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Long Beach Employers, Workers And Business Leaders Weigh In On Minimum Wage; More Small Business Owners Speaking Out As They Add Up The Negative Impacts

Confronting an emotional and politically charged issue, employers, workers and business leaders convened at two meetings in the past two weeks to share their perspectives on the potential effects of raising the minimum wage in Long Beach.

On September, 29, more than a dozen people spoke at city hall at the first of six public forums scheduled by the city, which has commissioned the Los Angeles County Economic Development Corporation (LAEDC) to conduct a study on the feasibility of a citywide minimum wage policy and to look into possible incentives or exemptions for employers to comply with such a law.

The second meeting was conducted last week in which Mayor Robert Garcia hosted a roundtable discussion in Bixby Knolls with some of the city’s top employers and nonprofits, drawing a crowd of nearly 150 people.

During the meeting at city hall, the 11-member Long Beach Economic Development Commission, appointed by Garcia, heard testimony from speakers in favor of and against a city-mandated minimum wage hike, while some remained neutral.

City staff clarified that the forums at various locations across the city are meant to provide an opportunity for public testimony and are not necessarily meant to give direction to the LAEDC, which is expected to present the results of an independent and objective study to the city council in early December.

The next meeting is set for 7:30 a.m., October 29, at Long Beach City College, before the city council’s three-member economic development and finance committee.

The study and public forums follow a recent wave of large cities across the state and the country passing minimum wage laws, as labor union groups have led a grassroots movement to organize workers to fight for higher pay. The City of Los Angeles, for instance, passed an ordinance earlier this year requiring its minimum wage be increased to $15 an hour incrementally between 2016 and 2020.

Those who spoke in support of the “Raise the Wage” campaign, which has been promoted by the union-sponsored Los Angeles County Federation of Labor and which calls for a $15-an-hour minimum wage in Long Beach, mostly consisted of minimum wage workers in hospitality, warehousing and fast-food industries.

Policy Fit To Long Beach

While Long Beach city officials have yet to bring forward a proposal, business leaders, speaking on behalf of employers in the city and across the region, stressed the importance of drafting a policy that fits Long Beach rather than merely copying ordinances that have been passed by other jurisdictions.

Business Journal Publisher George Economides pointed out several times earlier this year that Long Beach, unlike Los Angeles, Seattle, San Jose and others, is all about small businesses, and that an increase in the minimum wage will have a much more negative impact here than in other cities. In August he wrote: “This is a city of small businesses, mom-and-pop shops, family-owned businesses, etc., with a growing start-up creative sector. The number of private sector businesses employing more than 1,000 people in this city can be counted on one hand. Long Beach is small business America.”

Jeremy Harris, senior vice president of the Long Beach Area Chamber of Commerce, said raising the minimum wage to the level requested by labor groups without considering factors specific to Long Beach would only put businesses at a “competitive disadvantage,” adding that “data, outreach and testimony” should be what drives public policy rather than “momentum” of other cities.

“We understand there’s a momentum for increasing the minimum wage around the region and in parts of the country; however, momentum alone should not be the reason to enact an ordinance,” he said. “It takes sound data, outreach and testimony from those who will be impacted most.”

Dustan Batton, policy associate for the Los Angeles County Business Federation (BizFed), which represents 150 business organizations in the county, called Long Beach a “leader” on the issue for researching its own economic profile and considering potential impacts and incentives before moving forward with an ordinance.

“Copy-and-paste policy is not the way to go,” he said, asserting that the county and city of Los Angeles both adopted nearly identical ordinances that had originally been drafted for cities in other states.

Harris, who estimates that there are 15,000 businesses in Long Beach, said a minimum wage policy should clarify the definition of a “small business” in terms of number of employees with respect to the number of businesses in the city. Conversely, such a policy should also determine what defines an “employee” and “entry level worker,” he said.

In addition, Harris pointed out that raising the minimum wage also increases payroll costs for employers that cover employer contributions for health care benefits, social security, Medicare, unemployment benefits and disability insurance.

Harris added that the city should particularly consider the potential impacts on nonprofits, stating that California State University, Long Beach conducted a study that indicates one in 10 jobs in the city is a nonprofit job.

Kraig Kojian, president of the Downtown Long Beach Associates (DLBA), said the Council of Business Associations (COBA), which represents all business districts in the city, plans to conduct its own private, independent study on the issue, to identify and reach out to business sectors that would be impacted.

Restaurants Take A Stand

Restaurants and hospitality businesses should also be contemplated, Harris said, noting that workers aren’t compensated only by their employers, since they often take home gratuities from customers.

