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Wage Hike Under Fire

A union-backed march to make private-sector health care providers pay dramatically higher minimum wages in nine cities in Los Angeles County got pushback last week in the cities of Los Angeles and Downey.

A hospital-financed referendum campaign said Aug. 10 that it gathered twice as many signatures as it needed to force those two cities to freeze their recently passed health care minimum wage hikes and hold a public vote on the matter.

Assuming enough of those signatures are ratified, a public vote would be held, but probably not until 2024, because it is too late to qualify for this fall’s elections and special elections that would be held next year are expensive, the campaign organizers said. That would give health care providers time to mount a counteroffensive and, at the least, give them a long respite from paying the higher wages. Otherwise, they were looking at paying as much as 67% more in minimum wages as soon as next month.

At issue is a campaign by the Service Employees International Union – Health Care Workers West to lobby nine local cities to make private-sector — but not public-sector — health care providers pay a minimum wage of $25 an hour, up from the current $15.

The counteroffensive, funded mainly by the California Association of Hospitals and Health Systems, is alarmed at that high number. Since many health care facilities operate on thin profit margins and much, if not most, of their expenses are salaries, a big hike in minimum wages could be ruinous for some, they said.

When asked if some health care facilities in Long Beach realistically could be closed as a result of the minimum wage hikes, John Edmond, a spokesman for the Long Beach Area Chamber of Commerce, said: “Yes. Absolutely … That’s exactly what we’re worried about,” adding that hospitals and other providers are weakened and still recovering from Covid-related losses.

The chamber’s board voted to oppose the move to raise the health care minimum wage, but the Long Beach City Council earlier this month made a preliminary vote in favor and is expected to vote for it this week.

The SEIU-UHWW, which represents nearly 100,000 workers in California, claimed that health care workers need a significant boost after soldiering through the hazardous Covid years.

A majority of workers are excluded from this ordinance.
Becky Warren
No on Unequal Pay
Measures Campaigns

“They’ve been through hell and back,” said Renee Saldana, a spokesperson for the union. She also said higher pay would help attract workers and alleviate hospitals’ labor shortage.

Saldana added that the union is “really appalled” that the hospital association had mounted the drive to fight the wage increases. “Millionaire hospital executives … are cutting pay for caregivers.”

When told that the hospital association does not intend to cut pay but only to stop the sudden and large increase in minimum wages, she said it was “the same as a cut” because they want to take away money that workers expected to get.

Targeted cities

The union so far has lobbied nine cities. In addition to Los Angeles and Downey, where city councils approved the union’s request to raise minimum wages for privately owned facilities, Monterrey Park also approved a health care wage hike earlier, and Long Beach is expected to vote for it this week. Inglewood and Duarte opted to put the measure on the ballot for a public vote. The matter is under discussion in Culver City, Baldwin Park and Lynwood.

The minimum wage ordinances passed in Los Angeles and Long Beach would not only cover traditional health care workers, such as nurses and pharmacists, but also such employees as janitors, guards, maintenance workers and cafeteria employees.

And the ordinances would apply not only to hospitals, such as those owned by Kaiser Permanente and Dignity Health, but to businesses including privately owned clinics, acute psychiatric hospitals, dialysis clinics, psychiatric health facilities and other similar facilities connected to a private hospital.

The union spokesperson explained that the drive is targeting only facilities in the private sector because cities cannot legally instruct the county or other governments how much to pay their workers.

But that point has been seized on by the hospital association. Because many health care facilities are owned by the county or other governments, the ordinances would affect only a minority of workers. The association said a report released last month by the Berkeley Research Group claims that 65% of health care workers in the targeted cities would be excluded from any new wage standards.

Not only is that inherently unfair, the hospital association group said, but the ordinances could create a kind of two-tier system in which private facilities would be burdened with high costs and may have to offload some less-profitable services to public facilities – which likely would have trouble attracting and retaining workers because of the lower pay.

“A majority of workers are excluded from this ordinance, and it unfairly creates winners and losers,” said Becky Warren, a spokesperson for the the “No on Unequal Pay Measure Campaigns” in Los Angeles.

Thin margins

According to a report commissioned by the city of Long Beach and conducted by the Los Angeles Economic Development Corp., industries in Long Beach, on average, have a gross operating margin of 19.8%. However, health care services in that city have an average margin of only 5.5%.

“These leave very little room for firms to absorb cost increases,” the report said.
At the same time, health care facilities face higher labor costs. Industries in Long Beach on average, have a labor cost intensity of 36 percent of total output, while the average across all health care industries in that city is 56 percent.
Therefore, an increase in the latter number could wipe out the former number.

The report included a sidebar testimonial from an unnamed representative of the Ocean View Psychiatric Facility in Long Beach who wrote: “Creating a minimum wage of $25 per hour for privately owned hospitals such as ours will have a devastating impact on our financial viability, especially considering the difficulties we have already been facing throughout the Covid-19 pandemic.

“The safety net that private health care facilities provide in our community will begin to fail and the public health system will be left with the financial and medical burdens.”

The writer urged the city council not to pass the ordinance but to place the measure on the ballot, “so that the people of Long Beach can express their opinion on an issue that could drastically impact access to vital health care services.”

Paola Mendez
Paola Mendez
Paola Mendez graduated from Los Angeles Valley College, then transferred to University of California, and now serves as a Receptionist and Office Assistant to the Los Angeles Business Journal. Paola wears many hats in different departments and is trilingual in English, Spanish and French.
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