The Long Beach City Council’s decision to raise the minimum wage to $13 an hour by 2019 with an eventual “pathway” to $15 an hour by 2021 was hailed as a victory by some workers’ rights advocates, but business owners said consumers will ultimately be stuck with higher prices and fewer job opportunities.
“I’m going to have to raise prices just like everybody else,” said Vince Passanisi, owner of Santa Fe Importers, an Italian delicatessen that started as a food market nearly 70 years ago in Westside Long Beach. “I’m going to do whatever I can to maintain my business to continue to provide good service and good products for my customers, but, in order to pay those additional labor costs, I’m going to have to charge more.”
The business owner, who employs more than 50 workers, has said that he also plans to replace 12 to 15 unskilled employees at his food manufacturing operation with automated equipment. Although the technology will cost about $1.5 million, Passanisi said it will still save him $400,000 annually long term since he won’t have to pay the higher wages.
After several hours of testimony and debate at a crowded council chamber, the city council at its meeting on January 19 voted 6-2 to approve a policy that includes raising the minimum wage to $13 an hour phased in over three years starting next year.
The two councilmembers who voted against the policy were 4th District Councilmember Daryl Supernaw and 5th District Councilmember Stacy Mungo. Third District Councilmember Suzie Price left before the vote due to a family emergency.
Many months ago, four of the six councilmembers who voted for the ordinance – Lena Gonzalez, Dee Andrews, Roberto Uranga and Rex Richardson – were seen outside city hall supporting protesters who wanted the city to impose a higher minimum wage.
“That was a pretty clear indication to the business community that nearly a majority of the city council had made its mind up before any meetings were held, before any testimony was taken, before any study was done, before a so-called compromise was presented,” claimed Business Journal Publisher George Economides. “So much for voters electing people who want to hear all sides of an issue before making an informed decision in the best interests of the city. Transparency? That word should never be uttered again at city hall.”
Under the new city ordinance, the minimum wage in Long Beach will be $10.50 an hour starting January 1, 2017, $12 an hour starting January 1, 2018, and $13 an hour starting January 1, 2019. Small businesses with 25 or fewer employees and nonprofits will be given a one-year delay to comply.
The council also agreed on the motion of Vice Mayor Suja Lowenthal to conduct a study in early 2019 that will analyze the impacts of the city’s minimum wage policy on employment, sales tax and the overall economy. If, after the study it is determined that there were no major negative impacts on jobs or the local economy, the minimum wage will be raised to $15 an hour by 2021.
Under this “pathway,” the minimum wage will be raised to $14 an hour on January 1, 2020, and $15 an hour on January 1, 2021. Small businesses and nonprofits would again be given a one-year delay.
Furthermore, in 2023, the minimum wage would be adjusted to the consumer price index (CPI) for the Los Angeles County metro area.
The new city policy, which will be imposed on all city departments on the same schedule, will include wage enforcement provisions managed by the city, covering private right-of-action for workers, mandatory posting, an anti-retaliation clause, revocation power and a program to fine employers for noncompliance.
The city council also agreed to add a “working intern” amendment that will allow employers to pay 85 percent of the minimum wage for 480 hours or 6 months, whichever comes first, for employees in a job or activity in which they have no previous or similar experience.
In addition, prior to the first reading of the ordinance, the city attorney is expected to bring back possible business incentives for review to the city council, and the city attorney is expected to return with information on a “total compensation” model.
The $13-an-hour minimum wage policy was recommended by the city’s economic development commission, which brought forward the proposal as a “compromise” between advocates of a $15-an-hour minimum wage and the business community.
The recommendation was made after months of public hearings authorized by Mayor Robert Garcia. In addition, the city had commissioned a formal study on the subject by the Los Angeles County Economic Development Corporation (LAEDC).
The study concluded that, while some employees would benefit from higher wages, others might suffer, since employers may choose to cut jobs or reduce employee hours to cover higher labor costs.
The Los Angeles Alliance for a New Economy (LAANE), which was instrumental in helping to pass a ballot measure known as Measure N in November 2012 that raised wages for hotel workers in Long Beach, has called the city’s recent action a “major victory for workers and working families.”
The organization anticipates that 54,000 workers will earn higher pay and 14,600 people will be lifted out of poverty.
In addition, the Raise the Wage Coalition, supported by union-backed Los Angeles County Federation of Labor, applauded the city’s move. However, the coalition called the action merely a preparation for a $15-an-hour wage with no exemptions and strong wage enforcement, that the group said is the “only way to ensure workers have a secure and stable life to provide for their families.”
While supporters of the $15-an-hour minimum wage campaign called concerns of higher prices and fewer jobs “fear mongering,” small business owners disagreed and stated repeatedly that small businesses, which will be impacted most severely by the local minimum wage law, are ultimately being forced to solve a complex problem of poverty that has been exacerbated by large conglomerate corporations.
“It’s going to make it more difficult if not impossible for a small business to survive in this city,” said Mike Sheldrake, owner of Polly’s Coffee on 2nd Street and president of the Belmont Shore Business Association. “Nothing happens in a vacuum. You can’t just raise the minimum wage and solve the problem of poverty.”
Although he employs fewer than 25 workers and will be given a year to comply, Sheldrake said he will most likely have to eventually cut medical or dental benefits and won’t be hiring any unskilled workers. The state increased the minimum wage from $9 to $10 an hour on January 1, an 11 percent increase with which businesses are now coping.
Sheldrake pointed out that the LAEDC study indicated that 75 percent of employees making minimum wage live outside of the city, which he said means that only 25 percent of the wage boost will likely end up benefiting the local community.
Ultimately, raising the minimum wage will make products and services more expensive, he said, adding that the policy will also cost nearly $1 million for the city to enforce during a time when the city is facing budget deficits.
While business owners were asked to help develop a recommendation over the past several months, Passanisi called the city’s public process a “sham,” adding that it appeared elected city officials were fixed on a $15-an-hour minimum wage no matter what was recommended.
“The whole thing was pre-decided,” he said. “I’m disappointed. They didn’t even listen to the commission’s recommendations. The business community was told to come up with a compromise solution, and [the city council] just went ahead and passed this thing anyway.”
Passanisi likened the minimum wage hike to a “regressive tax” that hurts the same individuals it is meant to help. He said he knows of business owners who had planned to move businesses to Long Beach but ditched those plans because of the city council’s decision.
Ron Calkins, owner of West Coast Valve located in West Long Beach, said he too would no longer be hiring unskilled workers since labor will be too expensive. He noted that workers with higher skills from other areas such as Orange County will likely be attracted to Long Beach by the higher minimum wage rate.
Businesses unable to pass costs onto customers may have an even harder time adjusting.
Alan Anderson, who owns Bel Vista Healthcare Center, a senior care facility in Long Beach, for instance, said raising the minimum wage will create a new paradigm for the home care industry, since private-pay patients will ultimately be forced to pay for the higher labor costs while other patients are covered by Medicare and MediCal.
“It’s the private-pay patients you can pass it on to, and they’re already paying a large number now,” he said. “So how much more can they bear?”
Gus Sverkos, owner of Kafe Neo, said passing a minimum wage policy without exempting tipped workers is “illogical,” since servers already make well above minimum wage when tips are counted.
In addition, he pointed out that, if the economy enters another recession, many small businesses will likely be forced to close because of the higher mandated wages.
“People have to understand that at any moment the economy could take a little dip and that would have devastating effects on small businesses,” Sverkos said. “You can’t assume that the economy is always going to tick up. If you tick up with costs at the same time, you can get caught in a pickle.”