Garcetti calls for $13.25 minimum wage by 2017

Mayor Eric Garcetti on Monday launched an ambitious campaign to impose a $13.25-an-hour minimum wage requirement for all workers in Los Angeles by 2017, calling it the “largest anti-poverty program in the city’s history.”

The most far-reaching initiative of the 14-month-old Garcetti administration would increase incomes for an estimated 567,000 workers by an average of $3,200, or 21%, a year, according to an analysis commissioned by the mayor’s office and conducted by researchers from UC Berkeley.

The proposal, presented at a Labor Day celebration at a South Los Angeles park, immediately drew criticism from some business leaders, who said it would lead to layoffs, cutbacks in workers’ hours and price increases to maintain profits. Stuart Waldman, president of the Valley Industry and Commerce Assn., said the mayor’s proposal caused “extreme concern.”

“This a huge increase on labor costs, especially for small businesses and nonprofits, who have no ability to just raise their prices or absorb increased costs,” he said.

Garcetti’s plan, or something close to it, is expected to win approval from the generally pro-labor City Council members, seven of whom sat behind the mayor Monday during his announcement. Also supporting Garcetti were several Los Angeles labor and civic leaders, including billionaire businessman-philanthropist Eli Broad and Maria Elena Durazo, the head of the county Federation of Labor.

The Raise the Wage L.A. initiative arrives at the end of a summer in which multiple California cities moved to increase workers’ minimum pay, and as President Obama and Democrats in Congress tried without success to raise base wages nationally. An administration-backed bill to increase the minimum wage from $7.25 to $10.10 an hour has been stopped by Republicans, who control the House of Representatives.

Speaking at a labor festival in Milwaukee on Monday, Obama reiterated what he called “the simple truth: America deserves a raise.” He praised local political leaders, specifically Garcetti, for raising wages. “This is why I stay optimistic, even with some of the nonsense that goes on in Washington,” Obama said.

Presenting his plan, Garcetti sought to balance the demands of the powerful Los Angeles labor community, which is pushing for an even higher minimum, against those of business leaders, who warn that boosting pay too quickly could stifle the slowly rebounding local economy.

Garcetti’s ordinance would require businesses to increase workers’ pay from the California state minimum of $9 an hour to at least $10.25 in 2015, $11.75 in 2016 and $13.25 in 2017. The state minimum went from $8 to $9 an hour July 1 and is due to increase to $10 an hour in 2016. Beginning in 2018, additional adjustments in Los Angeles would be automatically tied to an inflation index.

Garcetti cited a litany of statistics, many of them from the UC Berkeley analysis, including the finding that 27% of Angelenos, about 1 million people, live below the federal poverty line of $23,850 a year for a family of four. Median wages in the city declined more than 11% during the Great Recession and its aftermath. And housing in Los Angeles became the least affordable in the nation, according to a UCLA study, with the average renter devoting nearly half of his or her pay to rent.

The setting of his announcement was Martin Luther King Jr. Park and Garcetti noted that the civil rights leader emphasized the dignity of work. “All labor has worth,” Garcetti said. “We are reminding a nation that it is a crime for people to live in this rich nation and receive starvation wages.”

The citywide minimum wage will be the second significant pay proposal to come before the City Council, which has spent months considering a plan to require big hotels to pay employees at least $15.37 an hour. City lawmakers said they expect to bring that proposal to a vote by the end of September. It will probably apply to hotels of 125 rooms or more.

Durazo, the labor leader, spoke last at the event and praised Garcetti for backing the hotel pay measure. She also implied that the mayor’s push for a $13.25-an-hour minimum wage is just a start.

“We are going to craft the best possible policy to raise that minimum wage and get to $15 an hour and lift workers out of poverty,” Durazo said.

Garcetti argued that the policy has business support, and introduced Broad, who ran Fortune 500 companies in the housing and financial services sectors.

Broad urged business, political and labor leaders to unite behind an increase in Los Angeles’ base pay. He told a crowd of about 200 gathered in the dusty park that it was “shocking and unconscionable” that so many Angelenos live in poverty. “I truly believe that raising the minimum wage is good for business,” said Broad, suggesting that billions of additional revenue would circulate through the economy as workers spend more.

The study from UC Berkeley’s Center on Wage and Employment Dynamics found that when other cities increased pay requirements, lower-income workers tended to spend more of their pay, creating a “modest economic stimulus.” The researchers also said minimum wage increases elsewhere had “little or no measurable effect” on total employment or hours worked by employees.

It is impossible to say conclusively if there will be “disemployment” from the Garcetti proposal because it would be a greater increase than required under previous ordinances they analyzed, the UC economists said. Under one scenario, however, the researchers projected that prices could increase and as many as 560 restaurant jobs could be lost a year.

Garcetti emphasized that low-wage jobs are no longer the province merely of those with high school educations. Nearly half of those who would benefit from the Los Angeles proposal have taken at least some college courses and 14% have a bachelor’s degree or higher, the study concluded.

West Coast cities have been leading the push for higher wages. In June, Seattle adopted an ordinance that would increase minimum pay to $15 an hour in three to seven years, depending on the size of the business. San Francisco voters will consider the same minimum in a vote this November. And San Diego lawmakers voted in August to go to $11.50 an hour by 2017.

Those cities all have markedly stronger economies than Los Angeles, where unemployment remains at more than 9%, according to a Garcetti confidant, who asked not to be named discussing private conversations with the mayor. The Garcetti advisor said the mayor considered Los Angeles’ slower recovery in declining to push immediately for $15 an hour.

Garcetti said his proposal would aid a large percentage of city residents “without doing any damage in terms of the job losses, that we wouldn’t want to see, if it were too high.”

“We think we have pegged it at the right place,” he added.

But business representatives disagreed. Carol Schatz, chief executive of the Central City Assn., representing downtown employers, said the state Legislature should set wage minimums for all of California to avoid creating an uneven playing field among cities. She predicted that Los Angeles would lose jobs to neighboring cities.

Gary Toebben of the Greater Los Angeles Area Chamber of Commerce said Garcetti could do more to create jobs by “making City Hall more helpful to those businesses who are interested in investing in Los Angeles.”

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