Minimum Wage – Page 4

Union Hypocrisy At Its Worst

May 31, 2015 By Josephine Djuhana 3 Comments

Just a week after the L.A. City Council voted in support of a $15 minimum wage, Rusty Hicks, the head of the Los Angeles County Federation of Labor and co-chair of the “Raise the Wage” campaign, has requested that unions be exempted from the higher wages for their members.

Hicks released a statement praising the City Council’s decision on May 19:

“We are one step closer to making history in Los Angeles by adopting a comprehensive minimum wage policy that will change the lives of hundreds of thousands of hard-working Angelenos. The City Council’s action today creates a path for workers to succeed and gives our economy the boost it needs to grow.”

But early last week, Hicks released another statement following his request for union exemption:

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them. This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

The L.A. Times came out in full swing against the request, calling the request “stunning” and “hypocrisy at its worst”:

“No, employers with a unionized workforce should not be allowed to pay less than Los Angeles’ proposed minimum wage. It’s stunning that after leading the fight for a $15 citywide minimum wage and vehemently opposing efforts to exempt restaurant workers, nonprofits and small businesses from the full wage hike, the Los Angeles County Federation of Labor is now lobbying for an exemption for employers with union contracts. That’s right — labor leaders are advocating that an employer should have the right to pay union members less than the minimum wage.

“This is hypocrisy at its worst, and it plays into the cynical view that the federation is more interested in unionizing companies and boosting its rolls of dues-paying members than in helping poor workers.”

Diana Furchtgott-Roth, the director Economics21 at the Manhattan Institute, provided insight on why union would campaign aggressively for a minimum wage hike and then request to be exempted:

“Although the union-funded Raise the Wage campaigned so vociferously in favor of a $15.25 minimum wage, unions are seeking exemptions from the higher wages for their members. The exemption, or escape clause, would allow them greater strength in organizing workplaces. Unions can tell fast food chains, hotels, and hospitals that if they agree to union representation, their wage bill will be substantially lower. That will persuade employers to allow the unions to move in. …

“Once the higher minimum wage bill is signed into law, with the exemption for unions, then organizing becomes a win-win for employers and unions. Unions get initiation fees of about $50 per worker and a stream of dues totaling 2 percent to 4 percent of the workers’ paychecks. Employers get a lower wage bill.

“The losers in this scheme are employees, who have to pay union dues out of their paychecks. Jobs become more scarce as wage levels rise and some less-skilled workers become unemployed.”

Originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: Economics21, Los Angeles, Minimum Wage, Rusty Hicks, unions

L.A. Minimum Wage Hike: How Will Businesses React?

May 22, 2015 By Joel Fox 2 Comments

Photo courtesy of channone, flickr

The Los Angeles City Council tentatively voted to increase the city’s minimum wage to $15 an hour by 2020. The business community opposed the move. How business will react is unclear but there was much discussion during the debate over issues such as lost jobs and companies eyeing more business-friendly locations.

The wage increase is to be phased in over time, so the immediate impact may not be felt. But businesses ought to keep score when the effects hit so that officials will be cognizant of the consequences. If the wage increase does not cause economic disruptions and businesses do not actually leave Los Angeles, the business community’s credibility will suffer in the face of a mere exercise in rhetoric.

The vote to pass the minimum wage increase was 14 to 1. The council gets to vote once more on the measure after an ordinance is drafted by the city attorney, but the lopsided vote indicates there is no turning back. The council even set the wage above the recommended level offered by Mayor Eric Garcetti, who initially proposed an increase to $13.25 an hour.

The city council’s version contains an inflation clause and offers an extra year for small businesses and nonprofits to comply.

However, the business community does not consider these admissions enough. Ruben Gonzalez of the Los Angeles Chamber of Commerce said, “There is simply not enough room, enough margin to absorb a 50 percent increase in labor costs over a short period of time.”

The chamber’s president and CEO Gary Toebben wrote to his members about the many small business owners who testified in various hearings on the measure. He wrote, “They also talked about the likelihood that in order to provide a wage increase for some employees, they would have to reduce hours for others.”

Toebben noted wryly, “Last week, there were banners hanging throughout City Hall celebrating Small Business Week. There are many small business owners in L.A. who don’t feel like the city is celebrating them today.”

