Proposed Retail Pay Hike: Pols Campaign, Businesses Divided
There’s a lot of talk about giving retail workers a raise.
Cities all over California are discussing or taking legislative steps toward raising minimum wages, which could add a few more dollars to sales staffs’ paychecks—or drive retailers out of business, depending upon whom you ask.
Los Angeles Mayor Eric Garcetti has led one of the more high-profile calls to raise the minimum wage with his office’s RaiseTheWageLA campaign. It seeks to raise the current minimum wage of $9 in the city of Los Angeles to $10.25 by 2015 and $13.25 by 2017. Earlier this month, Garcetti met with mayors of surrounding cities—including Culver City, Pasadena, Bell and Santa Monica—to lobby for minimum-wage laws in their municipalities.
Raising the minimum wage has become a top issue in San Diego, San Francisco and San Jose. In July, San Diego, the second-largest city in the state, passed an ordinance 6 –3 to raise the minimum wage to $11.59 per hour. However, opponents of the ordinance said they have collected enough signatures to challenge the law with a referendum. The city of San Jose passed a minimum-wage law in 2012 to raise the minimum wage to $10.15. It started to be enforced at the beginning of 2014.
In November, San Francisco voters are scheduled to vote on a measure to raise their city’s minimum wage to $15 by July 1, 2015. The city increased the minimum wage to $10.74 in 2003, said San Francisco Supervisor Jane Kim, but it wasn’t enough. “San Francisco wages have not kept pace with the skyrocketing cost of living,” she said in a statement.
In February, State Sen. Mark Leno (D–San Francisco) submitted a bill that calls for a state minimum-wage increase to $11 by 2015 and $13 by 2017. In June, the bill failed to pass the state Assembly’s labor and employment committee.
In April, Los Angeles City Councilmen Curren Price and Mike Bonin submitted a resolution to support Leno’s Bill 935 to increase hourly wages. No vote is scheduled on the bill, according to a spokesperson for Bonin’s office.
Hotel workers may get a raise. The LA City Council on Sept. 24 approved a first reading of a measure by a 12–3 vote to increase the minimum wage for hotel workers to $15.37. The council will vote again because the first vote was not unaminous.
The RaiseTheWageLA campaign has received support from high-profile Los Angeles–area companies such as BCBGMaxAzria, NastyGal and Groceries Apparel. They are listed as supporters of the RaiseTheWageLA campaign. Rick Caruso, the developer and owner of popular malls The Grove in Los Angeles and The Americana at Brand in Glendale, Calif., has been quoted in media stories voicing support for an increase in the minimum wage.
However, for many businesspeople and analysts, the matter is not entirely black and white. Economist Kimberly Ritter-Martinez of the Los Angeles Economic Development Corp. said minimum-wage increases could set two economic laws against each other.
“Two effects happen when you raise minimum wage. With an increase in minimum wage, the cost of labor goes up. When the price of something increases, Economics 101 says demand will fall— in this case, demand for workers and jobs are lost,” she said. “On the other side of the coin, when workers’ income increases, they tend to spend more money, which in turn helps create more jobs. You have these two forces acting upon each other, and which one will have the bigger effect is hard to say,” Ritter-Martinez said.
For Fred Levine, co-owner of the M.Fredric chain of contemporary boutiques in Los Angeles County, a minimum-wage increase is a double-edged sword.
“I’m on the fence because I can’t figure out who is suffering the most in these challenging times—the entry-level worker or the small-business owner,” he said in an email. “The minimum wage can cut both ways. Raising it improves conditions for the worker—if it doesn’t destroy the employer and eliminate the [worker’s] position completely.”
Garcetti’s RaiseTheWageLA website commissioned a research paper from the Institute for Research on Labor and Employment at the University of California, Berkeley, which was released earlier this month. The study’s authors say the industries that will be most affected by a wage increase in Los Angeles are restaurants, retail, health services, and administrative and waste-management services. Apparel manufacturing also will be affected.
The study claims that labor costs, excluding health benefits, currently account for 11 percent of retail operating costs and 13 percent of manufacturing costs. If wages are increased, the study claims, operating costs will increase by 0.6 percent for retail and by 0.4 percent for manufacturing.
The study states that retail prices won’t increase much. Retail prices will rise under 1 percentage point if an increase is passed. Also in the study, minimum-wage workers in Los Angeles will earn $1.8 billion if wages are increased, and they’ll most likely spend their increases, thereby boosting the economy.
If the current talk on raising minimum wages turns into more legislative action, there is divided opinion on how the economy will handle it. Anthony J. Oncidi is a partner at the Los Angeles firm Proskauer and a contributor to the firm’s employment-law blog (www.calemploymentlawupdate.proskauer.com). He forecasts that businesses will cut jobs if minimum wages are raised. “Small retailers don’t have all this money sitting around,” Oncidi said. He noted that much of the conversation on minimum wage is political. “We are in a political election year,” he said. “Increasing the minimum wage has been a central objective for labor unions for a long period of time.”
Prices will probably have to be increased at San Francisco boutique M.A.C. if Measure J, the minimum wage–increase initiative, passes on the city ballot in November, said Ben Ospital, a partner in the family-run boutique. But the San Francisco economy is strong enough to handle it, he said. “It is no fun to raise prices. We already pay above the minimum wage. …. People have to be compensated, too. … It’s only fair that everybody gets their share.”
Robert Wade Lohman, founder and chief executive officer of Groceries, one of the signatories to RaiseTheWageLA, thinks increasing the minimum wage is good business. “This isn’t a hand-out. This is a for-profit business” he said of his company, which pays 70 employees above the minimum wage. Groceries has been sold by retailers such as Nordstrom and Kitson. He said that his company is able to afford paying more than minimum wage because, among other things, it has a lean supply chain.
“When I jumped in the industry in 2010, I was astounded by the fragmentation and deception of the supply chains,” he said. For manufacturers faced with having to pay higher wages, he suggested cutting costs at the supply chain.