L.A. business groups fear another defeat over minimum wage hike
It’s been a dispiriting drumbeat for the Chamber of Commerce this year at Los Angeles City Hall.
In a matter of weeks, three initiatives opposed by the chamber were embraced by the City Council: a ban on the use of hydraulic fracturing, or fracking, in underground oil extraction; a prohibition on e-cigarettes in most workplaces; and a sweeping overhaul of commercial trash pickup promoted by labor and environmental groups.
The latest defeat came last week, when the council voted to hike the minimum wage to $15.37 for thousands of workers at L.A.'s large hotels — increasing pay for some employees as much as 71%. Business groups, who complained that their warnings about job losses were ignored, were left “alienated to a degree that I’ve never seen before,” said Fernando Guerra, director of the Center for the Study of Los Angeles at Loyola Marymount University.
“This decision seemed to say: ‘Not only are you going to lose, we’re not going to listen to you. You’re a non-factor,’” he said.
The chamber and its allies now are bracing for an even bigger battle: Mayor Eric Garcetti’s proposal to hike the minimum wage for all workers in the city to $13.25 by 2017. Lawmakers appear likely to approve an increase of at least that amount, further underscoring the diminished clout of traditional business lobbying groups at City Hall.
Gary Toebben, president of the Los Angeles Area Chamber of Commerce, said the wage hikes, fracking plan and trash initiative have fueled a growing sense that the business community is “under siege.”
“Almost every month, someone has an idea at City Hall that makes it more challenging to grow your business, hire people and contribute to the economy of the community,” he said.
The anxiety — and, in some cases, anger — expressed by business organizations is sharply at odds with the message Garcetti and city lawmakers have been trying to send: that they have flung open the doors to investors and are working hard to expand the L.A. economy.
On Monday, the mayor disputed the idea that businesses are under siege, saying L.A. added tens of thousands of jobs last year. “This is not Detroit struggling to come back or Pittsburgh that lost half of its population,” he added. “This is L.A. It’s growing its economy.”
The widening disconnect between the narratives of key business leaders and city elected officials was on full display last week at City Hall.
During the chamber’s yearly presentation to the council on the state of the local economy, Toebben warned lawmakers that the city’s business tax is driving companies out of L.A. Noel Massie, chairman of the chamber’s board of directors, pointedly challenged lawmakers to examine why e-commerce businesses, such as large distribution centers for online retailers, are bypassing the city for other parts of Southern California.
Councilman Paul Krekorian countered that he’s seen no evidence that L.A.'s business tax, which requires companies to pay the city a percentage of their gross receipts, has sparked an exodus to nearby cities. He pointed to Chamber of Commerce data showing tourism, construction activity and tax revenue are on the rise and urged business leaders to move “the rhetoric away from gloom and doom.”
“There are a lot of great, great things going on in the business community in Los Angeles,” he told chamber officials.
The following day, hotel industry leaders called a news conference on the steps of City Hall to declare they would continue fighting the council’s hotel wage hike, possibly in the courts. They vowed to seek public records on any behind-the-scenes communications between elected officials and the unions that backed the wage increase.
Labor leaders and their allies are now pushing for a citywide wage hike that goes beyond Garcetti’s plan, by taking the minimum hourly pay to $15. They contend that business groups have racked up valuable victories at the local level, including tax subsidies for new downtown hotels and the passage of a 2008 county sales tax that is raising billions for transportation improvements. Union officials also argue that, with incomes remaining stagnant, the public mood has shifted on minimum wage laws.
“Business interests will always have a voice in City Hall,” said Rachel Torres, lead organizer with hotel workers union Unite Here Local 11. “But on wages, the pendulum has swung.”
Garcetti says his citywide minimum wage proposal will benefit businesses, giving families on the brink of poverty more spending power.
At a Woodland Hills luncheon last month for chambers of commerce across the San Fernando Valley, the mayor also pointed to his efforts to keep film production in California, eliminate red tape for real estate development and cut the business tax in coming years.
“We want to make sure we have a City Hall that works for you,” he told the crowd.
The audience applauded the speech. But afterward, some business owners spoke anxiously about the mayor’s minimum wage proposal. Real estate agent Victor Viereck, a board member with the Universal City North Hollywood Chamber of Commerce, predicted it would be a “destructive” force on the city’s economy. Bob Cohen, president of the Sherman Oaks Chamber of Commerce, called it “just one more thing” for small businesses to deal with.
L.A.'s chamber warned the Garcetti plan will slow the city’s recovery from the recession by forcing business owners to lay off workers, cut hours or move to cities with a lower minimum wage. The group also contends the mayor’s proposal will hit younger workers and those with limited skills especially hard, by making fewer jobs available to them.
Business advocates have long had an uphill climb in heavily Democratic Los Angeles, where political representatives tend to be vigorously pro-labor. Since the mayor’s minimum wage plan was unveiled, business owners have been divided on the concept, making it difficult for advocates to deliver a unified message to City Hall.
Tony Safoian, chief executive of the North Hollywood information technology company Sada Systems, has endorsed the mayor’s plan, saying it doesn’t make sense for full-time workers to live below the poverty line. If the measure is defeated, Safoian said, taxpayers will continue absorbing the cost of services for those on the brink of poverty.
“So many business groups and business voices have automatically considered [Garcetti’s plan] to be a bad thing,” he added. “We provide a counterpoint.”
Real estate developer Tom Gilmore, a leader in the revitalization of downtown, also supports the Garcetti proposal, saying he worries L.A. is developing a “permanent underclass.” He expects the higher wages to drive prices upward. “I say those effects are worth it,” he added.
Even among business groups critical of the mayor’s proposal — which would take the $9 minimum wage to $10.25 in 2015, $11.75 in 2016 and $13.25 in 2017 — there are diverging strategies on how to fight it. Some are seeking to soften the effect on businesses, while others are opposing it outright. Garcetti wants a vote on the proposal by January.
The California Fashion Assn., a networking group for the apparel industry, expects garment makers to be hit especially hard by the proposal. The group wants tax credits for apparel manufacturers and a lower “training wage” for new employees. The downtown-based Central City Assn. wants Garcetti to phase in the wage increases more slowly and include tips and employee health benefits in any pay requirement.
The Chamber of Commerce, which objects to the citywide minimum wage hike, hasn’t sought specific amendments. Toebben, the chamber president, said he expects more businesses will speak up as additional information comes out on the costs of Garcetti’s plan.
“I believe there will be many phone calls and letters and communications from small businesses to our mayor and members of our City Council — and that they will pay attention to these communications,” he said.
Others were more skeptical about the chances of stopping the measure.
“We are very realistic about this,” said California Fashion Assn. President Ilse Metchek. “It is a done deal. Nothing we say is going to change it.”
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