Earlier on the day of the vote, the Los Angeles County Business Federation (BizFed) released a survey on business conditions in the area. According to a release from BizFed, “The city of Los Angeles stood out again as being cited most frequently by employers as unfriendly. Santa Clarita and Glendale were ranked in the top 5 most business friendly cities, which is notable because officials from those two cities are actively courting city of Los Angeles businesses in light of the proposed city of Los Angeles minimum wage increase.” (Author’s emphasis.)

So what will Los Angeles businesses do? Once the minimum wage law takes effect will there be jobs lost or hours cut? How many businesses move to a different location? Business credibility is on the line. Crying wolf and not acting will damage efforts to turn around what many decry as unfriendly business policies.

Originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: business, Eric Gracetti, Los Angeles, Minimum Wage

Minimum Wage Hikes Hurt the Economy and the Poor

April 14, 2015 By Jon Coupal 3 Comments

California has raised its minimum wage four times over the past 13 years, with each increase outpacing the federal minimum wage. California’s current minimum wage is 138 percent of the federal level, and with the impending statewide increase mandated by current law in 2016, California will have the highest minimum wage in the country.

Despite clear negative impacts on both California’s economy and low income citizens, Senate Bill 3 (Mark Leno, D-San Francisco) would mandate an additional statewide increase to $13 per hour with annual, auto-scheduled wage increases thereafter.

With another increase already teed up for January 2016, pre-programing additional increases is reckless. The weight of economic data compels the conclusion that arbitrary minimum wage increases do more harm than good. Motivated by the understandable desire to help the state’s lowest wage earners, the reality is that they reduce access to jobs for those citizens who need them most and further suppress upward mobility for those clinging to the bottom rung of the employment ladder.

Capitol Matrix Consulting studied the fiscal impact of a $13 minimum wage to the state and, not surprisingly, found devastating consequences. The study identified a $200 million annual cost to the state due to the recent minimum wage increases already being phased in. Worse yet, it projects a cost of $860 million to the state in the 2016-2017 fiscal year if the minimum wage is raised to $13. (Most of these costs are incurred due to increased state payments for providers of In-Home Supportive Services (IHSS) and increased state costs to the Department of Developmental Services (DDS)).

These negative financial impacts would not be offset by any additional revenue to the state. Paying for burdens would have to come from higher taxes – further accelerating an economic death spiral – or cuts to vital services and fewer public sector jobs.

While Capitol Matrix’s study analyzed the direct fiscal impacts of another increase, the projected costs to the state – totaling nearly a billion dollars a year – do not represent the full impact of such an increase. Increasing labor costs on California’s millions of small businesses creates additional unintended consequences, including higher prices for the goods and services we rely on and reduced access to jobs for teens and low-skilled workers. California’s recent minimum wage increase is not yet a year old, and another increase is only eight months away. These two increases are a 25 percent wage increase in just 18 months, and small businesses are already feeling the pressure to cut hours, eliminate jobs and raise prices.

Like many well-intentioned progressive policies the actual effects of a significant increase in the minimum wage won’t match the promise of helping the working poor – in fact, just the opposite. For struggling Californians looking for work, what good is an increase in the minimum wage if you can’t get a job?

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Filed Under: Top Stories Tagged With: economy, HJTA, Jon Coupal, Mark Leno, Minimum Wage

Oakland minimum wage hike burdens businesses, hurts employees

April 10, 2015 By Michael Saltsman 3 Comments

Oakland’s minimum wage rose by 36 percent to $12.25 less than a month ago, but the city’s neighbors to the north in Emeryville are already trying to follow suit. This week, the City Council settled on a plan to increase the minimum wage by 36 percent for smaller businesses, and by 60 percent for larger businesses.

Before acting on this plan, the council would be wise to take a closer look at what’s happening in the city it’s trying to emulate.

Oakland’s minimum wage increase was approved by voters in November, following a campaign by proponents in a labor union-backed coalition called Lift Up Oakland. Their argument, which can still be viewed at LiftUpOakland.org, was that increased labor costs would be good for business — indeed, that smaller businesses would even “appreciate” the new mandate.

A team of researchers at the University of California-Berkeley, including a former living-wage organizer from San Francisco, reached a similar conclusion: The costs of the mandate would be negligible, and the benefits would be substantial.

