Study Gauges Effect of Living Wage Law

The controversial “living wage” law adopted in 1997 by the city of Los Angeles raised pay for about 10,000 workers without producing the heavy job losses predicted by opponents, according to a comprehensive study to be released today by the law’s original backers, the Los Angeles Alliance for a New Economy.

But the law, which applies to city contractors and firms doing business on city property, failed to prompt any employers to add health insurance plans, as advocates had hoped.

Indexed to inflation, the living wage floor now stands at $10 an hour, or $8.75 an hour if health insurance is included -- significantly higher than the California minimum wage of $6.75.

Skeptics noted that the 10,000 affected jobs are a tiny share of the more than 1.6 million workers in Los Angeles. Also, more than half of the affected jobs are at Los Angeles International Airport.

“This doesn’t give you an idea of how a living wage would work in a broader context because airport workers are in somewhat of a bubble,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.

He said the airport was unique because it wasn’t subject to competition and the jobs couldn’t be moved.

Asked about the overall economic effect, Kyser said, “These people might have a little more money to spend on housing, transportation, maybe basics like food and clothing, but it’s really a very, very small sample.”

The four-year study by researchers from the alliance and the University of California was based on interviews with 82 employers and 320 workers, all randomly selected. Researchers then compared their experiences with similar companies that were not affected by the law.

They found an overall loss of 112 jobs, or about 1%, attributable to the law. They also found that employers made up the wage hikes, which amounted to more than 20% in some cases, in a variety of ways. They cut overtime and fringe benefits, hired more skilled, productive workers or passed on costs to the city. Lower employee turnover and absenteeism also helped offset the higher wage costs, making up 16% of the pay difference, the study said.

As the law was debated, opponents predicted a loss of 3,000 jobs and said employers would leave the city. Then-Mayor Richard Riordan vetoed the ordinance, but a labor-friendly City Council overrode it.

“Documenting the low employment loss was really important,” said David Fairris, an economist at UC Riverside and one of the study’s four authors. “Maybe even more important was getting clear the benefits to firms that came from higher wages.”

Fairris touted the study as the most thorough look to date at laws spawned by the energetic living wage movement of the late 1990s. More than 100 such laws have been adopted across the country, including in San Francisco, Boston and New York.

Researchers found that the Los Angeles law immediately increased wages by about $1.50 an hour in about 8,000 minimum-wage jobs, amounting to about a 20% increase. An additional 1,500 workers received smaller raises.

Most of the affected families were low-income, with about 40% officially considered poor. Fewer than 4% of the workers were teenagers. Most were older than 35, and about 70% had a high school education or less, said David Runsten, associate director of the North American Integration and Development Center at UCLA and one of the study’s authors.

“What we found was that the kinds of workers we wanted to benefit are, in fact, benefiting,” he said.