Proposed Minimum Wage Law for Santa Monica Professor Michael Reich August 12 and 18, 2015 Center on Wage and Employment Dynamics Institute for Research on Labor and Employment University of California, Berkeley mreich@econ.berkeley.edu
Outline • Santa Monica compared to Los Angeles • How minimum wages are absorbed • Los Angeles minimum wage: impacts on workers, businesses and local economy • Other local minimum wage laws • Likely impacts on Santa Monica
My focus today • The broad economic effects • Issues related to nonprofits and other policy choices will be addressed at a September 8 presentation.
Los Angeles minimum wage • Starts July 1, 2016. Annual increases: $10.50, 12, 13.25, 14.25, 15 by 2020. • For-profits and nonprofits with 25 or fewer employees can delay for one year, reaching $15 by 2021. • Nonprofits that help the disadvantaged or get most of their funding from government grants can apply for an extra year. • Indexing to inflation (20-year rolling average) begins in 2022. • Enforcement office to be set up with 5 employees, growing over time.
Four industries account for half of LA workers to receive increases • Food services, largely restaurants 17.3 percent • Health care and social assistance 12.9 percent • Retail trade 14.0 percent • Admin. & waste management services 9.4 percent (temp agencies, janitorial, security)
Proportional impact will be higher in Los Angeles than in Santa Monica SM LA City Employment Private sector 80,000 1.5 million Percent in Accommodations and Food Services 17.5 10.2 Average weekly pay Accommodations $737 $648 Restaurants 454 369 2014 figures. Source: Quarterly Census of Employment and Wages
Impact on Businesses Multiple adjustment channels Reduced employee Automation: turnover and substitution of improved employee equipment for labor performance Increased consumer Small increases in demand-- from wage prices and smaller increases-- offsets decline in sales decline in sales.
Our Los Angeles report • Examined impact of $15.25 by 2019 • Final bill differs somewhat in level and timing • Available at www.irle.berkeley.edu
Coverage of Los Angeles law • Private sector workers only: for-profit and non- profit • Excludes state and local employees, including LAUSD • Excludes In-Home-Support-Service (IHSS) workers • Next few slides refer to covered workers only
Proportion of Los Angeles workers affected
Percent change in operating costs in high-impact industries
Operating cost changes, continued
Impacts by firm size
Net impact on LA City and LA County
Cities and Counties with Minimum Wages
Final thoughts on Santa Monica • Even without the proposed law: Santa Monica low-wage employers will start to pay higher wages to keep their best workers from switching to jobs in LA • Coordinating minimum wage policies on a regional basis improves fairness and reduces any market distortions • Santa Monica is likely to be followed by other cities
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