During the forum, four restaurant owners expressed concerns, stating that mandating an across-the-board minimum wage hike would only put them at a competitive disadvantage with other restaurants in nearby cities and force them to raise prices or possibly close.

Matt Peterson, co-owner of Legends Sports Bar on 2nd Street in Belmont Shore that employs 100 people, cautioned city officials and consultants to “look at studies carefully” and to “get both sides” of the issue, as a minimum wage increase would have widespread impacts.

“It’s going to impact everybody in this community,” said Peterson, a member of the Belmont Shore Business Association (BSBA). “My type of business is very, very elastic. I’m going to raise my prices. But, if people want to get paid more . . . goods and services are going to cost more. So let’s just proceed with caution and be very careful about it.”

Mike Sheldrake, president of the BSBA and owner of Polly’s Gourmet Coffee also located on 2nd Street, said employees may see a larger paycheck with a minimum wage of $15 an hour, but it would also raise his labor costs by nearly 40 percent, adding that businesses throughout the city may be forced to cut jobs as a result, a point he had made in a previous article in the Business Journal.

“[Employees are] going to get more money,” he said. “Great. But, if it’s not done properly, there are going to be fewer employees employed in the business.”

Sheldrake noted that a study on Seattle, which last year enacted an ordinance that raises its minimum wage incrementally to $15 an hour by 2017, has already seen the loss of more than 1,000 restaurant jobs while surrounding areas saw employment gains.

Costs Of Enforcement

Another issue brought up was the potential costs to the City of Long Beach to pay for enforcing a minimum wage policy.

Both Sheldrake and Peterson stated that enforcing such a law might require the city to hire additional city workers since state and federal governments are only required to enforce laws under their own labor codes. They said the City of San Francisco has nearly 140 employees enforcing labor laws.

Max Norris, a local civil service attorney and Long Beach resident, however, interjected that a way to make such a program “self sufficient” would be to enforce penalties.

Many supporters of raising the minimum wage, meanwhile, requested that Long Beach draft a policy that would include certain protections, such as stricter labor law enforcement provisions that would prevent “wage theft” and ensure workers are provided adequate paid sick days.

Other speakers, however, said such matters are valid concerns but should be dealt with separately from the minimum wage issue.

‘Unsustainable Wage Increase’

Vince Passanisi, owner of Santa Fe Importers, an Italian delicatessen that has been located in West Long Beach for 68 years and employs about 50 people, said helping the “free market” to compete while creating more educational resources is a solution to poverty rather than increasing the minimum wage through a city ordinance.

He added that, if employers are left alone to compete, wages in Long Beach, which as of August had an unemployment rate at a seven-year low of 7.6 percent, will rise “automatically” due to an improving economy.

“Instead of sabotaging growth with an unsustainable wage increase, the city should be asking, ‘how do we create a better educated and more skilled workforce?’” Passanisi said, adding that the city should also be focusing on incentives for businesses to train and educate workers while making neighborhoods safer and upgrading infrastructure.

“I hope the commission will do what’s best for Long Beach by giving workers and businesses the freedom to make their own decisions,” he said.

Balancing ‘Trade-Offs’

Still, Commissioner Walter Larkins, an entrepreneur specializing in life and health insurance for businesses, non-profits and governmental agencies, said that, if a minimum wage policy is proposed, the city may need to address such issues as wage theft and labor costs to businesses that he called “unintended consequences.”

Christine Cooper, vice president of LAEDC’s Institute for Applied Economics, which is heading up the study for Long Beach, said the city is going to eventually have to weigh the costs and benefits for both workers and employers in drafting an ordinance, adding that, in the end, “some people will be suffering and some people will gain.”

“There are trade-offs,” she said. “This is, unfortunately, what economics is about.”

Cooper added that the study, which includes using a San Diego-based survey firm to take a random sample of 600 businesses in Long Beach, would include analysis of literature and highly qualified economic studies to show evidence of the outcomes of different wage policies.

She added, however, that accurately determining the effects of minimum wage laws often takes decades and, even then, the evidence is still “quite mixed.”

Commission Chair Frank Colonna, a local real estate agent, said an important factor to consider is that Long Beach is still transitioning out of being a city with an abundance of manufacturing jobs from a naval shipyard and Boeing’s C-17 aircraft production line that have both shut down.

Cooper agreed, adding that cities across the country are struggling with the fact that “middle-paying” production-based jobs are being replaced by low wage service-based jobs.