However, a series of news articles published in the weeks since the minimum wage took effect — in publications such as the East Bay Express and the San Francisco Chronicle — suggest that costs of the new minimum wage are real. Restaurants have reported raising prices by as much as 20 percent, hoping customers won’t be turned off. The Chronicle interviewed a member of the Oakland Chinatown Chamber of Commerce, who noted that (predictably) some businesses have closed up shop for good.

To expand on these anecdotes, we worked with a survey research firm and contacted 223 mostly-small businesses in the city between March 23^rd and March 25^th, all of whom were affected by the wage increase to $12.25. What we found in these conversations was a sentiment far different than appreciation.

Of the businesses surveyed, 56 percent reported a large increase in labor costs. One in five of those businesses who were able to estimate the size of the cost increase pegged it at greater than 20 percent.

Customers might expect price increases following a minimum wage increase, and indeed, 47 percent of surveyed businesses reported raising prices. But the law didn’t just cost customers — it cost employees, too. For instance, 30 percent of the surveyed businesses either reduced their employees’ hours or their hours of operation. Seventeen percent — or about one in six — laid off employees or otherwise reduced staffing levels. Perhaps most concerning, 27 percent of surveyed businesses reported that they were “somewhat” or “very” likely to close their doors altogether.

In follow-up conversations after the survey was complete, we spoke with some of these “likely” businesses. One husband-and-wife team, who’ve owned a sewing business in Oakland since 1990, cut their staff from 5-6 additional employees down to 1-2 additional employees. One of the business owners said they’re going to try this overworked arrangement for 6-12 months — and close down if it isn’t feasible.

At a seafood restaurant in Oakland that’s been open less than a year, a similar dynamic applies. The owner, who used to operate with three additional employees, has cut two people from his staff since March 1^st just to make ends meet. His wife sometimes comes in to help with the restaurant. Like the husband-and-wife sewing team, he said it’s possible he’ll close if he can’t make the low-staffing model work.

Child-care providers have also been pinched. The Chronicle reported the Salvation Army’s childcare service was “scrambling” to fill a $146,000 hole that the minimum wage increase ripped in its budget. One small provider I spoke with, Muriel Sterling, has had to make cutbacks for the first time in her business’s existence: Employees are working fewer hours, and she’s posted a sign warning of higher childcare rates to come — which typically means a loss of business.

Members of the Lift Up Oakland coalition have shown a surprising lack of empathy for the damage they’ve wrought. When asked about the deleterious impact on childcare services, for instance, a spokeswoman said they “did not specifically analyze impacts on all industries.” Oops.

She offered that the childcare cuts might not matter, because employees’ higher pay might create a beneficial situation where “less child care is needed in the first place.” This response highlights perfectly the economic illiteracy that underpins these campaigns. Instead of destroying job opportunities for the many in order to give higher pay to a few, we should create more pathways for all to a better-paying future.

It may be too late for Oakland to learn this lesson — but Emeryville still has a chance.

Michael Saltsman is research director at the Employment Policies Institute

Filed Under: Top Stories Tagged With: Employment Policies Institute, Michael Saltsman, Minimum Wage, oakland, san francisco

Raise the Minimum Wage, or Lower the Cost of Living?

April 2, 2015 By Ed Ring 4 Comments

Increases to the minimum wage in California are moving closer to reality. As reported on March 30th by MyNewsLA.com, “Los Angeles County Supervisors Sheila Kuehl and Hilda Solis will ask their colleagues to approve spending up to $95,000 to have the Los Angeles Economic Development Corporation review a series of studies of the issue performed in relation to the city of Los Angeles’ proposal to raise the minimum wage to $13.25 an hour by 2017 and to $15.25 an hour by 2019.”

California’s minimum wage is currently $9.00 per hour. The federal minimum wage is currently $7.25 per hour.

Largely lost in the debate over the “fight for fifteen” (dollars per hour) is America’s inflation adjusted minimum wage based on historical precedents. It’s an interesting topic that deserves discussion, because historical minimum wages expressed in 2015 dollars vary a great deal. Since establishing the first federal minimum wage in 1938, the amount has been adjusted 22 times. As can be seen on the chart, between 1938 and 1968 the minimum wage expressed in 2015 dollars rose steadily. In 2015 dollars, for example, the 1938 minimum wage would be $4.13, rising to $11.01 per hour by 1968. Since then, it has been in decline – in 2015 dollars the minimum wage was roughly between $9.00 and $10.00 per hour during the 1970’s, then fell to roughly between $7.00 and $8.00 from 1980 through 2009, when it was last adjusted.

