State Minimum-Wage Hike to Hit Many Sectors
How will the higher minimum wage decreed by California’s state government Monday--a $1 hike over two years to $6.75 an hour--affect the working poor, small businesses and the Southern California economy?
The answer is that it will save taxpayers a little money by adding a little more to the costs of some businesses. Yes, taxpayers have a hand in the matter, because the minimum wage is as much a political issue as an economic one.
For workers earning the current minimum wage of $5.75 an hour--$11,900 a year--the 50-cent wage hike next year will put a little more money in their pockets but then take some of it away by reducing the cash assistance those workers get from federal and state welfare.
It might surprise many people to learn that the average wage of a working welfare recipient in Southern California is $7.20 an hour. It would take a wage of $8.74 an hour to get a single mother with two kids off public assistance, says Lynn Bayer, director of the Department of Public Social Service, the Los Angeles County agency that administers federal and state welfare.
Even at $8.74 per hour, or $18,179 a year, a single mother with two kids--the typical welfare-receiving worker--would still get some food stamps and Medi-Cal health coverage for the family, Bayer explains.
The legal minimum today does not really fulfill the original purpose of a national wage, decreed in the Fair Labor Standards Act of 1938, to assure every worker a minimum standard of living and to maintain purchasing power in a Depression-wracked economy.
But then for most businesses, especially in the thriving economy of Southern California, the minimum wage is irrelevant. “I have never paid a minimum wage on any construction site,” says Patrick Green, owner of concrete plants in the South Bay.
Average wages in construction are about $22 per hour, in movie production more than $37 per hour.
But some businesses will face tough choices--restaurants, for example. Entrepreneur Linda Griego, the onetime head of Rebuild LA who owns the Engine Co. 28 restaurant in downtown Los Angeles, describes the effect on her business precisely. “The restaurant works 76,000 hours a year with 55 employees, so the minimum-wage hike will add $60,000 to $76,000 in costs in a $3-million-annual-revenues business,” Griego says.
“And the wage hike will mean a greater-than-10% increase in workers’ compensation insurance and health benefits,” she adds.
Lunch and dinner patrons will pay some of the added cost in higher prices. But there are limits to how much prices can rise without discouraging customers.
Likewise in other Southern California industries, it’s a question of who pays the living wage--employers, customers or taxpayers. Basic garment manufacturing in Los Angeles employs more than 100,000 people at wages of less than $7 an hour. “Unless apparel companies or retailers pay us more for our products, some of the companies will close their doors,” says Joe Rodriguez, head of the Garment Contractors Assn. of Southern California.
But in Orange County, says economist Esmael Adibi of Chapman University, “our garment industry does higher-priced work, for St. John Knits, surf wear, swimwear.” So fashion buyers ultimately pay higher wages for garment workers in the county, where 2.5% unemployment makes labor scarce--and higher-priced--for most jobs anyway.
Economists used to say that minimum-wage laws discourage employers from taking on new workers. But opinions have changed, reports Daniel J.B. Mitchell, a professor of labor economics at UCLA’s Anderson School. Now minimum-wage laws are seen as ways to get a little more for low-wage workers without disrupting larger economic patterns.
Still, Mitchell says, minimum wage laws are not as good an idea as collective bargaining agreements between employers and employees. “Minimum-wage laws are too broad. In collective bargaining, the particular needs of employers and workers and the industry can be taken in account.”
Times are changing. Southern California has never shown much enthusiasm for collective bargaining --until recently, when union organizing has been energized by a new social movement for the living wage. Living wages--higher than the legal minimum--have gained acceptance in Los Angeles and 50 other cities nationwide in the last five years. Los Angeles, for example, demands that all businesses selling services or products to the city pay workers close to $8 per hour. Yet businesses bidding for city contracts haven’t objected to that ordinance. Why not? Because the city, in effect, is telling the contractors to charge more so that taxpayers shoulder the burden of supporting the working poor.
The living-wage movement, joined by churches and other groups, has helped “by giving low-wage workers, who feel powerless, the idea that they have a right to a living wage,” says Maria Elena Durazo, head of the Hotel Workers Union Local 11.
And now in Santa Monica, the living-wage movement is propounding new social theory in demanding that hotels, restaurants and amusement parks pay all their workers a minimum of $10 an hour. The argument made is that the businesses attract customers through the natural beauty of Santa Monica, so they should pay workers more.
Businesses understandably argue that they need to earn a return on investment to stay in business. Mary Ann Powell, manager of the 250-employee Pacific Park on the Pier, says the proposed living wage would force a boost in prices beyond what the public would pay. The argument in Santa Monica may be settled next month in a vote on a measure put forward by hotel owners.
But while arguments go on, the fact is that minimum wages, and, more important, education and training, deserve a real place in Southern California’s economy.
Simply put, nobody in society wants to have a permanent class of underpaid workers. Underpaid, underemployed workers do not make for a strong economy. They cost money in public services, and they represent a waste of human capital, a grievous economic sin in these times.
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What Does It Pay?
Most occupations in Los Angeles, and elsewhere in Southern California, pay well above the minimum wage. But some will be directly affected by the new $1-an-hour hike over two years. A look at average hourly earnings in various industries:
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Job category Avg. hourly earnings Movie production $37.37 Construction 22.95 Industrial machinery 15.84 Food products 13.43 Retail trade 11.51 Furniture and fixture manufacturing 9.81 Apparel and other textiles 8.75 Medical/health care 8.64 General office work 8.17 Security guard 7.41 Domestic services/child care 6.15
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Sources: Bureau of Labor Statistics; Los Angeles County Dept. of Public Social Services
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What Does It Buy?
The federal minimum wage has increased from $1.00 an hour in 1960 to the current $5.15, set in 1997. Although the actual amount has grown considerably, inflation has eaten away at the wage’s purchasing power--the relative value in goods and services the wage earner can buy. A look at wages over 37 years and their value measured in 1998 dollars:
1998 dollar value: Value: $5.23
Minimum wage: Wage: $5.15
Researched by NONA YATES / Los Angeles Times
Source: Bureau of Labor Statistics , Los Angeles Times
