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Should L.A. nonprofits get more time to hike minimum wages?

As LA mulls raising its minimum wage, some lawmakers want to give nonprofits, small businesses extra time

As Los Angeles launches a series of hearings on boosting the minimum wage, several lawmakers are pushing to let some small businesses and nonprofits increase pay more gradually.

City leaders are weighing whether to increase the minimum wage to $13.25 by 2017 -- a proposal backed by Mayor Eric Garcetti as a way to combat poverty. Some council members want to go a step further, boosting the base wage to at least $15.25 by 2019.

Councilmen Bob Blumenfield, Felipe Fuentes and Mitch O’Farrell are not on the committee holding a string of hearings around Los Angeles on whether to increase the citywide minimum wage to $13.25 or $15.25 hourly. So they sent a letter Tuesday to Councilman Curren Price, who heads that committee, suggesting there should be extra time for some nonprofits and small businesses to boost wages.

In their letter, the three lawmakers warned nonprofits that rely on state or federal government reimbursement to fund their work might have trouble meeting the higher wage requirements without successfully lobbying to change their reimbursement rates.

At a Tuesday hearing, Councilman Paul Krekorian echoed those concerns. “Those nonprofits that are providing lifesaving services to people are going to provide fewer of those lifesaving services if they have to pay more in wages,” he said.

To help such nonprofits and other struggling groups, the lawmakers said the city could slow down the wage boosts for nonprofits and small businesses where there is a low level of “wage disparity” -- where the top employee earns no more than 10 times as much as the lowest paid worker.

Blumenfield, Fuentes and O’Farrell also suggested loosening the rules for teen workers, trainees and those who get tips. And they argued that the city should have an automatic system to assess how the wage boosts affect the Los Angeles economy -- and to stop, reassess or accelerate them if needed.

The question of whether to alter the rules for nonprofits and small businesses came up repeatedly at the lengthy hearing at City Hall, as lawmakers listened to economists describe the findings of three different studies on whether boosting pay would help or hurt the L.A. economy.

One of those studies, underwritten by the Los Angeles Area Chamber of Commerce, suggested eliminating the wage requirements entirely for nonprofits and small businesses. That same study warned that hiking wages could sharply reduce job growth.

But UC Berkeley economics professor Michael Reich, whose research team was selected by city officials to examine the plans, warned that totally exempting small businesses could create a “perverse incentive” to discourage companies from expanding.

Reich added that exempting small businesses could cut out a huge number of people from getting wage increases, particularly in the restaurant industry. The Berkeley study found that the benefits of a $15.25 wage boost would largely offset the costs, including a slight reduction in job growth.

As for nonprofits, another researcher who authored a third study -- one funded by the county labor federation -- argued that reimbursement problems would affect only a small slice of nonprofits.

“There is a moral burden on nonprofits that their workers be able to have a minimally decent life,” Economic Roundtable President Daniel Flaming said. If there are concerns about government reimbursement, “those carveouts need to be very, very specific.”

Council members are slated to hold more wage hearings around Los Angeles, including meetings in Watts, Van Nuys and on the Westside.

Labor activists and other backers argue that a wage boost would help L.A. families withstand the area's high cost of living and inject billions in added spending into the economy, while major business groups and other opponents counter it will end up hurting workers as businesses relocate or slash staff.

“Today is only the start of our work,” Price said at the end of the hearing.

In reaction to the letter from Blumenfield, Fuentes and O'Farrell, Price later said he was "pleased to see so many of my colleagues fully engaged on this issue" and looked forward to deliberating on their ideas further in the upcoming hearings.

"At the end of the day, all that matters to me is ensuring that we get a fair policy enacted, as soon as possible, impacting the largest number of hard-working Angelenos," Price said in a statement.

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