BUSINESS
Your Thanksgiving dinner is cheaper this year. Here's why
Opinion

What's the right minimum wage for Los Angeles?

What's the optimum minimum wage for L.A.? $13.25? $15? $15.25? $10.24?

The question in Los Angeles is not whether to raise the minimum wage -- that’s almost certainly going to happen -- but how much to raise it?

The City Council recently voted to hike base pay for hotel workers to $15.37 an hour -- 70% above California’s $9-an-hour minimum wage. Mayor Eric Garcetti has proposed L.A.’s first citywide minimum wage, which would reach $13.25 an hour in 2017, with annual adjustments pegged to the consumer price index going forward. This week, City Council members called for a study of how to raise the city’s base wage to $15.25 an hour by 2019. And there’s a proposed ballot initiative to set the wage for most workers at $15 immediately.

Where are these wage figures coming from? How did $13.25 or $15 an hour become the magic number? Is there any economic basis or justification for why $13.25 or $15 or $15.25 is the right minimum wage for L.A.?

The reality is that, so far, politicians and advocates have picked their preferred dollar figure and then come up with the rationale to support that number. There’s nothing wrong with that, per se. Setting a minimum wage tends to be more an art than a science. But if you're looking for the formula to set the optimum wage in L.A. with the most benefit to workers and the least impact on jobs, well, you're not going to find it among these proposals. Here’s a look at the explanations:

How did Garcetti settle on $13.25 an hour in 2017? The mayor’s office said his figure was set so 1.5 workers in a family of four would earn 20% above the California Poverty Measure. (The California Poverty Measure is an index developed by Stanford University and the Public Policy Institute of California to factor in the state’s high cost of living, which the federal government’s official poverty measure does not.) But why is 20% above the poverty measure the right goal? Why not 10% or 30%?

How about $15, which is the figure proposed in a ballot initiative now being circulated in L.A.? The Economic Roundtable, in a study commissioned by the Los Angeles County Federation of Labor, said that wage was needed for a worker in a high-cost city like Los Angeles to achieve what the Fair Labor Standards Act calls the minimum standard for “well-being.” The report said an employee working full time (35 hours or more) and earning $15 an hour would be paid at least $26,250 a year, which is roughly twice the federal poverty threshold for a one- or two-person household.

How about $15.25? Council members said their wage proposal is not tied to a particular economic measure, as of yet. It simply adds $2 over two years to Garcetti’s proposal. But council members did point to a symbolic rationale for $15.25. It’s essentially the equivalent in 2013 dollars to the demand for a $2 national minimum wage made during the 1963 March on Washington. (Of course with inflation, $15.25 in 2019 will be worth less than $2 in 1963.)

And what about $10.24 or $11.51, which is what one economist has recommended as the appropriate minimum wage for L.A.? Earlier this year Arindrajit Dube, an economics professor at the University of Massachusetts in Amherst, offered a methodology for designing state and local minimum wages.  He proposed setting base hourly pay at half the median full-time wage for a region, with further adjustments for cost of living. So, for the metropolitan Los Angeles area, including Long Beach and Anaheim, the minimum wage would be $10.24 an hour and could be adjusted upward to $11.51 because of the high cost of living. Dube said this would be a “well-balanced policy option” that is similar to how other advanced countries set their minimum wages.

Dube’s recommended wage is much lower than what is on the table in L.A.  So, really, why has Garcetti gone with $13.25 and why are his council colleagues aiming for $15.25? They’re all trying to set the wage as high as they think is politically possible. Garcetti, who campaigned on economic development and job creation as his top priorities, is probably more worried about potential negative impacts if business and job growth slow as a result of a significantly higher minimum wage.

The City Council doesn’t face the same pressure to boost employment. Plus, council members just championed a $15.37 minimum wage for hotel workers amid criticism (including from The Times editorial board) that they were favoring some workers over others. This proposal helps them counter that criticism.

And that’s how L.A. will set its new minimum wage. Part symbolism, part practicality, all political.

For more opinions, follow me @kerrycavan

Copyright © 2017, Los Angeles Times
EDITION: California | U.S. & World
86°