Chamber of Commerce Hits Back at Minimum Wage Increase, Advocates to Rally Before Key Committee Meeting Tonight

In the wake of the Pasadena Chamber taking a strong position against a Pasadena minimum wage increase proposed by advocates to mirror the measures enacted by nearby Los Angeles, the city’s Economic Development and Technology Committee is expected to convene tonight at 6:00 p.m. in the City Council Chambers to determine how to move forward while engaging various stakeholders.

The Pasadena Chamber of Commerce board voted unanimously on Tuesday to oppose the Los Angeles model of minimum wage increase, concluding the proposed law may hurt the very people the measure is intended to help.

Meanwhile the advocate group Pasadenans for a Livable Wage moved ahead with plans for a rally at All Saints Church at 5:00 p.m. to march to tonight’s committee meeting where they will urge the four Councilmembers to adopt a plan with incremental hourly increases through the year 2020.

The minimum wage in Los Angeles City and County, including neighboring Altadena, will go from $10.50 an hour in 2016 to $12 in 2017, $13.25 in 2018, $14.25 in 2019 and $15 per hour in 2020. After 2020, the minimum will be adjusted to inflation.

The California minimum wage will increase to $10 per hour in January 2016, out ahead of the $7.25 federal minimum.

Paul Little, President and CEO of the Pasadena Chamber, said his board wants the City to do a study particular to Pasadena rather than rely on analysis that was done for the city or county of Los Angeles.

“It’s reckless to move forward without having impartial and adequate analysis of impacts here in Pasadena,” Little said. “We are completely and wholly different from either of those entities. The business communities, our competition, everything is different.”

On July 26 the City Council assigned the Economic Development and Technology (EdTech) committee the task of meeting with the various stakeholders in order to move forward with the conversation in the “Pasadena Way” — respectfully, all-inclusively and fairly.

The committee is chaired by Councilmember Victor Gordo. Its members are Councilmembers Tyron Hampton, Steve Madison and Andy Wison.

The committee will review studies prepared for Los Angeles City Council’s decision including one by Beacon Economics Group’s Chris Thornberg. Thornberg said his “warnings” to the Los Angeles Council about the potential perils of significant minimum wage increases to L.A.’s economy and need for caveats were ignored.

“Unfortunately, the act of having the debate and doing the reports seemed largely for show. The L.A. City Council was pretty much committed to doing this in a way they were going to do it long before we got involved,” Thornberg said. “We can only hope that it doesn’t inflict as much damage on the economy as I fear it might.”

At Thursday’s meeting the Pasadena committee will instruct city staff on the type of outreach strategy they would like to see in order to involve business representatives in the restaurant, home-healthcare, childcare, retail and other impacted industries.

City staff suggested hosting three separate meetings for the advocates, employers and business representatives, and then economists and others who have researched the topic.

Pasadena is the ninth largest City in Los Angeles County. Based on the most recent census, 13,765 people who live in Pasadena are employed in Pasadena. A staff document said about thirty percent of the workforce would be impacted by the wage increase—about 4,130 Pasadena residents.

Diego Coagila, age 30, is one of those Pasadena residents. He has lived and worked in Pasadena for 15 years. His five family members live in a 2-bedroom apartment close to Caltech, which they can barely afford. Four of the five work minimum wage jobs, struggling to get enough hours to help sustain the family.

“With that minimum wage it’s truly really hard, I find it a little impossible to be able to pay for housing and other just needs without the help of other folks. It’ll be really difficult for me to live on my own independently. And I know that will really be difficult for my family to not have me help out with the cost of rent and just general food and other items,” Coagila said. “Sometimes you get 20 hours a week. Nobody is guaranteed 40 hours a week.”

A minimum wage increase to $15, Coagila said, would make a huge difference for his parents, who are immigrants from Peru and do not have the skills or language to advance to higher paying jobs.

An estimated 15,000 individuals —or about 15 percent of those who work in Pasadena — earn less than $15 per hour, according to one advocate group.

Peter Dreier, one of the loudest voices of Pasadenan’s for a Livable Wage, says that city governments have very few ways to directly impact people living in poverty, but raising the minimum wage, in his opinion, is the most tangible way to have immediate impact for impoverished families.

A study by local economic professor Mark Maier says that a family of four in Pasadena actually need to make $23 per hour to “get by.” The study also says Pasadena has a poverty rate of 16 percent, higher than the national level.

Some economists’ studies show that raising the minimum wage significantly high within a relatively short timeframe may not be the most effective way to help people in poverty, and could actually hurt the unskilled and uneducated working class with fewer jobs and hours available to them in order to account for the increased labor costs.

“The only thing I’ve heard while we were having this conversation is poor people need [a] raise,” economist Thornberg said. “And there’s no doubt that we have a working poor problem in Southern California and that thing needs to be done to handle it. The question is, is a minimum wage [increase] an effective way of handling it? And the answer to that is, no it’s not.”

The Beacon Economics study predicted a job loss of 73,000 to 140,000 in Los Angeles City itself saying that although the efforts are well intentioned the plan fails on a cost-benefit basis. The study says, “Economic fundamentals are also clear: You cannot increase the size of the pie by simply transferring income from one group of individuals to another.”

The studies done by UC Berkeley that show an increase in 46,400 jobs and additional millions in tax revenue, Thornberg said, come from an advocates’ point of view and ignore basic economics.

