By Michelle Dalton Tyree

LOS ANGELES — California apparel manufacturers and retailers said Gov. Arnold Schwarzenegger’s veto of a bill to raise the state’s hourly minimum wage to $7.75 from $6.75 by 2006 gives them a respite from higher costs that have forced some companies to shrink, move or close.

Citing projections from the state employment development department, Schwarzenegger said in his veto message last week: “This will increase the costs to California employers by at least $3 billion and as much as $4.4 billion. Now is not the time to create barriers to our economic recovery or reverse the momentum we have generated. I want to create more jobs and make every California job more secure.”

California’s apparel industry has lost an estimated 56,000 manufacturing and retailing jobs in seven years, partly because of production moving overseas, where labor costs are lower. The industry continues to struggle with rising worker compensation rates, mandated health insurance and joint liability issues, as well as facing stiffer competition from abroad.

“It’s definitely a bullet dodged,” said Bill Dombroski, president of the California Retailers Association. “I think he recognized the argument of this business community that to increase the minimum wage while waiting for cost savings from reforms [to the workers’ compensation system] would be a job killer.”

The state’s neighbors to the north, Oregon and Washington, have higher minimum wage requirements, with Oregon at $7.05 and Washington at $7.16. The federal minimum wage is $5.15 an hour.

“It probably has a bigger effect on the small retailer than the large, because the small one has less of an ability to pass [costs] on to the customer,” Dombroski said. “Don’t get me wrong — it still hurts, but [the larger retailers] have a national base.”

Greg Weaver, chief executive officer of teen specialty retailer Pacific Sunwear Inc., said, “I think that it’s a prudent move for the moment. I don’t expect that it’s a decision that will stick for years to come, though.’’

Organized labor, which supported the bill, cited free trade as the major cause of apparel-industry layoffs. Democratic assemblywoman Sally Lieber of Mountain View, Calif., author of the legislation, said she would consider reintroducing it or would try to put the issue on the ballot. She did not provide specifics.

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