Wage deal: $8 an hour

The deal, which will be formally announced today, allows both parties to claim victory in an election year while elevating California's profile as one of the best-paying states in the country.

Under the agreement, the state's lowest-earning workers would receive a 75-cent raise in January 2007, followed by a 50-cent boost in 2008.

California's minimum wage is currently $6.75 per hour, which is higher than the federal minimum of $5.15 per hour but lower than wages in half a dozen states.

"I have always said that when the economy was ready, we should reward the efforts of California's hard-working families by raising our minimum wage," Schwarzenegger said in a statement.

"This is another sign California is coming back stronger than ever and exciting news for the people of our state."

The vehicle for the raise, Assembly Bill 1835, is expected to be taken up by the Senate on Thursday before going to the Assembly.

Assuming the Democrat-controlled Legislature passes the bill and the governor signs it, California would tie Oregon as the third-highest paying state when the minimum wage increases to $7.50 per hour in January.

Washington state's minimum wage is currently $7.63, and Connecticut's minimum wage is expected to jump to $7.65 in January.

Should no other state grant another increase by January 2008, California would become the top-paying state when the 50-cent increase takes effect.

"By the beginning of 2008, we will have the highest minimum wage of any state," said Assembly Speaker Fabian Núñez, D-Los Angeles.

"This sends the right message to working families, especially poor working families. They deserve it, they've earned it, and I'm very pleased."

In order to reach the deal, Democrats had to abandon their push to tie the state's minimum wage to inflation.

Assemblywoman Sally Lieber, D-San Jose, and Sen. Gil Cedillo, D-Los Angeles, had language in their bill that would have tied pay to the Consumer Price Index.

"It was either sending the governor a perfect bill or giving poor workers a dollar and a quarter more," Núñez said. "He was at a dollar and we reached agreement on $1.25. I'm very pleased we were able to provide families with some dignity."

Perata, the Democratic Senate leader from Oakland, had previously said he would trade indexing for a $1.50 raise.

He conceded Monday that he had to be more realistic with a Republican governor in Sacramento.

Art Pulaski, executive secretary treasurer of the California Labor Federation, said Schwarzenegger had been playing "political football" with the minimum wage.

Pulaski said labor will continue to push for indexing because it would remove politics from the process of determining the minimum wage.

Schwarzenegger, who twice vetoed minimum-wage legislation last year, reversed his position by proposing a $1 increase earlier this year.

The Republican governor resurrected the Industrial Welfare Commission and appointed four of the five members to consider his proposal, which called for a 50-cent increase in September, followed by another 50-cent increase in July 2007.

Monday's deal means the commission will end its proceedings.

"We got him to agree to more than what he vetoed in the past, and more than what he was offering," Cedillo said.

Pulaski put it more bluntly: "We dragged the governor kicking and screaming into it."

The Governor's Office noted that the administration has been working on a compromise for months.

"Since January, I have been working with my partners in the Legislature to find a common-sense solution that will lead to a higher wage for working Californians without negatively impacting our jobs climate," Schwarzenegger said.

A coalition of employers, led by the California Chamber of Commerce, remains opposed to any increase. However, employer groups focused on the positive.

"We applaud the governor for standing firm against putting government-imposed wage increases on autopilot," said Vince Sollitto, a spokesman for the California Chamber of Commerce.