Historical Minimum Wages
Expressed in 2015 Dollars

Those who believe in minimum wage laws can draw many conclusions from this data. What they cannot easily conclude, however, is that the minimum wage, today, can rise much beyond $10.00 per hour and still conform to historical norms. Only twice, in 1968 and 1974, did the inflation adjusted minimum wage exceed $10.00 per hour.

From this perspective, California’s state minimum wage, $9.00 per hour, finds itself placed almost exactly at the median in terms of historical federal minimum wage levels expressed in 2015 dollars. From what should be a reasonably compelling economic standpoint, there is no urgent reason to increase the minimum wage above $9.00 per hour, even for those who are solidly in favor of having minimum wage laws. While one may argue that California has a higher cost of living than most other places in the United States, justifying a minimum wage higher than the historical median, one might also acknowledge that many of the benefits offered minimum wage earners today were not available until relatively recently. Examples include the earned income tax credit, not established until 1975, and the steep discount on health premiums offered under Obamacare.

It rises perhaps to the level of overkill to join the libertarian chorus extolling the virtues of an utterly unregulated wage market. Also well documented are the many ulterior motives for labor unions to lead the charge for a higher minimum wage – it gives them powerful political rhetoric to address millions of low income workers not represented by a union, and, more pragmatically, a higher minimum wage rewards union members directly whenever – as is frequently the case – their wage scales are pegged a fixed level above the prevailing minimum wage.

Two observations potentially underrepresented in this debate, however, do deserve mention. First, the fact that unions are attempting to fight for workers in low paying, competitive industries, is at least consistent with the illustrious aspects of their legacy. Unlike unions representing government professionals who perform high paying jobs for monopolistic, taxpayer funded agencies, at least the unions fighting for minimum wage workers are fighting for the little guy. If they might abandon their commitment to flood the United States with unskilled immigrants who drive down wages and threaten the solvency of social welfare programs, and if their labor agreements didn’t peg their own wage scales to float upwards as the minimum wage rises, one could almost believe in their sincerity.

The other fact is more challenging and obscure, yet ought to merit a central place in the debate over economic justice. That is the fact that California’s cost-of-living is the highest in the nation. In California’s coastal cities, the cost of housing is prohibitive; the costs for energy, water, and transportation are punishingly high. For middle class residents, the cost of health insurance is punishing as well. And it doesn’t have to be that way. Competitive resource development – free of extremist environmental hindrances, other regulatory roadblocks, costly project labor agreements and union work rules – would lower the cost of living at the same time as creating millions of new jobs. It could usher in a new golden age for California’s working class.

Those unions who fight for a higher minimum wage might consider fighting to lower the cost-of-living instead. But to do so, they will have to break ranks with the public sector unions, who hide behind oppressive environmentalist restrictions, because they know full well that infrastructure development will come at the cost of their own exorbitant compensation.

Ed Ring is the executive director of the California Policy Center.

Filed Under: Top Stories Tagged With: Cost of Living, Los Angeles, Minimum Wage, unions

UC Berkeley Slammed Over Allegedly Biased Minimum Wage Report

February 23, 2015 By Connor D. Wolf 3 Comments

A top researcher has called out University of California, Berkeley for allegedly releasing a biased research paper that served as leverage for the San Francisco minimum wage increase.

Economic expert Michael Saltsman, research director at the Employment Policies Institute, argues that a biased research paper by UC Berkeley helped lead residents of San Francisco to support a rapid minimum wage increase, which possibly contributed to several businesses closing. As Saltsman argues, the wage increase makes the cost of operations a much worse burden for business owners. They often have to cut hours or even in some instances completely close their business.

The paper, “San Francisco’s Proposed City Minimum Wage Law: A Prospective Impact Study,” was released in August, and argued that an increase of the minimum wage will have a vastly positive impact for workers in the city.

