Following two months of extensive public testimony in which workers and employers spoke passionately about the potential positive and negative effects of increasing the minimum wage in Long Beach through a citywide policy, the city’s economic development commission now has until January 19 to make a final recommendation to the city council.
The community review process, which included six public forums, officially ended after a two-hour meeting of the 11-member commission at city hall on November 24. The meeting took place about 10 days after the Los Angeles County Economic Development Corporation (LAEDC) released a study, as commissioned by the city council, to analyze the potential implications of Long Beach passing a minimum wage law, which has yet to be proposed.
During the meeting, the commission agreed to meet at 4:30 p.m. on December 14, either at the council chambers or on the third floor of city hall, and sometime in January to further discuss the issue before giving formal direction to the city council.
Commission Chair Frank Colonna, a former vice mayor/city councilmember and local real estate agent, indicated at the meeting that it might take longer to come up with an official stance on the complex and critical issue, adding that other cities are closely watching Long Beach’s next move.
“It’s going to be a very interesting series of maybe weeks or months before we come to a conclusion,” he said at the end of the commission meeting. “It’s going to rely on us to put together a formula that basically tries to level the playing field and at the same time works for the best interests of all of us.”
Similar to previous forums, supporters of a $15-an-hour minimum wage pushed by unions across the nation, stated that such an increase would boost morale, increase productivity and lift low-wage earners, mostly in industries such as retail, food service, warehousing, transportation and senior homecare services, out of poverty.
Advocates of a higher minimum wage also expressed concerns of a high percentage of earnings currently going toward rent, adding that such an increase would give workers more disposable income and thus benefit local businesses.
On the opposite end of the spectrum, business owners said raising wages to such a level, even doing so through graduated annual increments, would result in a flurry of unintended consequences, including higher prices for consumers, job losses, automation replacing workers and a business exodus to other cities, in addition to youth and unskilled job seekers being pushed out of the labor pool.
Business owners have also called for a higher minimum wage at the state level, stating that a city mandate would only create an unlevel playing field. Business owners have pointed out that the state’s minimum wage is already scheduled to increase to $10 an hour next month while efforts are afoot to bring a ballot measure forward next year that would raise it to $15 an hour by 2021.
Christine Cooper, senior vice president of LAEDC’s Institute of Applied Economics, who led the study, summarized the complexity of the issue, stating that there would be both pluses and minuses to passing a city-mandated minimum wage policy.
She said so far not enough data is available to determine the outcome of minimum wage policies, adding that such a determination is also difficult to calculate, points highlighted in the LAEDC study.
“There are going to be positives and negatives,” Cooper said. “The difficulty is in determining what the balance is going to be in the aggregate outcome.”
The LAEDC study provides worst- and best-case scenarios using two models– raising the minimum wage to $12-an-hour by 2017 and $15-an-hour by 2020. However, she said both scenarios make “assumptions” about reactions to raising the minimum wage.
The best-case scenario would be that workers would receive a raise (an additional $940 a year under the $12 model for about 33,000 workers and an additional $5,160 a year under the $15 model for about 46,000 workers) and be able to spend money locally, benefiting the local economy, Cooper said.
Still, this assumes that businesses are resilient and can manage their costs without responding negatively by laying off workers, raising prices or cutting hours, she said.
On the flip side, the worst-case scenario would be that 14,000 workers (under the $12 model) or up to 20,700 workers (under the $15 model) in the city would be at risk of losing their jobs, having hours cut or being substituted by other workers, Cooper said.
This scenario, however, assumes no cost savings through a more happier and productive workforce. In addition, those who say higher wages would make for happier workers often don’t consider that lower skilled or less educated workers would be at risk of falling out of the labor market, she said.
Ultimately, however, Cooper said, “business owners facing an increase in labor costs are going to have to respond somehow.”
She said business owners only have a handful of responses in their arsenal: raising prices, taking a hit to profits, requiring better skilled labor, laying off workers, eliminating benefits, reducing the pay of higher-paid employees or cutting costs in other areas, such as supplies and rent.
Though the study provides some economic strategies as potential mitigations to help employers pay workers more money, Cooper said, essentially, “there’s no free lunch.”
