Ron Calkins has a stack of job applications from people willing to work for his valve repair shop in West Long Beach, but many of the job seekers are unskilled, and some have criminal records.
Today, he might take a chance on an unqualified applicant just to help train or simply provide short-term employment, but, if Long Beach raises the minimum wage to $15 an hour, Calkins, who has owned West Coast Valve Service since 1981, would have no choice but to close the door on unskilled workers, he said.
“I hire people all the time just to clean parts, but not at $15 an hour,” Calkins told the Business Journal. “I give them maybe $9 or $10 an hour, and I keep them for a short period of time until I have to let them go . . . They don’t have the qualifications.”
Ron Calkins is owner of West Coast Valve Service. (Photograph by the Business Journal’s Larry Duncan)
As Long Beach considers whether to pass a minimum wage policy, following major cities across California and the country, business owners and economists have brought up how increasing the minimum wage may come with the unintended consequence of impacting unskilled laborers, some willing to take any work just for a paycheck and others seeking on-the-job training.
It’s an issue that was recently brought up during the last of six public forums organized by the city aimed at gathering community input on a potential minimum wage policy for Long Beach.
During a meeting of the city’s economic development commission at city hall on November 24, Christine Cooper, senior vice president of the Los Angeles County Economic Development Corporation (LAEDC), said youth, unskilled workers and those with barriers to employment, such as ex-offenders, may be pushed out of the labor pool if the minimum wage is increased.
She explained that increasing the minimum wage would expand the labor market as more job seekers would be drawn by higher wages. Therefore, unskilled workers would be entering a more competitive job climate. In addition, business owners have said that unskilled workers and youth would be the first to be let go if the minimum wage is increased.
Vince Passanisi, owner of Santa Fe Importers, an Italian delicatessen at 1401 Santa Fe Ave. in West Long Beach that began as a food market in 1947, said during the public forum that he is already making plans to deal with a higher minimum wage.
Passanisi, who currently employs about 75 people and manages an Italian food manufacturing operation, said his company would see a $770,000 increase in annual labor costs if the minimum wage were raised to $15 an hour. To deal with this, he has already put bids out to automate his manufacturing.
With a one-time investment of $1.5 million, Passanisi would be able to eliminate 12 to 15 unskilled workers. This would save him $400,000 minimum per year, he said.
Passanisi, who added that the workers’ compensation rate for manufacturers is high at 18.73 percent, said he would also replace unskilled workers, who live in Long Beach, with higher-skilled workers, who live outside of the city and would be willing to commute.
“Currently, 90 percent of our skilled workers come from outside of Long Beach,” he said. “Our unskilled workers are Long Beach residents.”
In addition, Passanisi said he would be forced to raise prices by at least 8 percent for every dollar increase in the minimum wage.
Representatives of the Magnolia Industrial Group (MIG), a business improvement district in West Long Beach, meanwhile, have stated that some industrial businesses are already considering leaving for other cities without a minimum wage policy.
Calkins added that increasing the minimum wage might also deter start-up companies with small margins from setting up shop in Long Beach.
Rather than raising the minimum wage, a better move by government agencies would be to help create more opportunities for training in vocational trades, he said, adding that the area suffers from a shortage of skilled workers.
Another issue, Calkins said, is that work for his business has dropped over the years since contracts have gone to companies overseas and other parts of the country with cheap labor, forcing him to cut his workforce from 15 to six employees.
The Metropolitan Water District of Southern California (MWD), for instance, turned him down for an offer to manufacture valves that would have been a $1 million project and instead went with a company in China because it was cheaper, even though lesser quality, he said.
“If the government is going to do something, they should require we buy U.S.,” Calkins said. “We’ve got to be innovative. We’ve got to create something. We’ve got to find jobs for our young people. Our future is in our youth. They have got to learn for themselves.”