“We do struggle with the idea of how we’re going to transition to this new information-led economy and what we’re doing through that transition period,” she said. “It does seem that a lot of our middle class, middle-paying jobs have left, and it is a problem nationwide.”

Mayor’s Roundtable Held In Bixby Knolls

During a two-hour roundtable discussion at the Expo Arts Center in Bixby Knolls on October 5, Mayor Garcia spoke with a diverse group of people made up of residents, workers, restaurant owners, business leaders, healthcare executives and nonprofit directors.

“I’ve committed that this process be very open, inclusive and balanced,” Garcia said. “I think we’re interested in hearing the entire community. I think it’s important that everyone has a voice so when this comes back to the council months from now, we have all the data and we’ve heard everyone.”

Many speakers expressed sympathy for low-wage workers, particularly for an employee who said she has worked at Taco Bell for nine years and is still making minimum wage since she has yet to receive a raise.

Restaurant owners, however, expressed concerns about raising the minimum wage and how it would impact tipped employees, adding that they may have to be exempt or it would have a very negative impact on the industry.

Jimmy Loizides, owner of George’s Greek Cafés whose two restaurants in Long Beach employ about 160 people, said raising the minimum wage to $15 an hour for all workers would potentially change the service of restaurants if restaurant owners were forced to do away with tips.

“We are a performance-based restaurant, meaning our servers who sell the most and do the best job, will always make more money,” he said. “But what’s the incentive to do better with a straight salary? We’ll lose our good employees. They’ll go to another city and use their talents there. I’ve been around long enough that any increase on that side will be an increase on this side.

Loizides added that small minimum wage increases and additional healthcare benefits mandated by Obamacare add up for small businesses, costing hundreds of thousands of dollars in extra labor costs.

“This year I have been hit with $200,000,” he said. “I don’t make millions. $200,000 is a lot of money. At what point do we stop raising prices?”

Mike Rhodes, owner of Domenico’s Italian Restaurant in Belmont Shore that he said is the oldest restaurant in Long Beach and has 42 employees, echoed many of the same concerns, adding that he will likely have to raise prices, putting him at a competitive disadvantage with other nearby restaurants.

“The public doesn’t understand what small business people like me are up against,” he said. “My lease is up in two years. Rent will probably go up $4,000 a month and now this? Hopefully the public understands why I have to raise my prices.”

Luis Navarro, who owns Lola’s Mexican Cuisine on 4th Street and other restaurants in Long Beach totaling about 60 employees, said he understands the need for workers to want higher pay having been “groomed through labor unions.”

However, he expressed confusion as to how such a law would work for all businesses and employees. Navarro added that Long Beach is different than Los Angeles in that it’s a “community of small businesses,” and would be impacted more than most cities.

“My philosophy is how do we get there where it works for everyone?” Navarro asked. “We are a small business. We are different than a corporation. If you’re a small business owner, you’re the first one there in the morning, the last one to leave, and also the last to get paid. That’s the reality.”

Gary Godshall, owner PrideStaff, a staffing agency in Long Beach, questioned whether temporary workers who often take jobs in other cities would be covered under the city’s mandated minimum wage policy.

“If we go through a minimum wage hike, and I service surrounding cities, do I have to pay my workers minimum wage working in those cities because my business is located in Long Beach?” he asked. “If that’s the case, then there are a lot of other staffing agencies that will basically put me out of business providing lower wages in those other cities.”

John Molina, chief financial officer of Molina Healthcare, which employs 3,300 people in Long Beach and 20,000 people across the country, said his company receives 98 percent of its income from federal Medicare and MediCal programs so, unlike retail businesses, Molina can’t simply raise prices if the minimum wage is increased.

“You can’t raise your price to those folks,” he said. “You need to figure out how to do more with less.”

Nonprofit executives expressed similar concerns, adding that they receive most income from donations in addition to state and federal programs, making it difficult to budget for increased labor costs.

Furthermore, Molina said exempting certain businesses from the mandatory minimum wage increase would only “cheapen” their workers when the point of such a policy is to help employees. He added that 10 percent of his employees make less than $15 an hour but make more than that when health care benefits are factored in.

Still, Molina said it’s only a matter of time before the minimum wage is increased, adding that the city could help alleviate the burden on businesses by lowering costs for certain city services.

“We have to figure out a way to work together, because it is not an ‘if’ minimum wage will be increased – it’s ‘when’ and ‘how,’” he said. “For people who own businesses, labor costs are a significant cost, but they’re not the only one. There are other costs that the city could help lower.”

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