A Higher Minimum Wage: Businesses Respond at Third Community Meeting

An animated and involved crowd filled the Cahill Astronomy Auditorium on the Caltech campus Thursday evening, as the Pasadena Chamber of Commerce presented its case that a higher minimum wage in Pasadena will damage local businesses before the Economic Development and Technology Committee of the Pasadena City Council.

The meeting is the third of four community meetings that the committee will be holding on the subject of eventually raising the minimum wage in Pasadena to $15 an hour, to match Los Angeles’ recent wage hike.

The meeting began with an hour-long presentation led by Paul Little, president of the Pasadena Chamber of Commerce.

Little outlined the number and range of businesses in the City, stating that, according to Chamber figures, there are 100,000 jobs in a city of 140,888, with 13,700 resident workers and 15,000 minimum wage workers.

According to a Chamber survey, 70.16 percent of Pasadena businesses owners think that the higher minimum wage will hurt their businesses, while 11.29 percent think that it will benefit them. 18.55 percent feel that the new wage will have no impact on their businesses.

The survey also stated that 59.2 percent of businesses in Pasadena would raise prices with a wage increase, and 52.8 percent would reduce their workforce. According to the survey, 21.6 percent of businesses would consider moving out of the city.

Among the industries most impacted, said Little, were home health care workers, with set insurance and medical reimbursements for services; and childcare and pre-school workers, for whom a raise might make child care unaffordable for some families. Costs for senior living care for fixed income residents, would mean $1250 more per month per unit, and could force seniors to lower cost options, said the report.

Restaurants, who would be unable to raise prices enough to cover additional costs, would “seek other options,” said the Chamber report. Non-profits, who depend on state funding and fundraising could see diminished services for clients, according to the report. In addition, the Chamber report stated that local retailers , who are dependent on part-time minimum wage employees and seasonal employees, could not raise prices enough to cover additional costs, which would likely mean fewer employment opportunities.

 

According to the Chamber presentation, young people, especially minorities, are at special risk, as well as those with barriers to employment, such as formerly homeless, convicted felons, people with disabilities and former gang members.

The Chamber of Commerce recommended that the City Council do an economic study specific to Pasadena, and form a working group of stakeholders to “inform any decision that the council may make.” The group also recommended exemptions for those employees, and their employers, “who will be harmed,” such as youth, and difficult-to-employ populations. Little also asked that the City consider the “Total Compensation Model” (which has been ruled illegal in many cities and court decisions), in adjusting the wages of those who earn tips.

The Chamber presentation also recommended that the City “find consideration for small, locally owned businesses and non-profits. In addition, the Chamber asked the City to wait for a November 2016 ballot measure, and assess the impact of the first wage increase before mandating another.

A number of small business owners also made comments to the Council including Peggy Simonian, a co-owner of Lucky Baldwin’s  pub, since 1996, who stated that she could not “raise the price of fish and chips to $25” if the wage increase were to go through.

Biff Naylor, owner of Dupar’s said he has supported previous wage hikes in other cities, and  is unionized, but was concerned about the impact a wage increase would have on providing workers’ health care.

The meeting also featured four economic experts, whose opinions seemed to differ widely on the effect of a higher minimum wage.

Dan Flaming, of  The Economic Roundtable, said that 30 percent  of workers employed in Pasadena will get pay raises; specifically, out of a projected formal economy labor force of more than 100,000 workers in Pasadena in 2020, 14,000 workers earning $1,250 a month or less will get raises, and 16,000 workers earning $1,251 to $3,333 would get raises.

Over 10,000 workers and families members will escape poverty, said Flaming.

According to the Economic Roundtable, without a $15 minimum wage, 9.5 percent of Pasadena’s labor force, an estimated 9,700 workers in 2020, will have family incomes below the federal poverty threshold, and the $15 minimum wage would reduce the labor force poverty rate to 5.3 percent. An estimated total of 4,400 workers and 5,700 additional family members will escape poverty, said the Economic Roundtable report.

The higher minimum wage would result in a $234 million annual pay increase for Pasadena workers, a $255 million increase in economic output in LA County, 1,800 jobs created in LA County, a $16 million increase in state and local tax revenue, and a $22 million increase in federal tax revenue, according to Flaming’s report.

Chris Thornberg of Beacon Economics, argued that the higher minimum wage would not “lift anyone out of poverty,” and disputed Flaming’s conclusions, saying that a higher minimum wage would have a negative impact on the City’s businesses, and that many, surrounded by cities that did not have a higher minimum wage, would simply leave.

The crowd, which was heavily in favor of raising the minimum wage, challenged Thornberg’s findings, and booed him at least once during the evening.

Professor Michael Reich of the Center on Wage and Employment Dynamics presented a UC Berkeley study that stated that a higher minimum wage would have a “very small net aggregate economic and employment effect,” and that “a decline in consumer demand because of higher prices (and 0.7 price elasticity of demand), (would be) offset by increased demand, because of the higher incomes of low-wage workers.” He and Thornberg clashed more than once during the evening on their interpretations of similar studies.

A number of community residents also commented before the committee, on the effect a higher wage would have on their lives.

Said one, in Spanish, “I have never made more than $9 an hour, and if I made $15 an hour, maybe I could take my son to a movie, or buy some fish and chips at that restaurant where the lady can’t charge $25.”

The fourth and final meeting of the Education and Technology Committee hearings on minimum wage will be held December 10, at Pasadena City Hall.