Everything You Need To Know About L.A.'s Record-Setting Wage Increase

Photo: Sandy Huffaker/Getty Images.
We’ve all been known to stretch our paychecks to the extreme, but there’s only so far a stub can go before it breaks — especially when it's made of wages that barely cover lunch and the gas it took to get to work. An untenable minimum wage is a huge problem in this country. But, in L.A., that's about to change.

You've probably heard the news that the minimum wage for Angelenos will be increasing soon. But, unless you've been following the story closely, the process may seem a bit confusing. Not to worry; we'll get you up to speed.

Let's start with the facts...

The current minimum wage in Los Angeles is $9 per hour, which means these workers earn less annually than the nearly $17,900 it currently costs to rent a one-bedroom apartment in the city (groceries, childcare, transportation, and medical expenses not included). Translation: The math doesn’t add up. Employees in bottom-rung jobs manning stoves, stocking shelves, selling merchandise, or cleaning everyone's messes can’t swing living in Los Angeles on their salaries alone. At minimum wage, they’d have to be on the clock nearly 24 hours a day, 365 days a week.

Last week, the Los Angeles City Council did something about these stark numbers: They voted 14-to-1 to bit-by-bit raise the minimum wage to $15 by 2020. Next January, it goes up to $10 an hour, followed by bumps to $10.50 in July, $12 in 2017, $13.25 in 2018, $14.25 in 2019 and, starting in 2022, it will climb with inflation. Before you say "hooray for higher pay," consider that this means you might have to shell out more for your food and fashion.

The movement for a $15 wage burst onto the scene three years ago, when 200 fast-food employees in New York walked off their jobs. On April 15 of this year, Fight For $15 (an organization funded by the Service Employees International Union (SEIU) that advocates for better pay for low-wage positions) held demonstrations in 200 cities attended by 60,000 workers across a wide range of industries.

But, union backing for the cause recently encountered a speed bump in L.A. A handful of labor officials in the city are pushing for an exemption to the minimum-wage increase for companies with workers that collectively bargain for compensation below the minimum threshold. They proclaim the exemption will enable workers to concentrate not only on pay, but on health and retirement benefits, too. Other cities that have passed laws elevating the minimum wage (such as San Francisco, Oakland, and Chicago) have carved out exemptions for union deals.
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Why is Los Angeles’ minimum wage being pushed to $15 an hour?

You can’t get by on good weather alone. Because living in L.A. is so expensive, its $9 required wage translates to a meager $6.38 in a typical American city. Let that sink in for one second.

Plus, housing costs have dramatically increased. Between 2006 and 2013, rents in L.A. rose 11%, while the salaries of renters dipped 4%. The Economic Roundtable says a worker in L.A. should earn $15 an hour to make a living wage — or, in other words, provide adequate support for his or her family.

In a study underwritten by the Los Angeles County Federation of Labor, the research organization calculates full-timers earning $15 an hour would pull in at least $26,250 before taxes, an amount that’s still below the $30,785 poverty threshold for a family of four in L.A. County. It's also well below the $34,324 to $91,949 the liberal think tank Economic Policy Institute estimates is necessary for one- to five-member families to live securely, albeit modestly, in the greater L.A. region.

Whom will the pay raise affect?

Woo-hoo, we’re all getting raises! Well, not quite, but a lot of us are. The Economic Roundtable found 46% of workers in L.A. are paid less than $15 an hour. That percentage covers some 450,000 full-time employees and 359,000 part-time employees. Assessing an earlier version of the minimum wage increase in L.A., the Institute for Research on Labor and Employment at UC Berkeley discovered that around half the affected workers are in four industries: retail, restaurants, health services, and administrative and waste-management services. They are almost entirely 20 years old or older, and 83% are people of color. The Institute concluded affected workers are generally responsible for 51% of family income. Michael Reich, an economist at the Institute, told NBC News that these workers should ultimately expect a raise of $3,000.

Whom does the minimum-wage increase in L.A. leave out?

