L.A. Raises Minimum Wage to 15 Dollars

[General Mung Beans]

http://www.nytimes.com/2015/05/20/us/lo ... v=top-news

Los Angeles Lifts Its Minimum Wage to $15 Per Hour
By JENNIFER MEDINA and NOAM SCHEIBERMAY 19, 2015

LOS ANGELES — The nation’s second-largest city voted Tuesday to increase its minimum wage from $9 an hour to $15 an hour by 2020, in what is perhaps the most significant victory so far for labor groups and their allies who are engaged in a national push to raise the minimum wage.

The increase, which the City Council passed in a 14-to-1 vote, comes as workers across the country are rallying for higher wages and several large companies, including Facebook and Walmart, have moved to raise their lowest wages. Several other cities, including San Francisco, Chicago, Seattle and Oakland, Calif., have already approved increases, and dozens more are considering doing the same. In 2014, a number of Republican-leaning states like Alaska and South Dakota also raised their state-level minimum wages by ballot initiative.

The effect is likely to be particularly strong in Los Angeles, where, according to some estimates, almost 50 percent of the city’s work force earns less than $15 an hour. Under the plan approved Tuesday, the minimum wage will rise over five years.

“The effects here will be the biggest by far,” said Michael Reich, an economist at the University of California, Berkeley, who was commissioned by city leaders to conduct several studies on the potential effects of a minimum-wage increase. “The proposal will bring wages up in a way we haven’t seen since the 1960s. There’s a sense spreading that this is the new norm, especially in areas that have high costs of housing.”

The groups pressing for higher minimum wages said that the Los Angeles vote could set off a wave of increases across Southern California, and that higher pay scales would improve the way of life for the region’s vast low-wage work force.

Supporters of higher wages say they hope the move will reverberate nationally. Gov. Andrew M. Cuomo of New York announced this month that he was convening a state board to consider a wage increase in the local fast-food industry, which could be enacted without a vote in the State Legislature. Immediately after the Los Angeles vote, pressure began to build on Mr. Cuomo to reject an increase that falls short of $15 an hour.

“The L.A. increase nudges it forward,” said Dan Cantor, the national director of the Working Families Party, which was founded in New York and has helped pass progressive economic measures in several states. “It puts an exclamation point on the need for $15 to be where the wage board ends up.”

The current minimum wage in New York State is $8.75, versus a federal minimum wage of $7.25, and will rise to $9 at the end of 2015. A little more than one-third of workers citywide and statewide now make below $15 an hour.

Los Angeles County is also considering a measure that would lift the wages of thousands of workers in unincorporated parts of the county.

Much of the debate here has centered on potential regional repercussions. Many of the low-wage workers who form the backbone of Southern California’s economy live in the suburbs of Los Angeles. Proponents of the wage increase say they expect that several nearby cities, including Santa Monica, West Hollywood and Pasadena, will also approve higher wages.

But opponents of higher minimum wages, including small-business owners and the Los Angeles Chamber of Commerce, say the increase approved Tuesday could turn Los Angeles into a “wage island,” pushing businesses to nearby places where they can pay employees less.

“They are asking businesses to foot the bill on a social experiment that they would never do on their own employees,” said Stuart Waldman, the president of the Valley Industry and Commerce Association, a trade group that represents companies and other organizations in Southern California. “A lot of businesses aren’t going to make it,” he added. “It’s great that this is an increase for some employees, but the sad truth is that a lot of employees are going to lose their jobs.”

The 67 percent increase from the current state minimum will be phased in over five years, first to $10.50 in July 2016, then to $12 in 2017, $13.25 in 2018 and $14.25 in 2019. Businesses with fewer than 25 employees will have an extra year to carry out the plan. Starting in 2022, annual increases will be based on the Consumer Price Index average of the last 20 years. The City Council’s vote will instruct the city attorney to draft the language of the law, which will then come back to the Council for final approval.

The mayor of Los Angeles, Eric Garcetti, a Democrat, had proposed a slightly different increase last fall and later negotiated the details with the Democratic-controlled Council. Mr. Garcetti said Tuesday that he would sign the legislation and that he hoped other elected officials, including Mr. Cuomo, would follow Los Angeles’s path.

“We’re leading the country; we’re not going to wait for Washington to lift Americans out of poverty,” Mr. Garcetti said in an interview. “We have too many adults struggling to be living off a poverty wage. This will re-establish some of the equilibrium we’ve had in the past.”