“Drawing on a variety of government data sources, we estimate that 140,000 workers would benefit from the proposed minimum wage law, with the average worker earning an additional $2,800 a year (once the law is fully implemented),” the study noted. “Our analysis of the existing economic research literature suggests that businesses will adjust to modest increases in operating costs mainly through reduced employee turnover costs, improved work performance, and a small, one-time increase in restaurant prices.”

The following November, residents of the city voted to increase the minimum wage gradually to $15 an hour over the course of three years. Saltsman argued the UC Berkeley study used biased findings.

“These are the comforting studies they can turn to,” Saltsman told The Daily Caller News Foundation. “It creates stories that say you can raise the minimum wage without consequences.”

“If you look at the methodology,” Saltsman said. “Basically they didn’t take into account the fact it could have a negative impact on employment.”

Saltsman argued that the study only looked at how the wage increase will benefit workers, as opposed to how it may negatively impact businesses. If a business owner is unable to hire as many employees or has to close their business because of the higher cost of operations, it becomes bad for workers, too.

“These contribute to the public policy debate,” Saltsman continued. “It’s become a key position in the public policy debate.”

Saltsman said their approach and the results of the study are not at all surprising. Some of the researchers involved had activist backgrounds.

“The problem at UC Berkeley is they are presenting themselves as unbiased economists,” Saltsman notes. “This is the sort of thing you expect from an advocacy group.”

Michael Reich, one of the researchers involved in the report, shot back at the claims the study was biased.

“In restaurants and retail, stores both open and close all the time. You’d need to know whether closings increased and openings decreased relative to a control group,” Reich told TheDCNF. “That’s an objective method that all economists, including me, use to identify the causal effects of a policy.”

Though the wage increase has not gone into full effect yet, opponents are already pointing to several businesses that have closed. These include Borderlands bookstore, Abbot’s Cellar, Luna Park and Source.

Follow Connor on Twitter

Originally published by the Daily Caller News Foundation.

Filed Under: Top Stories Tagged With: Berkeley, Daily Caller, Michael Saltsman, Minimum Wage, san francisco, University of California

Sen. Leno’s “Income Inequality” Lost Cause

February 20, 2015 By Michael Saltsman 3 Comments

California’s minimum wage is set to rise to $10 an hour on January 1^st of next year. But for Senator Mark Leno (D-San

CA State Senator Mark Leno, D-San Francisco

Francisco), this already-dramatic wage hike isn’t nearly dramatic enough.

Citing an “income inequality crisis,” Sen. Leno has called for a minimum wage increase to $11 an hour in 2016, followed by another jump to $13 an hour in 2017. Unfortunately for the senator, the evidence suggests a hike in the base wage will do very little to solve this crisis — and might even make it worse.

San Francisco, which Sen. Leno represents, has one of the highest minimum wages in the country — and one of the country’s most dramatic gaps between the rich and the poor. (One analysis last year compared the city’s inequality level to that in a developing nation.) City voters in November resolved to fix this problem by approving a proposal to raise the city’s minimum wage even higher, to $15 an hour, by 2018.

Thus far, the looming $15 minimum wage only seems to be worsening the city’s inequality crisis. Several small business owners have been forced to close their doors as a consequence of the coming cost hike, hindering their own entrepreneurial dreams and those of the people they employed. This trade-off isn’t unique to San Francisco. If you’re an employee working at a business with small profit margins, your employer will be faced with one of two difficult choices when the minimum wage goes up: Either raise prices, or cut labor costs by reducing staffing levels or employees’ hours.

If the wage goes up and the terms of your employment don’t change, you may be better off; if you lose job and your co-workers do, too, then you’re most certainly worse off. That means Sen. Leno’s plan for a statewide $13 minimum wage will create winners and losers in the entry-level workforce. Unfortunately, a team of economists writing in the Journal of Human Resources discovered that the “losers” from a wage hike — employees who are pulled below the poverty line, or at least closer to it, as a consequence — outnumber the “winners.”

Put differently: Instead of redistributing income from the top 1 percent, Sen. Leno may unintentionally redistribute it among the bottom.

The Senator’s office has pointed skeptics to comforting studies from a team of ideological researchers at the University of California-Berkeley, suggesting that the negative impact of a higher minimum wage in California—both on the city level, and statewide–would be minimal or nonexistent. But the Berkeley team’s estimates are looking less and less credible in the face of real-world evidence.

