Measure would do little to help the city’s working poor

The Los Angeles City Council will soon consider a controversial proposal to mandate that companies with city contracts pay a minimum $7.25 an hour to employees.

The proposal for a “living wage” certainly has moral appeal; something called that sounds easy to support. But what is not supportable is the notion that private company wages should be set by City Hall. Advocates of a living wage have their hearts in the right place, but, as proposed, the idea is bad economic policy that could in the long run hurt the people it is intended to help.

After months of review, however, the Personnel and Budget and the Finance committees last Tuesday unanimously passed a scaled down version of Councilwoman Jackie Goldberg’s living wage proposal. The measure would require holders of city service contracts worth $25,000 or more and lasting for at least three months to pay their service workers at least $7.25 an hour with paid days off and health care benefits, or $8.50 without benefits. The mandate would also apply to any person or firm receiving $100,000 in financial assistance from the city in any 12-month period, or $1 million in one-time financial assistance. This would apply to such upcoming projects as the DreamWorks SKG film studio and the proposed downtown sports arena.

The measure is long on symbolism but falls far short of its goal of helping the working poor. It would affect less than 1/2 of 1% of the city’s total labor force. About 3,800 workers employed by city contractors would receive pay raises and 4,800 would get improved benefits. Only about 800 families would be lifted above the poverty line. Some jobs losses are expected because city contractors and concessionaires would have to offset the higher labor costs by either raising prices or cutting jobs, or both.

Most of the $21.6 million in projected costs might not be borne directly by the city because contracts and concessions in proprietary departments such as Airports, Harbor and Water and Power would be involved. If so, although the City Attorney’s office has said the council cannot mandate the living wage for these semiautonomous departments, some of the increased costs would be passed on to consumers in the form of higher prices or to property owners through assessments.

Los Angeles is only the latest city to take up the living wage. The slow growth in real wages and the widening gap between the rich and poor, especially in urban areas, have prompted efforts nationwide to improve wages for the working poor. Congress raised the federal minimum wage last year and California voters passed Proposition 210 to raise the state’s minimum wage above the federal level.

Cities such as New York, Baltimore, St. Paul, Minn., and Portland, Ore., have enacted different versions of living wage ordinances. Los Angeles County has an especially high concentration of the working poor: 37% of families so classified in California live in the county.

The federal poverty level for a family of four is $15,600 a year. The current minimum wage in California is $4.75 an hour, rising to $5 an hour next month and $5.75 in March 1998.

A UCLA study of the living wage measure, commissioned by the city, pointed out that most minimum wage workers in the city would benefit by taking advantage of the federal government’s underused $3,500 earned income tax credit. The study said that only about 48% of eligible city families currently collect the tax credit, leaving $100 million of unused benefits still available at no cost to the city, its private contractors or the local economy. The study recommended that the city launch an informational campaign to alert all low wage workers and city contractors to encourage their employees to apply for the tax credit.

A campaign to make the earned income tax credit better known should be the first priority for the city, rather than the living wage. It would take the least amount of city funds and have a great impact on the working poor. Organized business groups, which are opposed to the living wage proposal, ought to step forward and organize a public service campaign to inform workers about the tax credit.

The plight of the working poor of course could be best addressed by creating jobs in the city’s private sector that pay well. Warehousing, for example, is booming in the region. Might the city provide incentives to build warehouses, which provide good paying jobs? The business sector too often seems to come to City Hall only to fight a measure out of self-interest. It needs to work with city government, which could use constructive and innovative ideas. This is especially crucial now because welfare reform means the city needs new jobs. When business refuses to deal seriously with the problems of the working poor, it contributes to overreactions--such as proposals for mandated wage hikes. When business refuses to deal seriously with the problems of the working poor, it contributes to overreactions--such as proposals for mandated wage hikes.