New York City does not have a separate minimum wage, but Mayor Bill de Blasio has spoken out in favor of higher wages statewide. “Los Angeles is another example of a city that’s doing the right thing, lifting people up by providing a wage on which they can live,” Mr. de Blasio said in a statement “We need Albany to catch up with the times and raise the wage.”

The push for a $15-an-hour minimum wage is not confined to populous coastal states. In Kansas City, Mo., activists recently collected enough signatures to put forward an August ballot initiative on whether to raise the minimum wage to $15 by 2020. The City Council is deliberating this week over how to respond and could pass its own measure in advance of the initiative.

As the Los Angeles City Council considered raising the minimum wage over the last several months, the question was not if, but how much. The lone councilman who voted against the bill — a Republican — did not speak during Tuesday’s meeting.

Still, for all their enthusiasm, some Council members acknowledged that it would be difficult to predict what would happen once the increase was fully in effect.

“I would prefer that the cost of this was really burdened by those at the highest income levels,” said Gil Cedillo, a councilman who represents some of the poorest sections of the city and worries that some small businesses will shut down. “Instead, it’s going to be coming from people who are just a rung or two up the ladder here. It’s a risk that rhetoric can’t resolve.”

Even economists who support increasing the minimum wage say there is not enough historical data to predict the effect of a $15 minimum wage, an unprecedented increase. A wage increase to $12 an hour over the next few years would achieve about the same purchasing power as the minimum wage in the late 1960s, the most recent peak.

Many restaurant owners here aggressively fought the increase, saying they would be forced to cut as much as half of their staff. Unlike other states, California state law prohibits tipped employees from receiving lower than the minimum wage. The Council promised to study the potential effect of allowing restaurants to add a service charge to bills to meet the increased costs.

And while labor leaders and the coalition of dozens of community groups celebrated in the rotunda of City Hall after the vote, they acknowledged there was a long way to go.

“This says to Los Angeles workers that they are respected, and that’s an important psychological effect,” said Laphonza Butler, the president of Service Employees International Union-United Long Term Care Workers here and a leader of the coalition. “To know that they have a pathway to $15, to getting themselves off of welfare and out of poverty, that’s huge. This should change the debate of the value of low-wage work.”

Jennifer Medina reported from Los Angeles, and Noam Scheiber from Washington.

While I'm quite supportive of a wage increase to the 10 to 12 dollar range paired with indexing to inflation, I'm not sure how feasible an increase to 15 dollars is even if spaced out over some years. Then again, Los Angeles is quite an expensive city.

[Borgholio]

I think that a higher minimum wage is definitely a good way to help get people out of poverty, but I see two problems with it. First, will smaller businesses be able to afford it? They may have to let some workers go entirely just to pay the few who remain, making the overall situation worse. Second, what will this mean for people who currently only make a little bit more than $15 for what is considered skilled labor? They would want to ask for more money to compensate for the additional skills, thus making it a potential labor issue for even larger companies as well.

[General Zod]

I think that a higher minimum wage is definitely a good way to help get people out of poverty, but I see two problems with it. First, will smaller businesses be able to afford it? They may have to let some workers go entirely just to pay the few who remain, making the overall situation worse. Second, what will this mean for people who currently only make a little bit more than $15 for what is considered skilled labor? They would want to ask for more money to compensate for the additional skills, thus making it a potential labor issue for even larger companies as well.

Seattle's legislation takes care of the "small business" problem by making it so that it's only mandatory if a company has more than 500 workers. That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

[Borgholio]

That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

I can agree with that from a moral standpoint, but if an increase to the minimum wage causes a business to close up shop thus making everybody there unemployed...maybe it would have been better to have a lower minimum wage and at least you'd still have a job.

[Elheru Aran]

That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

I can agree with that from a moral standpoint, but if an increase to the minimum wage causes a business to close up shop thus making everybody there unemployed...maybe it would have been better to have a lower minimum wage and at least you'd still have a job.

Note also that the more small businesses close up, the more customers go to the large businesses, giving the large businesses even more market share and pricing power, hurting the start-up potential of anybody trying to start a new small business.

[General Zod]

That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

I can agree with that from a moral standpoint, but if an increase to the minimum wage causes a business to close up shop thus making everybody there unemployed...maybe it would have been better to have a lower minimum wage and at least you'd still have a job.

If your employees can't afford to pay their rent how much is that business actually helping anyone?

[Zaune]

I fail to see how the working population of Los Angeles having an extra $240 a week to spend on stuff is going to be bad for business.

