Far-Reaching, Intrusive Proposal Would Increase Costs for All

On Nov. 16, the Ventura County Board of Supervisors supported the concept of requiring private firms that contract with the county to comply with an intrusive set of new employment regulations. It directed staff to return to the board in early 2000 with an enabling ordinance.

News reports have emphasized only the minimum wage aspect of this proposal. This proposed minimum wage (referred to as a “living wage”) varies depending on whether the firm provides health coverage but is substantially higher than federal / state-mandated minimum wages.

However, the proposal goes much further.

In addition to setting wages, it states that every firm contracting with the county must provide employees a certain number of compensated and uncompensated days off per year, be subject to annual wage adjustments linked to a standard index such as the Consumer Price Index, be subject to a county sponsored oversight committee to implement and monitor the program and be subject to possible county legal action on behalf of any individual who seeks relief under the proposal.

More than a wage issue, this is an issue of county regulatory intrusion into how firms do business.

Under this proposal, the county would acquire a whole new set of regulatory and audit powers over private firms, including the power to set wages and company vacation policies and to review company health care benefits. To exert this new power over private firms, the county would undoubtedly set up a huge new bureaucracy to monitor and audit private companies.

This proposal would increase the costs of firms that contract with the county and would increase the county’s costs for goods and services. At a time when the county should be seeking more firms to bid on county contracts, this proposal would accomplish just the opposite.

If this proposal is approved by the Board of Supervisors, fewer companies will do business with the county, lessening competition and driving up costs.

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A July 1999 study by the Employment Policies Institute, titled “Economic Analysis of a Living Wage Ordinance,” examined the effect of a similar living wage proposal on the city of Chicago. The study concluded that it would cost that city nearly $20 million per year, with more than 20% of that amount ($4.2 million) for the administrative costs of certification, monitoring and enforcement of the program. For the private firms contracting with the city, labor costs would rise by $37.5 million, with an expectation of 1,300 lost jobs.

While Chicago is obviously not an exact example of what would happen in Ventura County with the passage of a similar living wage proposal, it can be anticipated that the Ventura County proposal would be very expensive for both private firms and the county.

Yet this Ventura County proposal was supported by four of the five supervisors without any information about or study of its fiscal impacts on the county. The board made its decision without knowing the total cost of the proposal or how many private firms would be affected.

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In addition, the majority of the Board of Supervisors made this decision while the county is having difficulty balancing its budget because of the $15.3 million levy it must pay for past health care program overbillings.

The Chicago study shows that costs of living wage programs can easily stretch into the millions of dollars. Such proposals are very inefficient uses of local government resources if the goal is to help family breadwinners increase their income, after analyzing such things as federal / state income taxes, FICA [Federal Insurance Contributions Act] taxes and reductions in earned income credit. These proposals also result in job losses and employment reductions among the least skilled.

The living wage proposal supported by the Board of Supervisors should not be adopted.