Now that the state legislature has increased the minimum wage in California to $15 an hour incrementally by 2022, the Long Beach City Council must decide whether to raise wages at a faster pace than the state under a city policy proposed earlier this year or to hold off entirely.
On January 19, the city council agreed in a 6-2 vote to draft an ordinance that would increase the minimum wage to $13 an hour by 2019. Under the proposal, if a study shows no negative economic impacts after the first three years of implementation, the minimum wage would eventually rise to $15 an hour by 2021.
Now that state lawmakers have raised California’s minimum wage, however, the city council may decide to change its original plan that still has yet to be enacted, Long Beach City Attorney Charles Parkin told the Business Journal in a phone interview.
“It’s a policy decision for the city council,” he said. “This minimum wage at the state level has certain advantages, and getting there faster has certain advantages for other groups.”
Long Beach’s plan was considered somewhat of a compromise between the needs of the local business community and the national union-backed “Fight For $15” campaign after Mayor Robert Garcia authorized a six-month process that involved surveys, studies and community forums along with recommendations from the city’s economic development commission.
Under Long Beach’s proposal, employees would be making $1 more an hour than the state’s new minimum wage ($12 an hour rather than $11 an hour) starting January 1, 2018, until reaching $15 an hour in 2021, a year earlier than the state.
California’s law, known as Senate Bill 3, however, allows for the state minimum wage, which is already among the highest in the nation at $10 an hour, to be increased each year by up to 3.5 percent after 2022 to account for inflation measured by the national consumer price index (CPI).
In addition, the state policy provides safety nets called “off-ramps” in which Gov. Jerry Brown, who signed the legislation into law on March 28, would be able to pause wage hikes if negative economic or budgetary conditions emerge.
In both the city’s and state’s minimum wage policies, small businesses – those with 25 or fewer employees – are given an extra year to comply.
Either next month or possibly in June, the city council will decide whether to enact a city ordinance or give staff further direction after city officials meet and confer with employee labor unions in coming weeks to discuss the implications of the proposed wage increase, Parkin said.
In any case, the city council can’t enact a policy that is the same or less restrictive than the state’s, he said, adding that, if the city council takes action before unions meet and confer with city staff, employees might file a charge with the California Public Employees Relations Board (PERB).
So far, some Long Beach city leaders have supported the state’s recent action but have been silent on the city’s next step.
Mayor Garcia has stated that the state’s recent legislation would maintain business competitiveness but hasn’t mentioned if Long Beach plans to continue with its current proposal that would implement a minimum wage faster than the state.
“Long Beach has already taken steps to responsibly increase the minimum wage for workers in our city, so this action from Governor Brown is good news for us locally,” the mayor said in a Twitter post. “This statewide approach also ensures that cities maintain similar wage levels to ensure business competitiveness.”
Some small business owners, however, have told the Business Journal that for the city council to raise the minimum wage quicker than the state and add more expenses for enforcement would be senseless and the worst option for local businesses.
“I can’t imagine why they would want to create another bureaucracy to hold businesses accountable to this when they can just let the state take care of it,” said Vince Passanisi, owner of Santa Fe Importers, a longtime Italian delicatessen in Westside Long Beach. “I mean they already have enough expenses as it is.”
He noted that Mayor Garcia and Long Beach city officials at the same time are proposing a ballot initiative this year to increase the sales tax by 1 percent to cover infrastructure and public safety needs. At the same time, the city is facing budget deficits totaling $10.6 million over the next two fiscal years.
With regard to the potential financial impact on the city, so far the city council has agreed to the most expensive method of enforcement, which would include creating a whole new city division to conduct communications and respond to complaints rather than rely on the state.
The city council agreed in January to a policy that would include “strong wage enforcement that is managed by the city and includes private right-of-action for workers, mandatory posting, anti-retaliation clause, revocation power for the city and a fine program.”
According to an analysis by the city’s financial managemen department, providing direct city enforcement would cost the city nearly $1.3 million starting in Fiscal Year (FY) 2021, along with $404,833 in one-time costs for partial funding of staff in FY 2016 and the acquisition of some vehicles.