Workers with jobs in Los Angeles County, a sweeping area with a population of 10 million or so, are excluded from the city’s ordinance. There are also workers not being paid the minimum wage, even if their employees are obligated to pay it. According to the Garment Worker Center, more than 60% of the roughly 45,000 garment workers in the city of Los Angeles earn less than the minimum wage. Small businesses (those with 25 employees or fewer) must comply with the minimum-wage increase, but have an additional year to adjust to the heightened wage realities. Tipped employees aren’t exempt from the minimum-wage requirements.

Who was for and against the minimum-wage increase?

In the simplest terms, the fight for and against higher minimum wages breaks down along labor and business, and Republican and Democratic, lines. Those lines can get blurred, though. Businesses such as e-tailer Nasty Gal and shopping center owner Westfield backed L.A. Mayor Eric Garcetti’s charge to elevate the minimum wage.
Photo: Sandy Huffaker/Getty Images.


Here’s where things get murky…

Will the increased minimum wage lift poor Angelenos out of poverty?

In short: maybe. For every economist or policymaker who asserts a higher minimum wage will help alleviate poverty, there’s another who contends it won't do much good for the neediest among us. UC Irvine economics professor David Neumark falls on the latter side of the argument; he stressed in a Wall Street Journal commentary that there’s no solid evidence loftier minimum wages reduce poverty. University of Massachusetts, Amherst economist Arindrajit Dube champions the exact opposite. In The New York Times, he declared there’s "clear evidence that minimum-wage raises have helped lift family incomes at the bottom."

Will L.A.’s higher minimum wage lead to job losses?

Possibly. Once again, it’s splitsville among those who do deep thinking about the minimum wage. The Economic Roundtable makes the case that the minimum wage hike could create 64,700 new jobs. It explains that workers earning higher wages will spend more money — to the tune of $9.2 billion in annual sales — and that spending will spur job development. Research firm Beacon Economics takes up the counterargument. Exploring a proposal to raise the minimum wage to $13.25, it surmises the wage bump would eradicate 70,000 to 140,000 new jobs in the city over the next five years. Can’t we all just get along?

Will the minimum-wage increase jack up prices at stores and restaurants?

The UC Berkeley researchers maintain restaurant prices could increase 4.1% under the previous $13.25 minimum-wage proposal. They believe retail prices would scarcely budge. Although it doesn’t specify how much prices will rise and profits will fall, Beacon Economics stipulates the minimum-wage hike in L.A. will produce steeper prices for consumers as businesses deal with the escalated labor expenses and squeeze company profits. In The Huffington Post, former U.S. Secretary of Labor Robert Reich postulates the impact will be primarily on profits, not prices.

Mo money, mo problems…

What are possible unintended consequences of L.A.’s minimum-wage increase?

Ilse Metchek, president of the California Fashion Association, speculates apparel manufacturers will head offshore. “For the past three years, there has been the constant drumbeat of 'Made in U.S.A.' The same [manufacturing] people who have started to bring it [production] back are now looking to take it out again,” she says. “We have reversed the trend of Made in the U.S.A. for manufacturing.” Additionally, Metchek wonders whether the elevated minimum wage will intensify the underground economy in which workers get compensated under-the-table in cash. “Things will be made. Designs will be sewn. You will still have ugly T-shirts printed in garages. They will find a way to pay,” she says. “It is only when a business gets to be at a substantial level where it has to look to the future and get financing, that is when they get religion [about paying aboveboard].”

Could this solve all our retail and restaurant-work problems?

The dreamiest minimum-wage scenarios won’t make the L.A. work world a paradise. Advocates for retail and restaurant workers have plenty left on their plates in Los Angeles. They’re campaigning for more predictable schedules, equal treatment for part-timers, enhanced job security, an end to wage theft (not paying workers for the total time they work), and paid sick days. (The Restaurant Opportunities Center of Los Angeles approximates 90% of restaurant workers don’t receive paid sick days.) No matter how many sick days workers gain, Los Angeles doesn’t get cheaper. By one estimate, residents have to earn $33 an hour to afford the average apartment in L.A. County. Translation: The wage increase my be record-breaking, but it'll likely only offset a much larger problem happening in our city.
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