[Borgholio]

If your employees can't afford to pay their rent how much is that business actually helping anyone?

Making not quite enough is better than making nothing at all. If they are barely scraping by, then a low paying job will be better than none at all.

I fail to see how the working population of Los Angeles having an extra $240 a week to spend on stuff is going to be bad for business.

For the places they spend money it would be great. Restaurants, clothing stores, lawn and garden, toy stores, etc will love it. But say you're a small business that specializes in industrial tools. How many "ordinary" people are going to spend that money on large drill presses or small Bobcat backhoes?

[Patroklos]

Seattle's legislation takes care of the "small business" problem by making it so that it's only mandatory if a company has more than 500 workers. That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

Except it the exemption doesn't exempt franchisers, who make up a large part of small businesses who employ low skill labor. This just made automation that much more cost effective. In a few years we will have a repeat of the steel bust.

I fail to see how the working population of Los Angeles having an extra $240 a week to spend on stuff is going to be bad for business.

Since the people protesting say then need it for things like childcare, education, rent and utilities hopefully not good at all if you are talking about them blowing it on consumer crap instead.

[Tribble]

IMO a better solution would be a guaranteed minimum income for all citizens. Unless I am mistaken over the years there have been a few towns which experimented with the idea, and it was a success - poverty, crime, school drop out rates and illnesses went down while contrary to expectations most people continued to work.

[General Zod]

IMO a better solution would be a guaranteed minimum income for all citizens. Unless I am mistaken over the years there have been a few towns which experimented with the idea, and it was a success - poverty, crime, school drop out rates and illnesses went down while contrary to expectations most people continued to work.

Good luck getting national support for it.

[Zaune]

For the places they spend money it would be great. Restaurants, clothing stores, lawn and garden, toy stores, etc will love it. But say you're a small business that specializes in industrial tools. How many "ordinary" people are going to spend that money on large drill presses or small Bobcat backhoes?

They won't. They'll spend that money on, among a great many other things, all the property and vehicle maintenance they've been putting off for lack of money.

Since the people protesting say then need it for things like childcare, education, rent and utilities hopefully not good at all if you are talking about them blowing it on consumer crap instead.

I was thinking of things like food that isn't frozen ready-meals or instant ramen, a down-payment on a car that isn't falling apart or getting the boiler serviced and the house repainted, actually.

[Elheru Aran]

For the people on the short end of the stick, it really comes down to the Sam Vimes Theory of Economics. Poorer people get the shaft because they can't afford better quality stuff or maintain the stuff they already have, which can be extended to cover food, childcare, etc...

[Tribble]

IMO a better solution would be a guaranteed minimum income for all citizens. Unless I am mistaken over the years there have been a few towns which experimented with the idea, and it was a success - poverty, crime, school drop out rates and illnesses went down while contrary to expectations most people continued to work.

Good luck getting national support for it.

True, I'm just suggesting that it would work better than simply raising the min wage.

The thing is, as we all know the public isn't really in control here. The way North American trade agreements and taxation work right now, the corporations have most of the power. All they have to do is threaten to ship their jobs to whatever area has the lowest wages and the least restrictive labour/safety/enviormental laws, and our governments immediately cave in. IMO corporations succeeded in starting a race to the bottom where regions are now competing with each other to have the lowest wages / weakest laws possible (which of course is what corporations want seeing as that improves their bottom line). Unless that kind of corporate leverage is removed (and good luck at doing that), raising the min wage will only accelerate the trend and make things worse. Unfortunately, the gap between rich and poor is only going to keep growing no matter what the public opinion is.

[Guardsman Bass]

Small businesses do eventually have to pay the $15/hr wage, I think - it's just delayed longer. I'm glad they do, because I don't think it's somehow more okay to earn a lower wage working for a small business than it is to be working at Walmart.

In any case, this should be an interesting experiment. I don't think most restaurants will be affected, because they'll just adjust their prices. Grocery stores and stores selling merchandise are another matter - if they have constraints on how much they can raise prices without damaging sales, they'll either fire people or shut down and move. Grocery stores in particular are vulnerable to that, because people with cars already often drive out of their way to a cheaper store (witness people driving outside city lines to go to Walmarts and other Big Box stores on county land).

I don't think things will stay at $15/hr. Sooner or later, someone's going to make the push for $20/hr by 2020, or the like. It'd be smarter for them to set it at $15/hr and then index it to inflation.

[Elheru Aran]

Do restaurants in California get to say their employees are paid 'tipped wage'? Because people could definitely still get shafted there. They get shafted anyway as it is.

