In my view, when we celebrate Labor Day it should be about creating jobs to provide opportunity for our citizens. When an economy is strong and when there are jobs, then there is plenty of room for upward mobility.
This past Labor Day, Mayor Eric Garcetti unveiled a proposal to hike the minimum wage in three increments to $13.25 an hour by 2017 and to index it to inflation thereafter. That would be a $10.25 minimum wage in 2015, $11.75 in 2016 and $13.25 in 2017. As this proposal moves forward, it may provide an opportunity to have a healthy discussion not only about the minimum wage but jobs as well.
I think most people would agree that there is a need to adjust the minimum wage. However, the State of California just raised the minimum from $8 to $9 an hour on July 1st. So the question we need to discuss is how much of an additional increase is warranted? When you add the City’s proposed increases to the State’s, it adds up to a whopping 66 percent increase in only three years. That is a substantial amount for many small businesses to absorb.
The City commissioned a study of the proposed hike from the Institute for Research on Labor and Employment at UC Berkeley. They estimate that in the first full year of implementation, workers will earn an additional $1.8-billion. What they fail to say is that this $1.8-billion is coming from the pockets of small businesses.
The study says that about half of all affected workers will be in four industries: restaurants (17.4%), retail trade (13.9%), health services (11.7%), and administrative and waste management services (9.5%). Restaurants, the most-impacted industry, are expected to see total payroll costs rise by 14 percent, but when you add in all operating costs, the study claims it is “only” a 4.7-percent increase in operating costs. They expect restaurants will raise their prices by only about 4.1-percent to recover the additional cost. They note that they “cannot rule out the possibility that the restaurant industry might experience small reductions in growth.”
It seems to me that these consultants are spinning this as a “no pain” wage hike that is going to add money to the pockets of those most in need, and have virtually no impact on businesses. In fact, they say businesses are going to benefit because they are going to see “improved worker performance and reduced turnover.”
If only things were so simple. What the researchers fail to consider is the narrow profit margin within which many businesses operate.
The Daily News ran an editorial yesterday calling for a “full, public debate” not just about the proposed minimum wage, but also “a wide-ranging discussion of what the city can do to lift both workers and employers.” Certainly, if the City took action to do away with the Gross Receipts Tax, then the business community would be more open to the idea of a hike in the minimum wage. Also, the separate proposal to raise the hotel minimum wage to $15.37 should be dropped, with the hotels treated the same as other businesses.
The Chamber’s Legislative Action Committee is scheduled to be briefed by the Mayor’s Office on Thursday, September 11, at 4:30 p.m. at the Chamber. We invite any members with interest to attend. We expect the committee to make a recommendation to the Chamber board for a position.
In the end, it should be all about creating jobs to help those on the lowest rungs to advance. Simply taking $1.8-billion from the pockets of small businesses does not help them to create more jobs! Let’s work together to not only improve workers’ lives but also to improve the business climate.
Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.