Law for Santa Monica Professor Michael Reich August 12 and 18, 2015 - - PowerPoint PPT Presentation

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
• ver 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

Reduced employee turnover and improved employee performance Automation: substitution of equipment for labor Small increases in prices and smaller decline in sales Increased consumer demand-- from wage increases-- offsets decline in sales.

Multiple adjustment channels

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