*PUBLISHED / BUSINESS / Neon Tommy / Urban Issues

[Neon Tommy] A few dollars, a big difference

This article was originally published on Neon Tommy.

Los Angeles roots for the underdog while riling businesses with proposals to hike the minimum wage.

Mayor Eric Garcetti, pictured at a recent news conference, says a minimum wage hike could help lift families out of poverty | Daina Beth Solomon

Mayor Eric Garcetti, pictured at a recent news conference, says a minimum wage hike could help lift families out of poverty | Daina Beth Solomon

Mayor Eric Garcetti says his proposal to raise the minimum wage in Los Angeles by nearly 50 percent over three years will boost struggling families above the poverty line, making the city affordable even for busboys, cashiers, janitors and others living off $9 an hour. In turn, he says, these workers will pump dollars back into the economy.

But business owners warn that the pay boost – which would reach $13.25 by 2017 – could trigger side effects that would endanger businesses and lead to job losses; some companies have said they would consider skipping town altogether.

The business lobby has taken a tough stance, predicting that restaurants and stores may need to slash worker hours or take a gamble with price hikes. With such conditions, entrepreneurs might jump ship into the underground economy. Even businesses located outside of the city may struggle with hiring L.A.-based companies at steep rates.

There are 3.3 million people nationwide earning the federal minimum rate of $7.25 an hour, including those whose wages are even lower and make up the balance in tips, such as restaurant servers. According to the Bureau of Labor Statistics, half of these people range from 16 to 24 years old, and 77 percent are white.

In L.A., roughly 567,000 people – or 37 percent of the city’s workers – are earning minimum wage, according to a recent UC Berkeley study commissioned by Garcetti. More than half range from 20 to 39 years old, and about a third are married. Nearly two-thirds are Latino. Just under half have found a place in three main industries: restaurants, retail and healthcare.

Garcetti has argued that these workers deserve better than getting “stuck in poverty.”

According to the Census Bureau’s American Community Survey, in 2012 more than 20 percent of L.A. residents lived below the federal poverty level, which was an income of about $11 thousand per person. That translates to $930 a month – requiring a little more than 25 hours of minimum wage pay a week – and does not take into account L.A.’s relatively high cost of living compared to other cities across the nation. Meanwhile, 4.7 percent of households received cash public assistance income, and 9 percent depended on food stamps.

Meanwhile, the city is still clawing its way back from the recession. During that period and continuing through 2012, incomes dropped across the pay scale but declined most drastically for the lowest earners, according to U.S. Census datapublished by the Los Angeles County Economic Development Corporation.Los Angeles can be a pricey place to lives. In July, the average apartment rent hit $1,471, according to the real estate data firm Reis Inc. (Enter an income figure in this LA Times map or an address in this KPCC map to view details on rates across the city.)

The recession also saw the state’s unemployment rate skyrocket, at one point rising to 12.4 percent while the country peaked at 10 percent.

L.A. County’s unemployment rate is decreasing but still high. Analysts cited by the LAEDC expect it to fall to 7.8 percent in 2015 from the current 8.2 percent. This is still higher than the national average, which hit 6.1 percent in August.

Garcetti is banking on the hope that if there were a wage hike, workers would put their additional pay straight back into the city’s economy, buying items in bigger quantities or at higher prices to sustain the small business that might feel the strain of having to pay bigger wages. Several city councilmembers and philanthropist Eli Broad expect a positive outcome, but groups like the L.A. Chamber of Commerce say that the mayor needs a comprehensive plan considering more factors— like business fees and taxes—that are also tied to the minimum wage.

Those same critics have lashed out at a proposal to pay workers at L.A.’s largest hotels $15.37 an hour. Proponents including Maria Elena Durazo of the Los Angeles County Federation of Labor consider this a suitable “living wage” that would provide enough income for workers to live off just one job. Twelve out of 15 council members have voted in its favor, and a final tally is set for next week.

A date has not yet been set for voting on city-wide wages. Economists have debated the minimum wage since president Franklin Roosevelt set the first federal pay level in 1938, when it was a mere 25 cents. Accounting for inflation, the country’s minimum wage has risen by just $3 since.

Today as then, politicians and lobbyists argue inside city hall and conference rooms, minimum wage earners take timid steps of confidence and small businesses hunker down to weather a possible storm.

Read the stories of these players in the minimum wage debate on Neon Tommy.

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