Just three months ago, Governor Jerry Brown voiced his opposition to a statewide $15 minimum wage stating “Raise the minimum wage too much and you put a lot of poor people out of work” and noted the estimated $4 Billion cost of implementing it. Last Monday in Los Angeles, Governor Brown signed landmark legislation to increase the state minimum wage annually until it reaches $15 in 2022 after being approved by the State Senate 26-12. “Economically, minimum wages may not make sense.” Brown added, but noted that work is “not just an economic equation,” and that labor was “part of living in a moral community.”
Here in Emeryville, “Large” businesses of over 55 employees will reach $15 next year and small business in 2018 (five years before the state schedule). In light of this highest-in-the-nation pace, the National media has increasingly turned their attention to our city to forecast what is in store for them, forecasts for statewide impacts of what most economists and even progressive media agree is a bold “economic experiment”.
Photo: Nick Ut, AP
Labor unions had been gathering support for a statewide $15 minimum wage measure and one that was likely to be passed according to polls (there were in fact two competing measures being put forth by different SEIU chapters). The measure would likely have touched off an expensive political fight between business and labor groups drawing attention and funds away from what could be an important and contentious national election. The 2016 Ballot is predicted to be flooded with initiatives because of a record low voter turnout in 2014 and relatively few signatures required to qualify (8% of the 7,317,581 votes cast or roughly 585K according to Ballotpedia).
Income inequality has come to the forefront of the national discussion this election and the time was ripe for candidates to capitalize on a politically popular measure, a measure labor interests claim will lift thousands above the poverty line and opponents say will drastically diminish the availability of these low-skilled, entry-level jobs and ultimately hurt those it is intended to help.
Ultimately, Brown opted to make a deal with the labor groups so he could incorporate some economic safeguards should economic projections be accurate. These so-called “off ramps” allow for the Governor to pause yearly increases in the event of negative budgetary and economic conditions. In the event of a state recession (which is statistically likely to happen before 2023), Brown, or whomever the current governor is, has the ability to apply the brakes. Brown’s maneuvering was a compromise that gave the Unions the $15 headline while still providing safeguards for a measure he seems to have some reservations with. Brown will be 80 years old when his fourth term as California governor ends in 2018. Fiscal prudence has been a hallmark of what is likely the end of the road of his political career.
Local Impacts Unknown but Being Studied
If you’re an Emeryville Small Business, you should have already received a notice from the City alerting you to the pending minimum wage increase from 12.25 to $13/hr on July 1st. “Large” businesses (over 55 employees) will jump to $14.82. When the state small business schedule reached $15 in 2023, Emeryville small businesses will be subject to an estimates $17.66 minimum wage based on an average 2.5% CPI increase.
While Brown noted a $4 Billion cost for a statewide $15 wage, the local costs are unknown. A City of Emeryville administrative analyst hired to oversee our Minimum Wage Ordinance (MWO) currently dedicates 70% of her time to administration of it at an annual cost between $50-60,000. The City did not have a cost available for implementing their MWO but the abbreviated timeline was estimated to be hundreds of staff hours. Additional costs include investigating violations as well as the annual mailers and notices which cost the city an additional $6,500 per. The City Attorney’s office will also be pursuing additional Minimum Wage Regulations this year to provide more consistent advice and answers to employers with questions on interpreting the law. In addition, the city will fund a study to research the impacts of the ordinance on local businesses at the one year mark of implementation (Expected to be presented to Council in September).
The L.A. Times piece profiles the Emeryville wage increases impacts on Los Moles, Farley’s Cafe and a local security guard. “I am not sure we can raise prices again in June when wages go up. We’ll have to figure that out soon because it is very tough right now.” notes Farley’s proprietor Chris Hillyard in the piece. Not mentioned in the piece is that since Farley’s raised their prices, their sales dropped as consumers become more price conscious. This seems to support a basic economic principle that the more you raise prices, the lower your sales. Another small business I spoke with who chose to remain anonymous noted “My monthly numbers are down about $6,000” after raising prices 15%. Both businesses have also eliminated staff positions as they look to offset this sudden jump in labor costs. Advocates for the $15 minimum wage have argued that the low-wage earners themselves will offset any business loss by spending locally.
The only data availble suggests Business Closures have accelerated and outpaced New Business Registrations since the MWO was implemented
The personal stories I’ve heard from small business are that they are struggling to adapt. These stories are merely anecdotal though without qualitative and quantitative data that considers cost increases, business loss and overall impact on net employment. The only current data the city maintains is in the form of their monthly progress reports that track new business licenses and closures, data that seems to suggest that business closures are on the rise and have surpassed new business registrations. The data does not account for whether the business fits the cities Large or Small business threshold or is in fact a sole proprietorship and therefore not applicable to the city’s MWO. The data also doesn’t account for seasonal trends in business closures.
What it’s like to live in a city with a $14 minimum wage
Lito Saldana, chef and owner of Los Moles says he has bumped up the price of every menu item by 10% to offset rising food and labor costs.
By Tracey Lein (Photo: David Butow)
Security guard Kenneth Lofton was among the workers who benefited last year when this East Bay city hiked its hourly minimum wage to nearly $15 for employees at large companies.
The jump was almost 50% more than what he used to make in nearby Oakland when he was paid $10 an hour. But it’s not enough for Lofton, 62, to move closer to work — he still has to commute nearly 20 miles from Hayward and back each day.
Read More on LA Times →
Jerry Brown signs $15 minimum wage in California
By David Siders
Gov. Jerry Brown, casting a living wage as a moral imperative while questioning its economic rationale, signed legislation Monday raising California’s mandatory minimum to $15 an hour by 2022, acting within hours of a similar bill signing in New York.
The bill’s enactment comes one week after Brown, Democratic lawmakers and labor leaders announced an agreement on the wage increase, averting a brawl on the November ballot.
In adopting the measure, California joined New York as the first states in the nation to enact a plan to raise their statewide minimums to $15. New York Gov. Andrew Cuomo signed his state’s legislation and was cheered by labor unions at a rally moments before Brown spoke in California.
Read more on SacBee.com →