Living wage feasible and the right thing to do
I never thought that trying to extend the city’s “living wage” law to a dozen hotels near Los Angeles International Airport was a good idea.
Please don’t misunderstand. Directing businesses to pay their employees at least $10.64 an hour is a smart and principled way to help the working poor. Those who insist that such a policy would trigger a huge loss of jobs are flat-out wrong.
The problem with targeting a handful of hotels -- and this was true even before a Superior Court judge last week barred the city from enforcing the ordinance -- is the narrowness of the approach.
Proponents of the measure say these hotels derive a substantial portion of their income from travelers using the city-owned airport, so they should be made to comply with the living wage law, just as municipal contractors have since 1997.
Yet this always seemed unfair. What about their competitors down the road? Why should they get off the hook?
The same logic applies to the workers. The housekeepers and bellhops along Century Boulevard deserve a living wage -- but so do the tens of thousands of other Angelenos making less than $10.64 an hour. (The state minimum wage is $7.50.)
In the wake of the judge’s ruling, some are suggesting that the issue be put to a public vote. I hope that happens. But it would be a mistake to limit a referendum to these 12 establishments.
It’s time, instead, to have a real, honest debate about implementing a citywide living wage.
I can already hear the screaming: “It’s up to the marketplace to decide what people get paid.” “Imposing a living wage across the city will make L.A. even more inhospitable to business.”
But creating a vibrant business environment and ensuring that workers are paid a decent amount are not mutually exclusive.
In many ways, the free market is magical. It’s far from perfect, though, especially for those struggling to make ends meet.
For decades, our nation’s leaders were sensitive to this. It was widely accepted by Democrats and Republicans alike that a robust minimum wage was, in the words of one president, “a matter of justice.” (By the way, it wasn’t Franklin Roosevelt, Lyndon Johnson or Bill Clinton who said that. It was Richard Nixon.)
Just how robust? One mordant remark I get a lot is, “If having a living wage is so brilliant, why stop at $10.64? Why not mandate $50 or $100 an hour?”
The reason is that this would be crazy -- as crazy as asking, “Why not pay people $4 an hour, if they’re desperate enough to work for so little? Come to think of it, why not legalize slavery? That would be economically efficient.” Nobody seriously contemplates these things because a civilized society has standards.
For decades, politicians on both sides of the aisle were guided by this one: Everybody who puts in a hard day’s work and plays by the rules ought to earn no less than half the average wage.
This wasn’t an economic argument; it was a moral one.
Today in metropolitan L.A., the average wage among workers in private industry is $20.16 an hour. At 52.8% of that, $10.64 falls right in the ballpark of what has long been regarded as fitting and proper. (This is hardly a bonanza, either, translating into a full-time annual income of about $22,131.)
Were L.A. to pass a citywide living wage, elevating the pay floor here by about 42%, it would be the largest municipality to do so. But others already have such laws. Among them is Santa Fe, where analysts have kept a close eye on what a 65% jump in the minimum wage in 2004 (from $5.15 to $8.50 an hour) has meant for the economy. (Santa Fe’s hourly minimum has since risen to $9.50 and could hit $10.50 next year.)
What have they discovered? It’s been a clear plus, lifting the earnings of low-income workers without sacrificing jobs overall.
“We were expecting a negative effect, and we didn’t find that,” says Nicholas Potter, who last year conducted an extensive review of the situation for the Bureau of Business and Economic Research at the University of New Mexico.
The bureau’s conclusion jibes with that of many other studies, including one released a couple of years ago by University of California economists who examined the effect of L.A.’s living wage law for city contractors.
“People don’t realize just how flexible businesses are in terms of pushing along small price increases” that can cover this kind of pay hike, says economist Robert Pollin, author of a forthcoming book on the living wage called “A Measure of Fairness.”
For a typical Santa Fe restaurant, meeting the living wage required no more than a 3% across-the-board bump on its menu (turning a $10 lunch bill into a $10.30 tab), Pollin says.
“At that level,” adds Pollin, “you’re not going to lose a lot of demand” from customers, which explains why you don’t see big hits to employment.
All this said, no living wage ordinance should be introduced lightly. A host of factors needs to be considered: What should be done about part-time, teenage workers? Should you exempt the smallest firms? What kind of phase-in schedule makes sense?
Plans for a living wage should also be coupled with a broader strategy to improve L.A.’s business climate. Officials could start by replacing the city’s onerous gross-receipts tax.
Even with this, I have no illusions. The business lobby will battle hard against a citywide living wage -- a thousand times harder than it did on the LAX hotels. The Chamber of Commerce and others will trot out studies to parry the kind that I’ve cited above.
As they do, remember what management guru Peter Drucker once said: “In all recorded history, there has not been one economist who has had to worry about where the next meal would come from.”
Rick Wartzman is an Irvine senior fellow at the New America Foundation. He is reachable at rick.wartzman@latimes.com.