A new study published by the American Action Forum and Manhattan Institute found that by increasing the minimum wage, more than 6.6 million jobs could be lost nationwide and only 6.7% of the extra $105.4 billion in new wages would go to people in poverty. The Economist issued a warning last month against higher minimum wages calling them a “reckless wager.”

The Center for Economic and Policy Research says that minimum wage hikes in the past have had no discernable impact on employment. Seven Nobel laureates in economics also have said an increase in minimum wage would have little impact on employment.

The Pasadena Chamber of Commerce received non-scientific input from 250 members in an online survey.

In the Chamber’s survey results, 69.42% said the minimum wage increase would hurt business, 11.57% said it would benefit business and 19.01% said it would not have any effect. The additional costs that businesses said they anticipate range from $5,000 to $8,000 per year per employee with as much as a 25 percent total increase in the cost of doing business according to Little.

“A lot of our members are looking at us to take the leadership for all because they’re concerned about backlash,” Little said.

The San Gabriel Valley Economic Partnership recently held a forum on the topic of minimum wage inviting two advocate experts, a Los Angeles Chamber of Commerce representative, and an owner of the Green Street Restaurant.

The meeting turned into a heated discussion, with each side rising in volume to be heard over the other and business representatives jumping in with loud remarks about how the labor increases would impact their restaurants, non profits and apparel businesses.

“For every complex problem there is a solution that is clear, simple — and wrong,” Ruben Gonzalez said, Sr. Vice President of Public Policy and Political Affairs with the Los Angeles Area Chamber of Commerce.

Gonzalez noted that the only way for businesses to absorb the increased costs is to cut labor costs by cutting benefits, hours or positions.

“We need to step back and realize the fundamental problem in the debate that has gone on in L.A. City and County. The proponents of the wage don’t want to talk about that. They fundamentally believe that this should be done. You can sit and show the facts, you can bring retail and restaurant owners, and show exactly what’s going to happen and what’s possible and what’s not,” Gonzalez said.

Continuing he said, “When you bring up fundamental problems like how the Green Street Restaurant talked about how economics works, what you hear back is, ‘Well it’s a moral imperative.’”

Gonzalez said most business owners in that room would likely not attend a city council meeting and speak against minimum wage because of the risk of speaking out against the moral imperative and being labeled a “bad person.”

The consensus among the panelists and most advocates for either side say that it is too soon to know after the wage increases have taken effect in Seattle and San Jose to determine any positive or negative effects. The impacts thus far are “anecdotal.”

Green Street Restaurant owner Michael Hawkins did the math of what the increased wages would look like for his business. With the increase to $15 he calculated the increased wages for his 84 employees to be $306,000 plus the total workers compensation he would have to account for, a large number that many restaurants are concerned about. The total payroll would climb by $356,000 before adding in benefits and sick leave.

“I would have to do $1.1 million more in sales to get by,” Hawkins said. “The question is where do I get all that extra money?”

Hawkins said his restaurant has already started to cut back hours in preparation and is looking at changing the model of operation, possibly getting rid of the tipping system and replacing that with a service charge. He said in the past he had been willing to hire high school students without experience to train them up, but with such a high standard of pay he may have to rethink that as an option.

“It’s a big puzzle we are trying to deal with. Mine is the real world, I’ve got to deal with this. During this recession, we did not terminate one single employee,” Hawkins said.

Less educated workers and unskilled immigrants could take the biggest hit.

“Some people are just not going to get the hours they used to get. And for $15 an hour, I expect to have a fairly competent person,” owner of multiple Pasadena restaurants Jack Huang said. “People want to get paid $15 but they got to perform at the $15 level and that’s tough.”

While former director for the Armory of the Arts Scott Ward is in favor of the minimum wage increase, he did want to see caveats in the law to allow for exclusions for youth and training positions, since the Amory hires about 40 interns per year.

“The reality is that the minimum wage for training positions and intern positions would literally reduce the number of people we can train and that adversely affects everyone. It’s simple math,” Ward said.

Little said that every time the minimum wage goes up youth employment consistently drops.

The adjacent town of Altadena will see the wage increases under the Los Angeles County decision made in July that will begin to take effect July 2016 after the state mandated minimum goes to $10 per hour.

An important looming question for many Pasadena businesses is how soon if ever will the surrounding cities of Arcadia, Sierra Madre, Glendale, San Marino, South Pasadena consider a minimum wage increase?

“For sure there is going to be a minimum wage in Pasadena and Glendale is moving toward that as well,” Dreier said with apparent confidence at the minimum wage forum.

New businesses looking to come to Pasadena might look at choosing a lower-wage location rather than face the labor increase mandated here. San Marino Seafood owner Basil Banks is currently on the search for a building in Pasadena near Huntington Hospital to open a second location. He said it would be difficult to afford Pasadena if a minimum wage increase were passed.

“That’s a game changer. I mean from where we’re at right now, $15 an hour to each employees, that’s a lot of money,” Bank said.

Currently Bank’s highest paid employee makes $16 an hour, someone who has been there a long time. Bank said he would open in South Pasadena instead of Pasadena if the ordinance passes.

The Chamber’s Little said it would be nice to have an outcome that everybody can support.

“But right now what is being proposed is just completely unacceptable,” Little said.

Others would like to see the increase happen and happen as soon as possible.

“I wanted it to happen yesterday. By 2020 $15 is going to be like $8.50 today. If it’s going to be effective it needs to happen right now. Unfortunately that’s not the will of the City Council,” NAACP Pasadena Branch President Gary Moody said.