Giving people who earn the least a 40 percent raise seems like it would make a dent in our city’s abysmal poverty rate. And with either of the pending city of L.A. minimum-wage proposals, low-income workers could take home anywhere from $1,000 to $5,000 more a year. This is nothing to scoff at, especially given that in the past three decades the city has gained 1 million people, lost 165,000 jobs and seen one in four children living in Los Angeles fall into poverty.
But the reality is that raising the minimum wage in such a dramatic way will do more harm than good. Even at the optimistic side of the scale, a $5,000 boost in annual income will not lift the average low-wage earner out of poverty. Magnified by the scale of our city’s minimum-wage workforce, it will force many employers to cut back on staff or go out of business, which will have a much bigger impact on the very population these proposals are purported to help.
While the mayor and City Council promote a feel-good silver bullet that doesn’t exist, they are ignoring the many other policy proposals that actual employers say would help their business grow, employ more people and pay better wages. Slogans like “Raise the Wage” are easy for many voters to get behind. Proposals for changing the business tax structure, California Environmental Quality Act reform and creating job-training pipelines to community colleges are more complex and less sexy but would have much bigger impacts on the wages and quality of life available to Angelenos.
On a micro level, the current proposals are severely flawed. Where are Boys & Girls clubs with tight operating budgets supposed to get the extra money to pay their clubhouse leaders who are mostly teenagers or young adults? What about tipped employees, many of whom earn well beyond the proposed wage hikes? How will this law be enforced, especially if a minimum-wage worker crosses the street into another city while on duty? These and other unanswered questions create uncertainty that cripples workforce investment.
While L.A.-based employers are forced to pay higher wages, consumers will likely shoulder the burden. L.A.-based employers will be at an even greater competitive disadvantage with businesses in neighboring cities. All of this is to say, why are we considering this on a city level? Why should Mayor Eric Garcetti have to shop around from one neighboring City Council to the next, essentially lobbying his fellow civic leaders to follow suit in order to make sure L.A.-based businesses are not priced out of their own city, when this could happen at the state level?
In actuality, the statewide minimum wage is slated to increase throughout California to $10 an hour Jan. 1, 2016. The current city of L.A. proposals are being discussed before we have had a chance to properly analyze the effects of the statewide minimum-wage increase.
Distinct from our concerns with the proposals themselves, we are disturbed by the integrity (or lack thereof) of the selection process. The city of Los Angeles selected the UC Berkeley’s Institute for Research on Labor and Employment – the same group that is advocating Garcetti’s plan – to perform what is intended to be an independent, unbiased analysis of the two ordinances being considered.
The four bidders and their price tags: Beacon Economics at $43,000, Berkeley at $84,000, Applied Development Economics at $88,000 and the Economic Roundtable at $100,000.
Clearly they had credible options besides Berkeley. In fact, among the four selection panelists, two actually preferred Beacon’s plan overall.
We stand firmly with Councilmen Mitch O’Farrell and Felipe Fuentes in calling for a truly independent analysis of these proposals to ensure policymakers are steered in an unbiased direction moving forward.
The Los Angeles County Business Federation, or BizFed, is committed to working in partnership with city leaders to create an economy that benefits all. This is why BizFed’s massive, diverse grassroots alliance of employers continues working for comprehensive job growth and economic development action for the city of Los Angeles, including expediting career pathways programs, reforming the gross receipts tax, streamlining planning and permitting processes, and stopping CEQA abuses. All of these are critical win-win job creation and anti-poverty solutions that shouldn’t be dodged in favor of proposals that are easy to communicate but less effective.
Tracy Rafter is founding chief executive of the Los Angeles County Business Federation, a grassroots alliance of 130 business groups representing more than 268,000 companies that employ nearly 3 million people in Los Angeles County.
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