Business owners argue, however, that the city council should now scrap its city policy since the state’s minimum wage reaches the $15-an-hour goal and levels the playing field.
“I’m sure the consensus would be to follow the state time frame that would give more people time to adjust and ease into it more,” said Blair Cohn, executive director of the Bixby Knolls Business Improvement Association and a leading member of a group representing business districts and associations throughout the city. “I think people can at least take that bitter pill knowing that there is equity across the board.”
The state’s move to increase the minimum wage to $15 an hour was pushed through by Democratic lawmakers rather than allowing voters to decide on the wage hike through a ballot measure, although Republican legislators unanimously opposed it.
Perspectives on what the outcome of enforcing a $15-an-hour minimum wage in the state varies widely, while studies show evidence is lacking and results are mixed when it comes to the overall, long-term impact of increasing the minimum wage.
Business groups have warned that the move will devastate California’s economy by forcing businesses to raise prices, cut jobs, turn to automation, leave the state or close their doors, possibly increasing the unemployment rate.
Labor unions and Democratic lawmakers, meanwhile, have said raising the minimum wage is a moral obligation to provide a better living for society and will create an economic stimulus effect since low-income families will have more money to spend in the local community.
Democratic city leaders and state legislators in Long Beach have applauded California’s action, stating that it would help “level the playing field,” which was a concern brought forward by many small business owners, who said local minimum wage laws would create a patchwork of labor laws across the state.
“While some cities across the state, including Long Beach, have laws in place to increase the minimum wage, others do not,” said Assemblymember Patrick O’Donnell (D-Long Beach) in a statement provided to the Business Journal “This patchwork approach could make local businesses feel like they are at a competitive disadvantage compared to those businesses just outside the city limit. A statewide approach is not only good for California workers, but creates a level playing field throughout our region.”
On the other hand, Republican lawmakers have been vehemently against increasing the state minimum wage. For instance, Sen. John Moorlach (R-Costa Mesa) said in a statement that the higher minimum wage will have devastating impacts on the Los Angeles region’s economy in particular, which he said is “shrinking.”
“We are at an inflection point in our history, and the reverberations of this decision, particularly the law of unintended consequences, will be significant,” he said. “Statistics consistently show that raising the minimum wage will eliminate entry-level jobs. Many workers hoping this change will improve their finances will be sorely disappointed because their job may actually no longer exist.”
The California Restaurant Association, which co-chairs a coalition called the California Consumers Against Higher Prices to advocate on behalf of members, called the state’s legislation “hastily crafted,” adding that the measure will bring negative consequences that will “recklessly destroy California’s businesses.”
The National Federation of Independent Business (NFIB), the largest small business association in California representing 22,000 small businesses, issued a similar statement that a 50 percent wage hike is “reckless” and will have “deep negative consequences, including job loss and increased costs to job creators, senior citizens and non-profits.”
Shawn Lewis, spokesperson for the NFIB, said the state’s decision to allow the minimum wage to rise with inflation will only create more struggles for small businesses, adding that the state hasn’t had enough time to assess impacts of the state’s most recent 25 percent minimum wage increase.
“Your [labor] expenses are now going to change every single year,” he said. “Talk about unpredictability and not knowing what your costs are going to be year by year. That’s an incredible variable for small business.”
Lewis added that automation will become more and more a reality in California and will likely replace labor jobs since making the shift has already become more cost effective and equipment doesn’t come with the high costs of workers’ compensation and unemployment insurance.
Passanisi said he has already raised prices up to 10 percent and is planning to spend $300,000 to half a million dollars this year on automation equipment for his food manufacturing operation in order to replace paid laborers.
Mike Sheldrake, owner of Polly’s Coffee on 2nd Street and president of the Belmont Shore Business Association, also said that, despite the state creating a level playing field, increasing the minimum wage will only force businesses to raise prices, which won’t provide workers with anymore spending power than they already have.
“They have just destroyed small business in California,” he said, referring to the state legislature’s decision to raise the minimum wage. “Nonprofits are going to suffer greatly. Small businesses like mine are going to suffer greatly. You’re going to have fewer people working. I’m never going to take a chance hiring someone who’s not already experienced and trained.”