Mark Twain once said, “There are three kinds of lies: lies, damned lies and statistics.”
Surveys can be interpreted in many ways depending upon the statistics provided. And the accuracy of statistics is most often based on the parameters established for gathering the data. The conclusions arrived from that data are easily skewed if the parameters that were initially set are not representative of the subject of the survey.
In this case, the issue is whether or not Long Beach should establish its own minimum wage that is higher than what is mandated by the State of California. The subject is the impact on the thousands of businesses in the city that would be forced to pay a higher minimum wage. To their credit, the mayor and councilmembers of Long Beach chose to contract for a study that included a representative survey of local employers in order to have good information on which to base their decision. The city contracted with the Institute for Applied Economics of the Los Angeles County Economic Development Corporation (LAEDC).
The 66-page report, released November 13, is called, “Considering Minimum Wage Policy In The City of Long Beach: Theory, Practice And Potential Implications.”
After reading the report, the Business Journal does not believe it is a complete representation of the Long Beach business community and, thus, we believe many of the conclusions of the study (referred to as “What This Tells Us” – Pages 43-61) are based on incomplete and/or inaccurate data. Let us explain.
The study called for a survey of 600 businesses that are representative of the business community. LAEDC developed survey parameters (Page 40) that split the city into three regions by zip codes – Northeast Long Beach (zip codes 90804, 90808, 90814 and 90815), Northwest Long Beach (90805, 90806, 90807 and 90810) and South Long Beach (90802, 90803 and 90813). Two hundred businesses in each region were interviewed, with one-third of the businesses employing 19 or fewer people; one-third employing between 20 and 99 people; and one-third employing 100 or more people.
According to the United States Postal Service, on November 13, 2015, it delivered mail to 11,077 business addresses in Long Beach zip codes (click to download pdf). That number does not include home-based businesses or those renting P.O. Boxes. However, the LAEDC study is based on 8,340 businesses (Exhibit 2-8, Page 29), or approximately 25 percent fewer businesses than actually exist. That is a significant difference.
Using the 8,340 total for the number of businesses, LAEDC indicates that 7,050 of those businesses have 19 or fewer employees (Exhibit 2-8, Page 29). That accounts for 84.5 percent of the 8,340 businesses. Yet, just 33 percent of the 600 businesses surveyed have 19 or fewer employees. That skews the results since it is generally accepted that small businesses employ a higher percentage of their workers at or near the minimum wage. Further, the LAEDC chart on Page 29 indicates there are 251 businesses with 100 or more employees, and 200 of them were interviewed. That means 80 percent of the largest employers were interviewed but only 33 percent of the smallest employers were interviewed. That leads us to believe the survey is not representative of the city’s business community and leads to faulty conclusions interpreting the data.
Most surveys are weighted – that is, they are adjusted to ensure true representation. A question for the city and LAEDC to answer is, have the three individual employee-size categories been weighted to reflect or represent the overall business population in the City of Long Beach? Based on several of the conclusions outlined in the survey, we are fairly certain it has not been weighted. Not weighting the employee size also provides faulty conclusions. An example of such is the statement on Page 48: “Overall, employers are unlikely to reduce their minimum wage staffing numbers.”
There’s more. If we apply the U.S. Post Office delivery numbers by zip code to the three regions established for the survey, we find the Northeast Region (zip codes 90804, 90808, 90814 and 90815) is over represented. Those four zip codes represent 2,596 of the city’s 11,077 business mail deliveries, or 23.4 percent, but they account for 33.3 percent of survey respondents. The three regions are not equally balanced.
The argument used by proponents of a higher minimum wage that workers will spend more money in the city is also questionable. The LAEDC report states that the city has a workforce of 146,577 (Page 28, a 2014 figure from the state employment development department), of which only 26 percent live in the city. That means 74 percent of the people who work in the city – including minimum wage workers – spend the majority of their earnings outside Long Beach.
There are several other “statistics” that can be challenged and numerous conclusions that don’t fit with what the Business Journal is hearing from businesses throughout the city. Most importantly, elected officials need to assure the business community that decisions on a minimum wage are based on sound, accurate information. This report is not up to the high standards we have come to expect from the very reputable LAEDC.
Finally, the report lists a series of incentives – referred to as “operational levers” –that may be implemented to help businesses succeed (Pages 20-21). Why do these incentives have to be tied to the minimum wage? If elected officials are sincere in wanting businesses to thrive, they should put those incentives to work now.