EDITOR’S NOTE: This story has been updated from an earlier version.
Hiking L.A.’s minimum wage would bring more benefits than costs to both Los Angeles and the region, according to a long-awaited and controversial study released Thursday afternoon.
The city-commissioned study, conducted by UC Berkeley’s Institute for Research on Labor and Employment, found that raising the minimum wage in Los Angeles would result in a small drop in jobs within the city, offset by more jobs being created throughout the county.
Meanwhile, both business and labor groups weighed in with their own studies on the wage hikes. The business-commissioned study said many Los Angeles employers in low-wage industries would locate or expand outside the city, resulting in a net loss of jobs. The labor study concluded a higher wage would add billions of dollars in economic stimulus to the local economy.
A City Council committee is considering two proposals to hike the minimum wage: Mayor Eric Garcetti’s plan to increase the wage to $13.25 an hour by 2017 and a measure from several councilmembers to raise the wage to $15.25 by 2019.
When Garcetti unveiled his plan last year, he submitted a study from UC Berkeley’s Institute for Research on Labor and Employment that generally supported the notion of raising the wage to $13.25 an hour.
In a controversial move last fall, the City Council chose the same UC Berkeley institute to conduct another economic study, with instructions to examine the issue in more detail and with broader scope. Business groups criticized the choice, saying that the study’s outcome was pre-ordained.
And indeed, the Berkeley study’s conclusions were generally similar to that first study, with the added consideration of the council proposal to raise the minimum wage to $15.25 an hour.
The study’s authors said that if the $15.25 an hour wage hike were adopted, worker wages would increase by $2.4 billion, generating additional consumer spending throughout the county. That spending in turn would generate an additional 5,000 jobs countywide.
The study concluded that the costs of the wage hike to the city would be relatively minor, with only about 3,500 jobs being lost and a net drop in gross product of $315 million.
“The benefits of the proposed minimum wage law will largely outweigh the costs in Los Angeles city, and when the larger region is considered, the net impact of the law will be positive,” the authors concluded.
Meanwhile, both the Los Angeles Area Chamber of Commerce and the Los Angeles County Federation of Labor submitted their own impact studies of the minimum wage proposals, with predictably disparate findings.
The chamber study, conducted by Los Angeles consulting firm Beacon Economics, found that Garcetti’s proposal would be of limited help in lifting Los Angeles residents out of poverty, cost some residents their jobs and reduce job prospects for others. The study did not look at the $15.25 wage proposal.
“While…the city is well-intentioned in its effort to help those in need, the proposed plan fails on a cost-benefit basis,” wrote the study’s lead author, economist Christopher Thornberg.
The study said that if Los Angeles implements Garcetti’s proposed increase, businesses in low-wage industries would locate or expand in nearby cities. The study also concluded that the additional wage costs for businesses would dwarf any savings from eliminating the city’s gross receipts tax.
The labor federation study, on the other hand, touted economic benefits of the proposal to raise the city’s minimum wage to $15.25 an hour by 2019. It did not study Garcetti’s proposed wage of $13.25.
The report from the Los Angeles Economic Roundtable, the UCLA Labor Center and the UCLA Institute for Research on Labor and Employment concluded this wage increase would boost cumulative worker pay by $5.9 billion a year, add $6.6 billion a year in total stimulus for the local economy and save local taxpayers $313 million a year in public assistance payouts to impoverished workers.
“Raising the minimum wage to $15.25 in Los Angeles and enforcing it wouldn’t just help workers,” said report lead author and Economic Roundtable President Dan Flaming. “It would stimulate the economy well beyond the city limits and put Los Angeles on a smart, sustainable path to tackling its far-reaching low-wage crisis.”
All three studies will be considered by the City Council’s economic development committee in coming weeks. Starting next week, the committee will hold hearings around the city.