On June 10, I cast the City Council's lone “no” vote on the $15-an-hour minimum wage proposal. While everyone agrees that there is genuine poverty in the city of Los Angeles, no wage increase can be high enough to offset the effect of job loss or reduced working hours that will result from a remedy that puts the complete burden on the backs of business.
Having been both a business owner and a low-wage service worker, I know firsthand about the struggles that business owners and their employees face every day. I've had days when paying my employees meant that I did not take my own paycheck.
This wage increase may hurt the very people it is designed to help. Most minimum wage jobs are in low profit-margin industries or small businesses that are easily relocated to one of more than two dozen cities bordering Los Angeles. Many of these cities have minimum wages substantially lower than $15 an hour. This competitive disadvantage doesn't support local job creation or retention.
BloombergView referred to the City Council's minimum wage vote as “L.A.'s Minimum Wage Experiment.” My colleagues on the council have expressed their hope for this experiment's success, but I have to note what the possibility of failure may bring.
Representatives of both the business and nonprofit/charitable communities testified that they will be forced to reduce hours or staff size to comply with the new policy. Some job providers testified that they will be required to make tough choices on reducing or even discontinuing worker protections, including employee pension and healthcare benefits. What then for low-wage workers?
The wage increase may not help low-income workers as much as proponents claim. Beacon Economics reported that “less than one in four dollars paid out by Los Angeles City businesses and consumers through this plan will actually benefit the workers who are targeted.”
Moreover, until the region gets serious about creation of affordable housing, a $15 minimum wage will not enable workers to live locally and use their increased buying power here. The average apartment rental in the city is more than $2,000 a month and, according to affordable housing advocates, requires a salary of $33 an hour if the occupant is spending just 30% of a paycheck on housing.
Minimum-wage increases by themselves do nothing to expand the middle class. In order to do this we need to create an educated workforce, bringing back trade training and shop classes to our high schools and encouraging a clear and affordable pathway from two-year colleges to four-year universities and beyond.
On the city's part, we need to eliminate the draconian gross receipts tax and raise the small-business tax exemption to $500,000 from $100,000. We also need to create an incentive for hiring local workers that was lost when the state's Enterprise Zone designation was eliminated.
The very last thing that we should be doing as a city is creating a competitive disadvantage for our businesses with those in neighboring cities. That move can only hurt job creators and reinforce the belief that Los Angeles is closed for business.
I voted no on the increase because cost-benefit analyses show that the disproportionate burden to business is not balanced by a guaranteed benefit to the impoverished, or to the local economy.
The solutions to poverty in Los Angeles require all sectors — public, private and nonprofit — to have skin in the game to benefit everyone. This means an ardent commitment to exponentially increasing affordable housing in the region, to providing tax incentives for job creators to hire local workers, and to educating a workforce destined for middle-class careers, not long-term minimum wage jobs.
Mitchell Englander is Los Angeles City Council president pro tempore.