During the recent heated debate over the imposition of the city of L.A.'s living wage ordinance on 12 airport area hotels, business leaders made a stand saying the spread of the living wage needed to be quarantined to those hotels.


Although the business community won a temporary victory last week as a state judge stayed the ordinance, there's increasing evidence that the living wage issue has moved beyond the ability of business to put the genie back in the bottle.


Living wage advocates and their labor union allies have pursued a strategy of incrementalism to expand the living wage, picking vulnerable private sector industries and using government to cajole the management to pay up or allow unions in.


Just last week, a Koreatown supermarket owner agreed to raise wages for market employees in exchange for city permission to build a three-story mall around the supermarket. The City Council last week codified the higher wage levels as part of the development agreement that allows the owners of California Market to expand. Without the agreement, which was mediated by the city's Community Redevelopment Agency, the project would likely have been stalled by red tape and community opposition for several more years. Owners of the market did not return telephone inquiries.


Businesses in Los Angeles have been slow to grapple with this growing challenge, and when business has responded, it has often been outmaneuvered.


"The business community has been outplayed by labor in L.A.," said Brendan Huffman, president of the Valley Industry & Commerce Association. "Instead of going all out, labor has taken an incremental approach to this issue and they've done a good job at it, using government and the legislative process to basically pick sides in private sector labor-management disputes."

Business costs


The result, say business leaders and economists, is that L.A. has become an even more expensive place to do business.


"With the city interfering in the marketplace, taking on industries that have no alternative but to go along and pay the higher wages, it makes these companies less profitable," said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University. "They either have to pass on the costs to the end users or they decide to expand their operations outside the city. Either way, the overall economy suffers in the long run."


Living wage advocates and their union allies disagree. First they note that the city has reduced business taxes. They also say that the problem of poverty-level wages has become so pervasive in the Los Angeles region that government must step in or the region risks permanent economic polarization.


"We have a real crisis of poverty-level wages, and as long as that crisis exists, we're not going to go away," said Madeline Janis, executive director of the Los Angeles Alliance for a New Economy, the labor-backed organization that was largely responsible for the city's first living wage ordinance a decade ago. "When we do our polling, we find that most people agree that we need a living wage throughout the city to prevent us from entering a downward spiral."


Janis, who also holds a seat on the board of the Los Angeles Community Redevelopment Agency, said that there is no effort to impose a single citywide living wage, nor is there a pre-mapped strategy to target individual industries. Rather, she said, the focus is on encouraging businesses to pay higher wages whenever possible and in "small instances," having government require businesses to do so.


What Janis does not emphasize is that in nearly every wage ordinance or agreement in which the city is involved, there is an exemption for unions or collective bargaining agreements. Business leaders have seized upon this, claiming that the whole living wage effort is more about beefing up union membership rolls (and contributions) and less about lifting the region's economy.

Hotel wages


That has been one of the underlying arguments put forward by business in the airport hotel living wage debate.


But the hotels were ineffective at getting their message out. They took months to respond to word of the original ordinance, and by the time they did, the unions and living wage advocates had the requisite council votes locked up. That left the hotels with no choice but to challenge the measure when the Council passed it last November. (The living wage ordinance forces businesses to pay higher-than-minimum wages of at least $9.39 an hour for jobs with benefits or $10.64 an hour without benefits.)


After some back-and-forth, hotel owners last week filed a lawsuit in Los Angeles Superior Court against the imposition of the living wage ordinance on them. Judge Dzintra Janavs issued a stay on the ordinance pending consideration of the ordinance's legality in a hearing set for May 13.


Whatever the outcome of this case, there already is enough action on other fronts that business leaders now realize the living wage and union organizing issues won't go away.


About 18 months ago, the city stepped into a long-running battle between security guard union organizers and high-rise commercial building owners. L.A. City Council President Eric Garcetti proposed an ordinance that would have imposed conditions on the building owners that they regarded as onerous. Instead of facing the ordinance, the building owners essentially caved, allowing the union organizers into their buildings.


At the same time, the Council intervened in the battle between grocery workers and store owners, passing a grocery worker retention ordinance under which new owners of supermarkets are banned from firing any existing workers for at least 90 days after they assume control of the supermarket. The grocery store owners have taken the city to court over this ordinance.


Living wage advocates and union leaders make no secret of the fact that they are eyeing other sectors. Tops on the list: truckers operating in or near the vast Los Angeles-Long Beach port complex.


"The main focus has been on the environmental side, on reducing emissions from trucks and protecting the health of surrounding areas," Janis said. "But there's also no question that many truck drivers make poverty-level wages." She suggested that some action on wages may be part of an overall package.


Wage issues have emerged front and center on many redevelopment projects. Developers (and their contractors) receiving city subsidies are already subject to the city's original living wage law, which applies to any entity doing business with the city. The Grand Avenue project and the Convention Center Hotel project both in downtown Los Angeles are two of the most recent examples.


But labor and living wage advocates have also sought to apply the living wage to tenants within these redevelopment projects; so far, there has not been enough support on the Community Redevelopment Agency board for this action.


All of these living wage proposals have added uncertainty to the prospect of doing business in Los Angeles.


"This whole incremental approach creates a feeling of uncertainty among businesses that they might be next. It may not be tomorrow or the next day, but maybe a year from now or five years from now," said Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce.


"What we don't want to do is to create a situation where there are certain rules that a business has been living by, but the moment that business wants to grow or embark on a major project, new rules are added."

For reprint and licensing requests for this article, CLICK HERE.