Raising the minimum wage in LA: 3 studies on the impact

Vice President Joe Biden and Mayor Eric Garcetti met with small business owners and members of Congress in Los Angeles to discuss efforts to increase the minimum wage.
Vice President Joe Biden and Mayor Eric Garcetti met with small business owners and members of Congress in Los Angeles to discuss efforts to increase the minimum wage. Alice Walton/KPCC

Thursday was a data dump at Los Angeles City Hall as three studies on raising the minimum wage hit the desks of policy makers.

Los Angeles's minimum wage currently stands at $9 per hour.  Last year, Mayor Eric Garcetti proposed raising it to $13.25 by 2017, and some members of the council said they want to bump it up to $15.25 by 2019.  The idea is popular but controversial, prompting policy makers to call for more analysis. The city hired researchers at UC Berkeley to assess the impact.

In the Berkeley report, authors said the benefits of raising the minimum wage will outweigh the costs.  

“The high density of low-wage jobs in Los Angeles means that the benefits of raising the minimum wage will be considerable,” the researchers wrote.

The study estimates that by 2019, 609,000 workers, or about 40 percent of the city’s workforce, would take home bigger paychecks as a result of a minimum wage hike. Eighty percent of those workers would be workers of color, and they would largely come from low-income families and neighborhoods. 

Businesses would see operating costs increase by less than 1 percent through 2019, according to the UC Berkeley study. The researchers also point out that by 2019, nearly 3500 jobs could be lost in Los Angeles as a result of a higher minimum wage, though the study said, that’s a small margin given that job growth is anticipated to rise by 2.5 percent each year.

The Los Angeles County Federation of Labor and the Los Angeles Chamber of Commerce released their own studies today. Each offered starkly different takes on the economic impact of raising the minimum wage in Los Angeles. 

The labor study was conducted by researchers at the Economic Roundtable and the UCLA Labor Center. It echoed some of the opinions in the Berkeley study. It said a minimum wage increase of $15.25 would be a "stimulus" that will make the city's economy more sustainable and inclusive, adding $5.9 billion in wages.

"We see a strong possibility out of this initiative that it could really help transform poorer communities of Los Angeles," said Daniel Flaming of the Economic Roundtable.

He said large concentrations of low-wage workers in the eastern part of San Fernando Valley and South Los Angeles typically commute to areas like downtown and West Los Angeles to provide services to more affluent people.

"Areas of the city that have had very weak consumer buying power would have a fresh and substantial infusion of new capacity for workers to buy goods and services for themselves in their communities," Flaming told KPCC.

The Chamber of Commerce study, which was done by Beacon Economics, called a wage hike a "blunt tool" that will force some businesses to cut jobs or skip to the next town. The authors acknowledged that something must be done to help low-income families, but concluded that the minimum wage proposal misses its target. 

"In short, this is a very blunt tool for helping low-income households as it will give a pay raise to many workers who are clearly not in that category," the report says.  It estimates a quarter of Los Angeles County workers earn less than $13.25 an hour.

Chris Thornberg of Beacon Economics said of the workers earning less than $13.25, half of them live in cities other than Los Angeles.  He called the proposed minimum wage hike a "tax on businesses and consumers."

“Thirty-five percent of L.A. businesses exist within two miles of another city," Thornberg told KPCC. "They could end up cutting their labor costs by 10, 12, 15 percent by simply locating two miles away.”

He said he did not anticipate many neighbor cities would follow L.A.'s example and raise their own minimum wages. 

The UC Berkeley researchers disagreed.

“Wages are likely to rise just outside of Los Angeles City as businesses there will want to hold on to their workforce,” they wrote. 

City Council member Curren Price sided with the UC Berkeley study on topic of fleeing businesses.

“There may be a few that are disgusted enough to make that kind of a move,” Price said. “But I think on the whole, we [the City of Los Angeles] will be more attractive to businesses that are serious about providing fair wages, getting workers who are more loyal, more healthy and more productive.”

Price chairs the council’s economic development committee  He said all three studies will be part of a major debate of a very important decision before the city.

“Citizens are entitled to a full and complete robust discussion on the issue, the pros and cons,”  Price told KPCC. 

Four public hearings on the issue and the studies are scheduled in different locations across the city, starting Tuesday at City Hall.

*This story has been updated

This story has been updated.

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