L.A.'s choice of UC Berkeley institute to study wage plan is criticized

L.A.'s choice of UC Berkeley institute to study wage plan is criticized
"Selecting UC Berkeley again for this independent analysis does not pass the smell test with me," said Councilman Mitch O'Farrell. Above, O'Farrell at City Hall in February. (Francine Orr/ Los Angeles Times)

A research team that provided a largely favorable analysis of Los Angeles Mayor Eric Garcetti's plan for raising the citywide minimum wage has been tapped by city leaders to conduct a politically sensitive review of his proposal — and a move to push base pay even higher.

Business leaders and Councilman Mitch O'Farrell criticized the selection of UC Berkeley's Institute for Research on Labor and Employment to prepare an assessment for the City Council of the economic effects of proposed wage increases. Garcetti wants the minimum hourly wage boosted to $13.25 in 2017, while a handful of council members are looking to raise it to $15.25 in 2019.


The institute prepared a report for Garcetti last year saying his proposed wage increase was not likely to have a significant effect on overall employment, an assessment at odds with that of critics who said the proposal could cost jobs. Economics professor Michael Reich, who heads the institute, accompanied Garcetti as he pitched the proposal to editorial writers. Reich also took questions from business leaders at a separate event on the wage increase set up by mayoral aides.

O'Farrell, who requested a new outside analysis of the two proposals last year, called the choice of the UC Berkeley team "outrageous and unacceptable." Picking the same research team that worked with Garcetti, he said, "removes all credibility" from the new review process.

"I asked for an independent study," O'Farrell said. "Selecting UC Berkeley again for this independent analysis does not pass the smell test with me. They're the same entity that the mayor is basing his minimum wage proposal on."

O'Farrell said he will push for a different research team to conduct the analysis. But Council President Herb Wesson said in a statement that the UC Berkeley team was picked through "an open and fair" bidding process. "Based on the selection process, UC Berkeley was the most knowledgeable and experienced bidder," Wesson said.

Councilman Bob Blumenfield, who co-sponsored the request for an outside analysis, declined to say whether the UC Berkeley team should conduct the review. In a statement, he said he wants "a quality study that answers important questions regarding impacts to nonprofits and small businesses."

The complaints about the selection of the UC Berkeley team come at a time of lingering distrust between lawmakers and leaders of some of the city's largest business organizations. Last year, those leaders accused the council of giving short shrift to reports that warned of negative consequences if the minimum wage were raised at large hotels. The council went ahead with the wage increase.

On Thursday, Ruben Gonzalez, senior vice president of the Los Angeles Area Chamber of Commerce, said the UC Berkeley institute is not an independent, unbiased analyst when it comes to the proposed wage plans.

"How is it not a conflict of interest for an institute that's already written a document favoring one of the proposals on the table, as is, to be brought in as an independent source of information for a review of the issue overall?" Gonzalez asked. "It just defies credibility."

Garcetti spokesman Jeff Millman declined to comment, saying the matter is being handled by the council.

Chief Legislative Analyst Sharon Tso, who advises the council, said some city officials were worried about how the selection of the UC Berkeley team would be perceived. However, a rating panel found it had the strongest proposal for the roughly $84,000 job.

Tso said the city panel concluded that the UC researchers "would probably go beyond being objective" in light of such criticism. "If they don't do a good study, they will be criticized," said Tso, who reports to Wesson and his colleagues.

Reich, an economist with the UC Berkeley institute, said the new analysis will differ from the one prepared for Garcetti because it also will include the $15.25-an-hour target sought by some council members.

"The higher you go, the more everyone gets concerned — and rightly so — about what the consequences of the higher mandate are," he said. "We'll do a fresh analysis, and we'll do the best we can.... My goal is to produce the best report possible."

In its analysis for Garcetti, the UC Berkeley team concluded that the mayor's wage proposal would deliver "significant gains in income" for L.A.'s low-wage workers and their families. The institute also concluded that most businesses would be able to absorb the increased costs and predicted L.A. would see a "small one-time increase" in prices at restaurants.


Stuart Waldman, who heads the Valley Industry and Commerce Assn., said that report was not "worth the paper it was printed on."

"It is inconceivable that they would ever come back and say, 'We were wrong, this will have more impact,'" Waldman said. "And that's what we're concerned about."