matter if the minimum wage train gets rolling in Texas. Similar movements in other parts of the country have proved unstoppable. Twenty-two states have raised their minimum wages above the federal level.

By taking the hard line, business owners cast themselves as convenient villains.

That's the theme that emerged from conversations I had this summer with business owners in Santa Fe, N.M., the national testbed for the "living wage" movement, which calls for setting pay floors high enough that workers can afford to live above poverty in their communities.

Santa Fe's city leaders, over the objection of many small-business owners, enacted a minimum wage that's $9.50 an hour and will probably rise by another $1 in early 2008.

No one's talking about such an extreme increase in Texas, but in a front-page story in Monday's Chronicle, Sen. Rodney Ellis, D-Houston, said he plans to lead the fight for Texas to raise its minimum wage above the national level of $5.15 an hour.

A lot in common

What surprised me about the Santa Fe battle to raise wages was how much both sides had in common.

Every business owner I spoke with agreed that the federal minimum was too low. Like their opponents, the business people blamed Congress for failing to address the issue during the past decade that the federal wage remained stagnant.

Most businesses said they already paid workers starting wages well above the federal level. Yet when the living wage discussions began, the business owners dug in. They warned of widespread closings, of higher prices and cutbacks in hiring, some of which has come to pass.

They sued the city, questioning its authority to enact such an ordinance.

And they lost — in the court of law and in the court of public opinion.

They also lost any say in setting the wage level. In hindsight, many of them told me they should have compromised.

Business owners in Texas, sooner or later, will come to the same conclusion.

Polls nationwide suggest support for minimum-wage laws running as high as 80 percent. Ballot initiatives in other states have enjoyed overwhelming support.

As one restaurateur in Santa Fe told me, when these things go to a vote, no one wants to be the bad guy, no one wants to deny the poorest wage earners a raise. To put it another way, it's easy to spend other people's money.

Issue of emotions

Hammond has some good reasons for opposing a higher wage.

"People who earn minimum wage have low or no skills," he says. "It's an entry-level position."

Those who learn their jobs usually see their pay increase to reflect their skills, he says.

That, of course, doesn't happen in all cases, but Hammond is right that the market essentially demands a higher wage for skilled workers.

Good arguments, though, don't matter in the minimum-wage debate.

As I said in my reports from Santa Fe, the issue is one of emotions, not economics.

Corporate profits now make up a bigger part of the national economy than they have in some 40 years, according to Labor Department data.

That comes even as most worker pay — not just minimum wage but salaries far higher — are lagging behind inflation.

By leaving the minimum wage unchanged for a decade, Congress essentially has given a pay cut for the poorest workers. There's a sense that workers are missing out on the thriving economy they've helped create.

The lesson of Santa Fe is that by compromising, business owners may pay higher wages for some employees, but it's likely to be far less than the wages imposed by the unstoppable swell of public sympathy.

Hammond says if it comes to that, business owners definitely want a seat at the table.

They may oppose a living wage, but they might be able to agree on a livable one.

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.