Minimum wage hike could affect 4 in 10 LA workers, boost economy

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Nearly four in 10 of Los Angeles' workers would get a raise under a proposal by Los Angeles Mayor Eric Garcetti to boost the minimum wage to $13.25 per hour by 2017.

And that could be good for the local economy as well, said Ken Jacobs, chair of UC Berkeley’s Institute for Research on Labor and Employment. “Low-wage workers, when they have more money in their pockets, they spend it and they spend it at a higher share than other workers do, and spend it locally, and that also cycles through the economy,” Jacobs said.

With Republicans blocking President Barack Obama's efforts to raise the federal minimum wage, Garcetti has become the latest local politician to support an increase in the minimum wage. He joins other big city mayors — particularly those with strong labor support — who have taken on the challenge of raising wages at the local level. 

"We all know that there is a region here and it’s important for us not to act by ourselves," Garcetti told KPCC's AirTalk. "We would like to see this happen nationally or statewide but in the meantime, as you see, San Francisco, San Diego -- we had other mayors who stood with us and we’ll have cities from around the area joining us so this will really be a countywide initiative."

Garcetti's proposal would affect 567,000 workers – or 37 percent of the city’s salaried and hourly non-government workers – who would get a raise if the mayor's proposal is enacted, according to UC Berkeley’s Institute for Research on Labor and Employment, which studied the impact of raising the minimum wage in L.A. at the request of Garcetti’s office.

That figure includes both those who make less than $13.25 and those who make more, but would benefit from a trickle-up effect. The average annual earning increase would be 21 percent, or just over $3,200 a year.

Berkeley's Jacobs summarized the effects of a wage hike:

  • Workers' spending more money in the local economy offsets some of the increased cost of labor.
  • Better-compensated workers tend to stay in their jobs longer, so companies save on training and recruiting.
  • But some higher prices are likely, especially in the restaurant business, where payroll accounts for a third of the cost of doing business.

There could also be a loss of more than 1,500 restaurant jobs during the three years L.A.’s minimum wage is phased in, the Berkeley Study found.

Gary Toebben, President and chief executive officer of the Los Angeles Chamber of Commerce, said he worries about the impact of raising the minimum wage on small businesses and nonprofits.

“The mayor’s minimum wage proposal will be helpful to many people, but it will also result in some people losing their jobs or cutting back the hours they work,” Toebben said, echoing a common argument by businesses.

But Daniel Flaming, president of the L.A.-based Economic Roundtable, said there’s no evidence that increasing the minimum wage ­– as least as high as $15 an hour – leads to unemployment.

Flaming published an AFL-CIO funded study last year on the benefits of raising the minimum wage to $15 an hour in L.A., as Seattle is doing.

“I think the starting point for the discussion should be: “How do we enable workers to live a decent life in L.A.?’” Flaming said.

Flaming’s 2013 study found that three-quarters of full-time workers in L.A. earn less than comparable workers did three decades ago.

With gridlock in D.C., minimum wage laws enacted at local level

In Washington, Republicans have blocked efforts to increase the federal minimum wage, which is $7.25. That’s left the work to local leaders, especially those in expensive cities with strong labor support:

  • In Seattle, wages will increase to $15 per hour by 2017.
  • A November ballot measure will ask San Francisco voters if they want to increase the minimum wage.
  • Similar proposals are being considered in New York, Chicago, San Diego and Oakland. 

"I think the politics of this is pretty simple, which is that it's a very popular issue. It would have started at the federal level except that the Republicans in Congress have absolutely, totally mobilized against it," said Raphael Sonenshein of the Pat Brown Institute of Public Affairs at Cal State L.A. 

"There is no chance of it getting increased at the federal level right now, so almost immediately it spread to the states and then to the big cities," Sonenshein said. "So it's really a bigger context."

Seven members of the Los Angeles City Council joined Garcetti in announcing the wage proposal. He’ll need just eight votes for approval. Sonenshein said it’s a near guarantee that L.A. will see some increase to the minimum wage.

"Because labor is very strong and has a very strong base at City Hall, where they’re on the same side with city leaders, there’s probably desire to really move ahead as quickly as possible on something they can really agree on, that is fairly popular with the community as well," he said. 

Representatives for the mayor’s office and council President Herb Wesson said it’s unclear when the L.A. City Council will officially take up the proposal.

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