Business leaders criticize city's choice to study minimum wage hike

Business leaders and Councilman Mitch O'Farrell criticize choice of researchers to look at Garcetti wage hike

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 provide a new outside review of the same proposal.

Business leaders and Councilman Mitch O'Farrell criticized the selection of UC Berkeley's Institute for Research on Labor and Employment to give the City Council an assessment of the economic effects of the proposed wage increases.

Garcetti wants the minimum wage raised to $13.25 in 2017, while a handful of council members are looking to take it to $15.25 in 2019.

The institute prepared a report for Garcetti last year on his wage proposal, which found that the increase was not likely to have a significant impact on overall employment, an assessment at odds with that of critics and other analysts who said the proposal could cost jobs. 

Economics professor Michael Reich, who heads the institute, accompanied Garcetti last year as he pitched his proposal to editorial writers.

O'Farrell, who originally called for the council to receive an outside analysis of the plan, called the choice of the Berkeley team "outrageous and unacceptable." Picking the same research team that worked with Garcetti "removes all credibility" from the new study, he said.

"I asked for an independent study," O'Farrell added. "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 Berkeley team was picked after "an open and fair bidding process."

"Based on the selection process, UC Berkeley was the most knowledgeable and experienced bidder," he said.

Several business leaders already were unhappy with the council's handling of a recent plan to raise the minimum wage for some workers at larger hotels. They contend the council gave short shrift to economic reports that warned of negative economic consequences from the hotel pay plan.

On Thursday, Ruben Gonzalez, senior vice president of the Los Angeles Area Chamber of Commerce, said the Berkeley institute is not an independent, unbiased source to look at the citywide 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."

Chief Legislative Analyst Sharon Tso, who advises the council on policy matters, did not immediately respond to a request for comment. But in a memo issued last week, she said the Berkeley research team had received the highest score from analysts looking for an outside analysis.

Reich, the UC Berkeley economist, said the upcoming analysis for the council will be different from the one prepared for Garcetti, since some council members are pushing for an increase larger than the one sought by the mayor.

"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 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."

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