A bill to raise California's minimum wage to $7.75 an hour over the next two years is headed to Gov. Arnold Schwarzenegger (search), providing a major test of his pledge to reject bills that "harm the state's business climate."

Business groups that are among the governor's biggest financial supporters believe Schwarzenegger will veto the bill, which was passed by the state Assembly Monday, days after the Senate also approved it.

Democrats led a 43-31 vote to send the bill to the Republican governor after a fierce debate about the minimum wage's role in curbing poverty.

"The idea that this is a young person's wage is no longer true in California and no longer true in other states," said the bill's author, Democratic Assemblywoman Sally Lieber.

A recent study by the California Budget Project (search), a nonprofit group that evaluates the effect of state spending on low- and middle-income families, reported that nearly 60 percent of those earning minimum wage in California were more than 25 years old.

But several Republicans said a $1 increase in the wage will drive businesses out of California, laying off the state's poorest workers.

"Why do we hurt the poor with these sort of misguided policies?" asked Republican Assemblyman Ray Haynes.

The legislation would increase the state's current $6.75 wage by 50 cents on Jan. 1, 2005, and another 50 cents on Jan. 1, 2006. That would place California's minimum wage above those of nearby states, including $7.15 per hour in Alaska and Oregon and $7.16 per hour in Washington.

The federal minimum wage is $5.15 per hour.