In San Francisco, for instance, one bookstore reported that the $15 minimum wage would cause a fatal 18 percent increase in operating costs—90 times greater than what UC Berkeley projected for city retailers. And in Oakland, where the minimum wage is rising to $12.25, restaurants are reporting price hikes of up to 20 percent—far greater than the 2.5 percent that the Berkeley team predicted.

These real-world examples are no doubt unsatisfying to the most dedicated ideologues, and it’s unsurprising that one of the Berkeley researchers insinuated employers might not be telling the truth. But spin like this only goes so far, especially in the face of real flesh-and-blood employees who no longer have jobs.

If Sen. Leno is serious about reducing income inequality and increasing opportunity, he owes it to the California residents who need those opportunities to examine the best way to help them. That starts by acknowledging that we should judge public policy by its outcomes rather than its intentions.

Michael Saltsman is research director at the Employment Policies Institute

Filed Under: Top Stories Tagged With: CA Senate, Legislature, Mark Leno, Minimum Wage, san francisco

Taking On The Minimum-Wage Debate in L.A.

January 25, 2015 By Joel Fox Leave a Comment

The national debate over minimum-wage increases will take center stage in Los Angeles because two efforts to raise the minimum wage face staunch opposition from the business community.

The Los Angeles Business Federation, known as BizFed, went on the offensive last week, coming out strongly against both minimum-wage proposals and the way the City Council is going about reviewing the consequences of a minimum-wage increase.

Mayor Eric Garcetti wants to see the minimum wage increased to $13.25 an hour; while advocates and some council members say that’s not enough, the minimum wage should go up to $15.25 per hour.

BizFed doesn’t think the discussion should be a competition on which higher minimum wage proposal takes effect, but whether there should be an increase at all at a time the state is raising the minimum wage — to $9 an hour in 2014 from $8; and to $10 in 2016.

BizFed made its argument against the minimum-wage increase as a way to deal with the tide of poverty that is washing over Los Angeles. Said MC Townsend, president and CEO of the Regional Black Chamber of Commerce of San Fernando Valley and chair of BizFed, “We share Mayor Garcetti’s strong commitment to reducing poverty, and that is best achieved by creating good paying middle class jobs that can actually lift individuals and families out of poverty.”

Jobs lost

BizFed leaders said minimum wage increases could cost jobs; something the city cannot afford.

While Los Angeles gained 1 million new residents over the last three decades, it lost about 165,000 jobs.

In an effort to convince the City Council to understand the effects of a minimum wage increase on the job market, BizFed has raised issues dealing with the proposals’ enforcement mechanisms, teenage workers looking for entry jobs, and that neighboring cities maintaining a lower minimum wage will draw jobs from L.A.

Convincing the mayor and council to stop a race to establish a higher and even higher minimum wage will not be an easy task. The Los Angeles City Council already approved a $15.37 minimum wage plan for hotel workers.

As I’ve written before, the council ignored a review to its hotel wage proposal – even when it asked for it:

“When the Los Angeles City Council passed the minimum wage for hotel workers, economist Christopher Thornberg opined in the Los Angeles Times, after studying the matter for the council, that the results of his study ‘strongly suggest that such a steep increase in the minimum wage could result in a sharp decline in the number of jobs in the hotel industry.’

“More troubling was Thornberg’s assertion that the council didn’t bother to look at his findings. Thornberg wrote, ‘But the City Council never seemed interested in really examining the potential economic consequences of the ordinance. We got our instructions about what questions to address just two weeks before the vote, and we were surprised to learn that the council intended to vote on the day after we turned in our final analysis, which suggests none of the members spent time looking at our findings.’”

There seem to be similar goings-on with the new debate over raising the minimum wage.

Questionable study

Mayor Garcetti used the University of California, Berkeley’s Institute for Research on Labor and Employment to study and then speak up for his minimum-wage proposal. Now, city officials wants to hire the same group to study its proposal instead of reaching out for new, independent researchers.

Apparently, city bureaucrats and some council members are not interested in second opinions, especially ones they might not agree with, as was the case with the analysis of the hotel minimum-wage proposal.

