Should the national and state minimum wages be increased? Will increase effect those who are already making more than minimum wage? How will it effect the economy and lower wage earners?
Argument In Favor
Why Los Angeles Should Raise the Minimum Wage
By: Curren Price Los Angeles City Councilmember
Across the country we are hearing and seeing legislators and the community at large, call for better more equitable wages for workers. For example, in cities like Seattle the Mayor is currently calling for a living wage of $15 for the entire city.
Los Angeles has always been a progressive leader. It is time that we get engaged in this important civic discussion. I believe that this motion to lift hotel workers out of poverty is a necessary step if we are ever going to truly address and correct the “barbell economy” we have seen grow so rapidly in our city, which leaves too many families priced out of the middle class.
I also firmly believe that we need to move expeditiously – too many hard working men and women are relying on us to do so. Some have said that we should be doing more I think if we can help one family go from struggling to surviving, then we have done a good job. Already we have seen reports that show raising wages for hotel workers could infuse some $70 million into our local economy. I think I can speak for my colleagues when I say that we cannot get this money into our local economy fast enough! That kind of investment would have tremendous ripple effects in the community, helping scores of businesses gain customers while helping lift more than 11,000 families out of poverty.
Argument Against
For Los Angeles, Minimum Wage Hikes Mean Economic Costs
By: Michael Saltsman
The left coast is moving even further out to sea.
While President Obama debates Congress on the merits of boosting the federal minimum wage to $10.10, west coast cities have their sights set even higher to a once-inconceivable $15-an-hour level. In Los Angeles in particular, three city council members and the Los Angeles Alliance for a New Economy (LAANE) are backing a wage mandate that evidence suggests will hurt the employees it’s intended to help.
Proponents are demanding a roughly $15-an-hour minimum wage that applies to larger hotels in the city, and their rhetoric is meant to suggest they have the employees’ interests at heart. But there’s first-hand proof – right here in California – that the proposal won’t deliver what’s promised. Up the coast in San Jose, the consequences of a steep wage hike are unfolding in real-time.
A union-backed ballot initiative approved last year hiked San Jose’s minimum wage 25 percent, up to $10 an hour. The rhetoric surrounding that increase followed the same playbook we’re seeing today in LA. Proponents said the mandated hikes would boost economic growth and create jobs. But that’s not what happened.
To measure the talking points against the facts, the Employment Policies Institute (EPI) conducted a survey of impacted city employers in the restaurant industry for a one month period spanning the end of 2013 and beginning of 2014. The results should give Angelenos pause. Two thirds of respondents reported big increases in the costs of doing business – between $10,000 and $69,000 a year, per location, for some 40 percent of restaurants.
To offset those costs, respondents had to choose from unattractive options like reducing staff hours, as 45 percent did; reducing staffing levels, as 42 percent did; or raising prices where possible, which two-thirds of respondents did. Most concerning, thirty percent of respondents cut back their future expansion plans in San Jose, and twelve restaurants closed at least one location outright.
The owner of one San Jose establishment described it this way: “I am struggling mightily. I’ve had to cut staff. I’ve personally had to work my own kitchen and my own bar a lot more than I need to, instead of spending the time that I would to promote my business, and pay my bills, and do paperwork.”
Proponents have offered the misleading argument that overall employment growth is up in San Jose—as if the economic realities of the tech industry have anything to do with the minimum wage. A close look at the employment of less-educated young adults in the San Jose metro area yields a very different picture: Unemployment for this group jumped sharply from 16.6 percent in 2012 to 26.8 percent in 2013. Additionally, the employment rate for this group fell by nearly four percentage points from 20.2 percent to 16.4 percent.
These economic realities are hardly unique to the city of San Jose. The past two decades of research on minimum wage increases, summarized by economists at the Federal Reserve and UC Irvine, yields a crystal-clear conclusion: Wage hikes reduce employment opportunities for the least-skilled employees.
Today, Angelenos have the opportunity to think more clearly. The argument that $15-an-hour wages will boost the economy should be recognized for what it is – the same inaccurate piece of rhetoric used by unions and their supporters at all times and in all places. San Jose and other cities have learned that lesson the hard way; Los Angeles doesn’t have to.
Michael Saltsman is research director at the Employment Policies Institute.