The battle lines are drawn in the coastal community of Santa Monica (California), the first city in the United States to pass a so-called "living wage" law for private businesses. The new wage for service workers in the city's hotels and restaurants has encouraged labor groups and angered business owners.

Labor laws governing private businesses are usually a federal and state matter. Advocates for low-income workers around the United States have increasingly taken their fight to city halls as they argue for wages based on the local cost of living. Dozens of cities have passed living-wage laws that cover their own employees or those of companies that do work for the city.

But labor activists scored an important victory in the seaside resort of Santa Monica, when the city approved a minimum wage of just over $12 per hour for its major businesses, which is double the amount of the statewide minimum wage. The wage would be slightly lower if the company provides health benefits to its workers.

Santa Monica city council passed the law in May and tightened it last month, to prevent businesses from using outside workers provided by contractors who are not bound by the ordinance.

This week, business owners launched a campaign to overturn the law, which will take effect next year. Labor activists took to the streets to defend it.

Miguel Contreras heads the Los Angeles County Federation of Labor, and was active in the effort to have the measure approved. He spoke to demonstrators outside a Santa Monica hotel. "Underneath the brass and the chrome and the sand and the beach lies poverty," he said, "poverty that's endured by these hotel workers who are dishwashers, who are janitors, who are maids in these hotels, busboys, who are getting paid below a living wage here in Santa Monica."

The new law to raise those wages will affect businesses that have at least $5 million a year in revenue, and which are located in the central city or the beachside tourist zone. The law will take effect in July, 2002.

Opponents argue the measure will drive up costs for businesses and force some of them out of the city, costing the jobs of some of the workers that the law is intended to help. Tom Larmore is a lawyer working to overturn the ordinance on behalf of the Santa Monica Chamber of Commerce. That association represents local businesses. "From a business owner's perspective, it's an incredible increase in their cost," Mr. Larmore says. "For example, if you were to look at a restaurant, about a third of their revenues typically go for labor. And this will increase it to well over 50 to 60 percent of revenues." Mr. Larmore says that could eliminate their profit.

The lawyer says waiters and waitresses are typically paid the statewide minimum wage, just over $6 per hour, because they earn most of their income from tips from customers. And tips in expensive restaurants in Santa Monica can be substantial.

Labor activists point out that janitors, maids and busboys do not share in that income. And those supporting families are struggling to get by.

The battle has moved to the streets, where opponents of the new law are collecting signatures in a petition drive to bring the measure before the voters. Opponents have 30 days to collect 6,000 signatures to get the issue on the ballot. Supporters of the new law have launched a counter-offensive urging residents not to sign the petition.