After lengthy public testimony, commissioners asked the city attorney’s office to look into whether it would be legal for the city to exempt youth or tipped workers from the higher wage, keeping such workers at the state’s minimum wage level.
Although state attorneys have recently issued a legal opinion that exempting tipped employees through a “total compensation” model would be preempted by state law, restaurant owners have pushed the idea, saying it would narrow the gap between the front-end staff, who receive tips, and the back-end staff, who don’t.
At the same time, it was brought up that raising the minimum wage might also push youth and unskilled workers out of the labor market, as this demographic of worker would be competing against more employees drawn by higher wages and would also be the first to go.
Lisa Ramelow, owner of La Strada, an Italian restaurant in Belmont Shore, said during public comment, for instance, that she would raise prices and lay off teenage staff members if the city passed a higher minimum wage.
“The first thing I would do besides raising prices . . . is I would have to eliminate all of my 16-, 17- and 18-year-olds,” she said. “I could never afford to pay them $15 an hour. I don’t think of them as second class, but they are unskilled workers just starting out.”
Commissioner Robert “Bobby” Olvera, Jr., president of the International Longshoremen’s and Warehousemen’s Union (ILWU) Local 13, who stated the state-mandated $9-an-hour minimum wage is unacceptable for the city, questioned whether there is any evidence of business closures or mass layoffs after city-mandated minimum wage policies have been imposed in other municipalities.
Cooper didn’t respond directly but said that no business owner necessarily “wants to let their staff go or would like to leave the City of Long Beach,” however, ultimately a “calculation” has to be made.
She added that raising the minimum wage would likely impact “those most vulnerable” to being unemployed, including youth, unskilled workers and those with barriers to employment, such as ex-offenders.
Cooper said that, as an economic development professional, her assessment is that “there’s a high correlation between education and wages.”
Still, some speakers used the LAEDC’s own study to advocate for a city-mandated minimum wage hike in Long Beach.
Steve Askin, a Long Beach resident and research coordinator for the Service Employees International Union (SEIU), a major backer of the “Fight for $15” campaign, noted that the study included a survey of 600 businesses in the city, showing a small percentage indicated they would respond negatively by cutting jobs and zero said they would leave the city.
Business Journal Publisher George Economides, however, has challenged the findings, noting in a detailed analysis that the LAEDC’s survey results were skewed because the consultants gave equal weight to large businesses with 100 plus employees and small businesses with fewer than 20 employees, despite the fact that 84 percent of businesses in Long Beach are small businesses. Companies which do surveys have told the Business Journal that the best way to ensure accurate findings in this or other surveys is to weight the survey so it reflects the audience.
Told of Askin’s comment, Economides said, “That is precisely why the survey results – the weighted results – must be presented. He just made our case. The analysis is skewed. Small businesses are not adequately represented in the results as submitted – not even close. This is really a farce. Everyone – the mayor, councilmembers, city staff and commissioners – who buy off on this survey as presented should be ashamed of themselves. They are throwing small businesses under the bus simply to appease unions. Since the weighted data is available, why not release it? What are they afraid of? What are they hiding?”
“I’m really disgusted that city officials are knowingly accepting faulty data. It is simply unethical. Now I wonder what other things are being done in this city that are not above board.”
Questioned about the survey results by Commissioner Becky Blair, a commercial real estate broker and former Long Beach planning commissioner, Cooper stood by the accuracy of the results. She said that, although an overwhelming majority of businesses in the city are small businesses, they only represent about 25 percent of the actual employment, adding that the business survey was “comprehensive” and “invaluable” to inform the commission.
“It’s also important to remember that large businesses are large employers and we have to understand how they’re going to react as well to the minimum wage,” Cooper said.
Blair also asked whether Long Beach’s business makeup, mostly small businesses, is similar to the City of Los Angeles or San Francisco, which both have passed $15-an-hour minimum wage policies. Cooper said the large cities have a “very similar” business composition as Long Beach.
“This is a nation of small businesses and small business creation,” she said.
Commissioners asked city staff to come back with further analysis, including impact on city employees and business costs related to the Affordable Care Act, before a final recommendation is made to the city council.
In the meantime, the Long Beach Council of Business Associations (COBA), which represents business improvement districts in the city, is expected to release the results of its own survey sometime this week, the Business Journal has learned.