As a real estate developer, businessman and native Angeleno, I have concluded it is time for the Los Angeles City Council to pass and the mayor to sign an ordinance substantially raising the local minimum wage. It is my view that without a vibrant middle class earning a decent wage, the future quality of life for all Los Angeles residents will suffer.

As a longtime owner of commercial properties, I believe there is a positive correlation between the economic health of my retail tenants and the income levels of the surrounding community. A higher minimum wage will mean substantial dollars that previously flowed to far away corporate headquarters will now go to local workers and their families, who in turn will increase purchases of local goods and services. I have negotiated with many retailers that have chosen not to open stores in certain communities due to low median family income levels. I have never heard a retailer claim that high labor costs affected their decision to pursue an L.A. opportunity. 

Having been involved over the years with a number of notable redevelopment projects, I have seen the positive impact that development can play in helping revitalize neighborhoods and communities. History teaches us that cities that don’t develop and grow to meet the needs of their populations, cities that don’t invest in their infrastructure, cities that don’t improve their commercial and residential housing stock, eventually wither.

Recently, some experts have estimated an individual needs to make more than $30 an hour to afford the average Los Angeles County apartment rent. If true, creating a pathway for a minimum wage of $15 an hour, like fellow high-cost cities San Francisco and Seattle, would be an important step in addressing the growing demand for housing in the region. That is why there are a growing number of housing advocates and developers alike who are supporting an increase in the minimum wage. Whether we wish it or not, L.A.’s population continues to grow. This growing population will need good housing, places to shop and places to work.

Local impact

One of the truths about real estate development today is that commodities, materials that we use to construct buildings, are often priced off of worldwide demand. Steel, concrete and drywall are examples of materials that have in recent years seen large price increases. The effect locally is that construction costs for new buildings continue to rise, and the amount of rent necessary to foster new development continues to go up. But who is going to pay the additional rent necessary to allow new construction? In commercial buildings, businesses must pay their rent. An increase in sales due to workers having more money to spend will help bridge this gap. In housing, it’s the individual or the family that pays the rent. A higher minimum wage will make housing more affordable for thousands of people. The alternative of not building only makes matters worse, as a deficit in supply only drives rents and prices higher without any tangible benefits.

Some of us that have done well might believe that the current disparity in wealth and income is sustainable and that our quality of life will not really be affected by the growing gap between income earners. And I have heard all the arguments about how people have to pull themselves up by their bootstraps or how we must be watchful of government intervention. But the fact is that we ultimately have to choose what kind of society we want to live in and what quality of life we want for our children and our neighbors. There is no question that some jobs will be lost by an increase in the minimum wage and some businesses will suffer. But in the end, the vast majority of Angelenos will be better off. Our city will be better off. People will be better housed, local business will do better as more money is spent closer to home and the wide gap of economic disparity will lessen.

It is sometimes difficult to appreciate the multiplier effect that a strong middle class produces. But a strong middle class is essential for the financial health for all of us, rich and poor. It is time for the business community to come together and support a higher minimum wage. It is good public policy and it is simply good business.

Clifford P. Goldstein is managing principal of GPI Cos., a commercial real estate investment and operating company in Los Angeles.