It’s been eight months since Mayor Eric Garcetti proposed setting Los Angeles’ first-ever citywide minimum wage, and the debate is no longer about whether to raise the base pay but rather how high it should go and how fast it should get there. City Council members are also considering whether certain employers should be exempt from paying the new minimum and whether they should be allowed to phase in the increase more slowly. The council will attempt to hash out these issues Wednesday in a committee hearing, with a vote expected on the final wage proposal later this month.
In setting its own minimum wage, Los Angeles is following the lead of San Francisco, Oakland, San Jose, Seattle and Santa Fe, N.M. — all high-cost cities where the federal and state minimums don’t have the same buying power as in more affordable parts of the country, and where the lowest-paid workers struggle to make ends meet. The problem is especially acute in Southern California because housing is so expensive and so many low-wage workers live here — an estimated 37% of the city’s total workforce. And half of the households in the metropolitan area spend more than a third of their income on housing, which leaves less money for food, healthcare, transportation and other necessities.
Raising the minimum wage is the right thing to do because it will help lift people out of poverty. But at what level should it be set? There have been three proposals and three academic studies, plus a peer review of each of the three studies. There have been weeks of hearings, with hours of public testimony from workers, business owners and advocates, all speculating on the potential effects, good and bad, of this hike or that hike or no hike at all. Yet there has been far more noise than signal, thanks in part to the ideological divide even among those studying the issue. What’s more, the suggested wage hikes are unprecedented in size and scale and would take effect in a city surrounded by competing cities with lower wages, making it difficult to predict the impact on L.A.'s economy, its workforce and businesses.
Given the uncertainty, Los Angeles leaders should stick with Garcetti’s original proposal — a gradual, more modest wage hike starting this year and reaching $13.25 an hour in 2017. In future years, the wage would increase automatically with inflation, reaching $15 around 2023 and continuing to rise with inflation in perpetuity.
By contrast, the proposal by some council members to set a wage that gets to $15.25 by 2019 goes too far too fast. There is simply not enough information available about the effect on jobs and the economy of such a precipitous hike (a 70% increase over the state’s current minimum), a point that was made by the peer-review study.
The third proposal, by Councilman Paul Krekorian, which would get to $15.25 in 2021, creates exceptions and carve-outs for certain employees. It would completely exempt nonprofits that rely solely on government funding from paying the minimum wage and would create a lower minimum wage for apprentices, teenage workers and tipped employees. It would also delay pay hikes for one year for businesses with 50 or fewer workers.
A slower phase-in for employers most sensitive to the wage hike, such as small businesses and nonprofits, makes sense and should be considered. City leaders have to acknowledge that mandating higher pay will prompt some businesses to cut staff or hours, or even close, and a slight delay in implementation could help avoid some negative effects. But permanent exemptions would only undermine the goal of the policy and create a new tier of sub-minimum-wage jobs.
Virtually every city that has adopted a minimum wage has also created a local enforcement and monitoring unit to handle complaints and crack down on employers who cheat workers. Los Angeles has to do the same. It won’t be cheap — the city will need to budget $500,000 for a five-person Office of Labor Standards, and one study recommended eventually staffing it with 25 investigators. But the city needs real enforcement to make sure the most vulnerable workers actually benefit and that law-abiding businesses aren’t put at a competitive disadvantage.
The city should also create a panel of experts that can collect data and evaluate the impact of the minimum wage on employment, job creation and business development. The panel could spot trends, for example if a particular community is experiencing high job loss or business closures and may need targeted assistance from the city. If Garcetti’s relatively gradual wage increase goes into effect and does not do much damage to jobs and the economy, there is nothing to stop the council from coming back later and raising the wage further.
It is extremely important to keep in mind that raising the minimum wage will not end the struggle of low-income workers or address the lack of economic mobility that hinders so many Angelenos. Garcetti and the City Council must treat the minimum wage hike as one piece of a larger, more ambitious economic development strategy that starts with making it easier to do business in L.A. and continues with ensuring that the region has the housing, infrastructure and educated workforce to attract investment. Setting the right citywide minimum wage is a start, but the goal should be to create more of the desirable middle-class jobs — $20- to $30-an-hour jobs rather than bottom-of-the-ladder jobs — that Los Angeles needs.