The business community has objected to this arrangement. BizFed president Tracy Rafter said the organization was “calling for a truly independent analysis of these proposals that will give policymakers credible, unbiased information to make decisions moving forward. It’s absurd for the city of Los Angeles to spend taxpayer dollars contracting U.C. Berkeley’s Institute for Research on Labor and Employment to tell them what they’ve already told them previously, especially when that organization has been helping advocate for the mayor’s proposal.”

With a unified effort from the business community, perhaps this time the City Council will at least listen to business concerns.

Originally published on Calwatchdog.com

Filed Under: Top Stories Tagged With: Eric Garcetti, Los Angeles, Minimum Wage

Berkeley Minimum Wage Hike Study Ignores Key Factor

January 14, 2015 By Michael Saltsman 1 Comment

Los Angeles Mayor Eric Garcetti’s proposal for a $13.25 citywide minimum wage hit a speed bump last week when two city councilmen — Mitch O’Farrell and Felipe Fuentes — insisted on an independent analysis of his plan.

They specifically objected to the group of researchers originally chosen to conduct that analysis, from a labor union-aligned research outfit at the University of California-Berkeley, due to concerns that their final product wouldn’t be sufficiently independent.

Are these concerns justified? Berkeley professor Michael Reich, who has accompanied the mayor on pitch meetings for the proposed wage hike, doesn’t think so.

Reich and his co-authors have been busy writing various reports on California minimum wage increases. In 2014, for instance, they released four separate reports on proposed city minimum wage increases in the state — in San Francisco, San Diego, Los Angeles and Oakland — and another report on a proposed statewide wage increase.

The geographies and populations studied varied dramatically, as did the minimum wage policies proposed: From $11.50 an hour in San Diego up to $15 an hour in San Francisco. And in every instance, the conclusion that Reich and his team produced was the same: Substantial loss of entry-level jobs is unlikely to occur following a minimum wage increase. (This consequence was apparently so remote in San Diego that it wasn’t even worth mentioning in the report.)

This kind of unanimity on the question of job loss and the minimum wage is highly unusual, to say the least: The issue has been studied exhaustively over the past two decades, and according to a summary of all these studies by economists at the University of California-Irvine and the Federal Reserve Board, a majority of the research points to job losses following a wage hike.

Policymakers curious how Reich and his team consistently reach a conclusion at odds with this economic consensus should read the fine print. In a seven-page document released last year explaining how they estimated the impact of citywide minimum wage increases, they offered this disclaimer: “We do not make any adjustments for potential positive or negative changes in employment due to the minimum wage increase.”

Got that? The reason why this team from UC-Berkeley consistently finds no impact on employment from a higher minimum wage is that they assume at the outset it doesn’t exist.

You could have all sorts of fun evaluating public policies following this approach. For starters, you might study the increased revenue from a new 50 percent tax on all new car purchases in Los Angeles — and assume at the outset that higher taxes won’t affect consumers’ purchasing decisions. Or perhaps you could study the ramifications of a $20 per-car toll on the Golden Gate Bridge — and assume from the start that higher tolls won’t impact driving habits. In both cases, you’re guaranteed to succeed!

Of course, if the assumptions are unjustified — if higher taxes on cars really would reduce purchases, for instance, and if a higher minimum wage really could hurt job growth — then this approach starts to run in to trouble.

It’s even more problematic in the case of Reich’s team at UC-Berkeley because the backgrounds of these researchers suggest they have more than the data in mind. Ken Jacobs, for instance, who was a co-author on all four of the city minimum wage studies, was formerly employed as co-director of the San Francisco Living Wage Coalition. Today, he oversees the Center for Labor Research and Education, which is supported by many of the same unions pushing for a higher minimum wage. Another co-author of these papers, Annette Bernhardt, made the leap to Berkeley from the National Employment Law Project , which boasts of “coordinating the campaign to lift the federal minimum wage to more than $10 per hour.”

The least that the City Council can do is commission a report whose independence is not in doubt. With an average 30 percent of Los Angeles’ job-seeking youth failing at finding a job, it’s crucial that any additional barriers to employment associated with a higher minimum wage be seriously examined rather than ignored as if they didn’t exist.

Filed Under: Top Stories Tagged With: Berkeley, Los Angeles, Michael Saltsman, Minimum Wage