The wheels are in motion to bring Santa Monica’s minimum wage in line with neighboring Los Angeles with outreach forums to provide information about the subject and an active request from city staff for input into the process.
Santa Monica is considering local rules that would raise the minimum wage in a way similar to a recently passed law in Los Angeles. As of July 1, 2016 Los Angeles will begin raising the minimum wage annually to $10.50, $12, $13.25, $14.25 and $15 by 2020. The rules allow small companies to delay implementation for a year and have an additional year exemption for nonprofits that help the disadvantage or receive a majority of funding from government grants. The increases are indexed to inflation and an enforcement office will be established.
Local officials have said they will use the Los Angeles rules as a base for any proposal in Santa Monica, but acknowledged there could be city specific issues that need resolution. The City held the first of three meetings on Aug. 12 with the goal of gathering input and providing additional information to interested parties.
Professor Michael Reich with the Center on Wage and Employment Dynamics
Institute for Research on Labor and Employment at University of California, Berkeley has been hired by the City to provide information at the outreach meetings based on his similar consulting work with Los Angeles.
He said the impact of a Santa Monica wage law would be less than the impact in Los Angeles due to differences between the two workforces.
Among the industries likely to be impacted by a minimum wage, Santa Monica workers currently make more than their LA counterparts. According to Reich, Santa Monica workers in the accommodations business make about $747 per week compared to $648 in Los Angeles. Local restaurant workers make about $454 per week as opposed to $369 in Los Angeles. He said about 17.5 percent of Santa Monica’s workforce is employed in the accommodations/food service industry, compared to 10.2 percent in L.A. and about 9 percent nationwide.
“The takeaway is even though Santa Monica has more employment in industries that are traditionally low wage, they are better paid in Santa Monica than in Los Angeles, so I suspect, and I’ll come back to this later, the impact will be a lot lower than it will be in Los Angeles,” Reich said.
He said the traditional arguments against a minimum wage are not particularly valid in the local context.
According to Reich’s presentation, minimum wage opponents often site a potential reduction in the workforce, movement to automation, price increases and lower sales as negative results. However, he said higher wages actually help retain workers (leading to cost savings in training), automation isn’t always possible (or more useful than a live person) and price increases would be minimal and industry wide, therefore offsetting their impact.
Based on his calculations, Reich said retail firms in Los Angeles could expect to raise prices by a little over two percent, while restaurants might raise prices by about seven percent.
“This is the magic of arithmetic,” he said. “There’s nothing here that’s controversial.”
Reich said some of the wealth created by a Santa Monica law would leave the city due to the lack of housing here.
“A very high percentage of the people that work in Santa Monica don’t live in Santa Monica,” he said. “You’ll have some leakage back into Los Angeles when Santa Monica raises the minimum wage.”
Reich said low-income workers tend to live in neighborhoods that they can afford, places that have low rents and are often defined by ethnic demographics. Those areas can expect to see an increase in local spending, particularly at the kind of small businesses that cater to the neighborhood clientele. However, more expensive neighborhoods that are responsible for more retail/dining spending will experience the wage increase as a cost.
“The benefits of the minimum wage are concentrated spatially,” he said. “The percent increase in income in [worker’s] neighborhoods will be much higher and spending will be much higher … where the costs are going to be felt is in the more affluent neighborhoods because they tend to spend more.”
While the benefits may be spread regionally, he said there are solid business reasons to equalize wage laws. Specifically, employers in low-wage areas could lose quality employees to the higher paid cities. He said that upward pressure would likely drive many nearby municipalities to follow the Los Angeles model.
“Santa Monica might be in the lead in filling-in on a regional basis, but it’s going to be followed by other cities eventually and it’s my guess it will be all of them,” he said.
Audience members for the first forum included restaurant owners, manufacturing companies, representatives from the Chamber of Commerce, union members, Santa Monicans for Renters’ Rights members, city staff and business district representatives.
Concerns were raised that what few manufacturing jobs remained locally would disappear with an increased wage and restaurant operators questioned the need for a wage increase on tipped employees with a low salary but an income that’s already above $15 an hour due to tips.
Staff said comments would be gathered and given to the Council prior to their expected discussion of the subject in September. The presentation will be repeated on Aug. 18 from 2 – 4 p.m. at the Main Library. For more information on upcoming meetings contact Stephanie Lazicki at (310) 458-2201 ext. 2062 or visit www.smgov.net.