I've noted a few articles commenting that to preclude the whole "raise the minimum wage" thing a lot of large companies are considering, or have already, kicked their wages up a bit, like McDonald's. The general notion is that if they can get it up enough to stop some of the grumblers, there won't be enough people pushing for higher wages to change much, and additionally the government (whether local, state or Federal) won't see the need to raise wages across the board. So I wouldn't be surprised if we see a few more corporations publicizing such a move. McDonald's just didn't count for shit because it only owns something like 10% of all the stores; the rest are franchise owned and operated, and are free to set whatever wage they want.

[Borgholio]

It'd be smarter for them to set it at $15/hr and then index it to inflation.

Actually that's kinda what they're doing. They get it to $15 by 2020 and then adjust based on the consumer price index from that point forward.

Do restaurants in California get to say their employees are paid 'tipped wage'?

I don't think so. I think CA is actually one of the few states where they have to earn minimum wage regardless of tips.

[Guardsman Bass]

Excellent news, then. At least theoretically the minimum wage will retain its purchasing power, then.

[Arthur_Tuxedo]

Given that almost none of the prodigious GDP growth over the last 40 years has gone to increased wages and that the inflation-adjusted minimum wage in the late 60's was about $18 / hr, I'm pretty sure businesses can absorb $15 / hr without missing a stride. All the contrary arguments I've heard are specious and ignorant of the fact that minimum wage hikes have happened many times in many places and have never caused mass job loss or any other predicted negative side effects unless the amount of the increase was truly beyond the pale.

[Me2005]

I think that a higher minimum wage is definitely a good way to help get people out of poverty, but I see two problems with it. First, will smaller businesses be able to afford it? They may have to let some workers go entirely just to pay the few who remain, making the overall situation worse. Second, what will this mean for people who currently only make a little bit more than $15 for what is considered skilled labor? They would want to ask for more money to compensate for the additional skills, thus making it a potential labor issue for even larger companies as well.

Seattle's legislation takes care of the "small business" problem by making it so that it's only mandatory if a company has more than 500 workers.

I thought it was set up such that the small businesses just have longer to absorb the raise than large businesses/franchises of large businesses do.

That said I'm of the mindset that if you can't afford to pay your employees a livable wage maybe you don't deserve to stay in business.

How many people making minimum wage actually need to pay to support themselves 100%? I lived with my parents or was in college through my first 7 years of employment. I only made minimum wage in the first two of those years, after that I started moving to better paying jobs that would take unskilled but tried workers like myself, then to semi-skilled and professional positions. Starting out, it wasn't about me making enough to live on, it was the employer taking a gamble on how employable I'd be. Raising the minimum you must pay someone raises the riskiness of that gamble, so it's less likely businesses will take it and no-skill workers will miss out.

[Guardsman Bass]

Given that almost none of the prodigious GDP growth over the last 40 years has gone to increased wages and that the inflation-adjusted minimum wage in the late 60's was about $18 / hr, I'm pretty sure businesses can absorb $15 / hr without missing a stride. All the contrary arguments I've heard are specious and ignorant of the fact that minimum wage hikes have happened many times in many places and have never caused mass job loss or any other predicted negative side effects unless the amount of the increase was truly beyond the pale.

The inflation-adjusted wage in the 1960s was about $10.10/hr, not $18/hr. And the problem with looking to existing minimum wage research on this is that we've never had hike of this size or target before - in the case of LA, it's boosting the minimum wage up to above 90% of the city's existing median wage, affecting about 46% of its workers.

That's what makes this a good experiment. When all is said and implemented, how will affect jobs in the area? The closest equivalent we have to a hike of this size was in Puerto Rico, and that did lead to a 9% job loss.

[Arthur_Tuxedo]

Ah, I must have mis-remembered the statistic. In CA it comes out to the equivalent of $11.20 in 1968, which is indeed less than the $15 being proposed.

[His Divine Shadow]

It's a problematic situation to be in, this transition. Which is why as a society, one shouldn't put oneself in the position where you have unlivable wages as a thing.

[Patroklos]

So affecting 46% of residents so just shy of about 2 million people, what will the impact be in local prices?

[Borgholio]

I think that businesses forced to increase the wage by a significant amount (fast food joints, Jiffy Lubes, etc...) will have to raise their prices or lay off workers to maintain the same prices. Companies where the workers already make close to or more than $15 (technical jobs for example) will probably be unaffected.