Monday marked the first weekday of a higher minimum wage for people who work in Pasadena. Workers at businesses with more than 25 employees who made $12 an hour on Saturday will now make $13.25, on their way, if the City’s legislation continues in place unchanged after a scheduled Council review, to an eventual $15 an hour.
At smaller Pasadena companies with 25 or fewer employees, workers will see pay jump from $10.50 per hour to $12.00 per hour.
The State’s minimum wage is $11 an hour for businesses with 26 employees or more, and $10.50 for smaller ones.
The pay hike is the third phase of the City’s Minimum Wage Ordinance which became effective in July of 2016, and which could raise the City’s minimum wage each year until it hits $15 per hour by 2020.
The wage increase is applauded by proponents who see the increases as an opportunity for low-income workers to earn a better living in a city where living costs are high, but as a challenging burden for those employers who oppose the higher-than-the-State’s increases and say it puts them at a competitive disadvantage.
As Vice Mayor John Kennedy pointed out recently, “It is extremely difficult to afford to live in the city of Pasadena.”
“Property values are just going up exponentially and so there has to be some kind of balance,” He continued, “People need to have a livable wage and businesses need to be able to stay in business. They’re in business to make money.
“So,” continued Kennedy, “I think the City Council has to have a balanced approach. We are going to pause [the wage hikes] at a certain point to make sure that this effort isn’t so burdensome that it’s causing substantial negative impacts.”
The City Council plans to formally review a report summarizing the economic impact of the citywide minimum wage on reducing poverty, unemployment, job creation, and the overall local business climate.
At that time, the City Manager will request direction from the City Council regarding its move to increase the citywide minimum wage to $14.25, and then finally to $15 in 2020.
“It’s difficult however you slice it, we’re not going to make everyone happy,” Kennedy said. “But I think the Council has done its best to provide the necessary leadership for our community around minimum wage.”
But Pasadena Chamber of Commerce CEO Paul Little already sees the wage increase as nothing short of calamitous.
“The impact’s going to be really felt when it goes to $13.25, which is a substantial jump,” said Little. “We’ll start seeing more dramatic coping mechanisms and potentially fewer employees.”
“And we may start to see some [business]people just give up,” he said.
Even the City of Pasadena — faced with impending budget deficits — is not exempt from the effects of higher salaries
Mayor Tornek explained recently, “ It affects the city’s budget, too.”
“We’ve got a modification to the pay scales that relate to the city complying with the minimum wage as well,” he explained, saying that the City actually has some minimum wage jobs of its own, including youth summer jobs.
“The summer jobs for kids that we’ve had for a long time may have fewer positions because of the impact of the minimum wage.”
As the Mayor said succinctly, “Trying to use the same amount of money for paying the individuals more, means you get fewer individuals.”
The summer jobs program is important and makes a positive impact in the City, Tornek said..
“We had expressions of profound gratitude, and statements that it changed people’s lives.”
“It’s like everything else that we do in both public policy, and what you do in private life,” said Tornek, taking the longer view.
“You make tradeoffs, and the studies have been pretty conclusive that if you do raise the minimum wage, there are some jobs lost. I think that’s sort of undeniable, and so the argument is if the minimum wage is impacting people by eliminating jobs, then it’s not a good idea.”
What impact have the minimum wage hikes had on the City’s economic landscape so far?
Eric Duyshart, Pasadena’s Economic Development Manager, says the City is working on finding that out now, and aims to have answers before next year’s increase.
“The City Council is officially evaluating that question in the beginning of 2019 and City staff is moving forward with evaluation using consultants this summer and in the fall of 2018,” said Duyshart.
The Council’s ordinance calls for a year three analysis before moving into the fourth and fifth pay raises which would take the minimum wage up to $15 per hour.
Mayor Tornek explained that the Council “committed to the five steps, but we built in this pause to make sure that we did an evaluation before we pressed ahead to steps four and five.”
Meanwhile, according to the Chamber’s Little, Pasadena’s restaurant sector may be experiencing the most dramatic fallout of the minimum wage increases.
Gregg Smith who, along with his brother Bob, owns three upscale local eateries in Pasadena — the Parkway Grill, Arroyo Chop House, and Smitty’s — says local businesses are now at a competitive disadvantage as a direct result of the minimum wage increase.
“My takeaway,” Smith explained, “is we’re not against the minimum wage because that’s going to happen. What we are extremely concerned with is that the City of Pasadena is not in line with the State on the minimum wage.”
Smith acknowledged that customers may notice higher prices at his restaurants.
“Of course we’ve raised the prices,” he said. “Everyone has raised their prices because minimum wage is going up.”
But no, Smith pointed out, you can just drive a minute or two to go to another restaurant in another nearby city “where menu prices are probably going to be a little less because they’re paying less minimum wage.”
Little said an often unnoticed impact on businesses is that employees in management positions may request raises in accordance with the minimum wage increases.
“If you’re paying a sort of mid-level management person $15 an hour and then all the minimum wage employees go $13.25,” said Little, “that $15 employee is going to say, ‘Well, I need more money’.”
But District 7 Councilmember Andy Wilson says business owners are likely to adapt in whatever way they can.
“I think it’s been challenging, but my sense is it hasn’t been Armageddon, so to speak. I think people have had to raise prices and be more creative, but I think the entrepreneurial instincts behind these small businesses have kicked in and most cases [they] have adapted,” said Wilson.
Wilson says the City was in the middle of a long business upcycle when it adopted the ordinance in 2016 and was originally concerned the City could experience a recession before 2020’s $15 wage increase. But, says Wilson, that has not been the case.
“We’re actually in with the progress of employment growth,” he explained, by way of illustrating the overall health of local businesses. “So the good news is, at a macro level, I think there’s a lot of jobs, and a lot of opportunities for people who want them.”