LB Council of Business Organizations Releases Survey On Views Within LB Business and Non-Profit Sectors Of Expected Impacts Of Raising LB Minimum Wage; Survey Says...
LB's "Economic Development Comm'n" sets Jan. 6 special meeting, likely to vote on recommendation(s) for LB minimum wage policy; Council majority will ultimately decide
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(Dec. 22, 2015) -- A little over two weeks before LB's Mayor selected/Council approved Economic Development Commission has scheduled a special meeting where it could vote on recommendations regarding a LB minimum wage policy -- a decision that will ultimately be made by a City Council majority -- Long Beach's Council of Business Associations (COBA) released a professionally conducted survey of perceptions within the LB business and non-profit sectors of potential economic impacts if the Council were to set a minimum wage at some not-yet determined level.
At a midmorning news conference on Monday (Dec. 21) at the offices of Downtown Long Beach Associates (DLBA), COBA released the survey, conducted by a firm contracted by COBA via the LB Area Chamber of Commerce and DLBA, which found that with a wage increase in place roughly 40% of those surveyed indicated they would try to hire more skilled workers from outside of Long Beach over local unskilled workers...and businesses near the border of other cities were very concerned about becoming less competitive.
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The survey's other key findings are:
[Summary of Key Findings pp. 3-4] 1. The online survey found that support of a straight minimum wage increase was very low with the business and nonprofit community closely aligned.
2. Support of a minimum wage increase to $12.50 was slightly higher than minimum wage increase to $15.00.
3. Mitigation strategies bolstered support of a minimum wage increase.
4. No clear preference of mitigation strategies [was] seen from the survey results, however the highest support came with the minimum wage occurring at the statewide level instead of locally and for all compensation and benefits to be included in the calculation of a minimum wage rate.
5. Delay in implementation for small businesses had an impact at the $15.00 condition; however, it did not have an impact for the $12.50 condition.
6. Different annual increases towards $15.00 did not show impact.
7. About 40% of those surveyed agreed with the statement that they would seek to hire more skilled workers from outside of Long Beach over local unskilled workers with a wage increase in place.
8. The focus groups found that businesses were very concerned about being less competitive due to the minimum wage increase, especially businesses near the border of other cities.
9. The focus groups found that nonprofits showed the most concern about State and Federal funding not keeping up with increased wage costs.
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S. Groner Associates conducted the survey using both an online survey and focus groups, it says working with assistance from LB business improvement districts citywide, the LB Area Chamber of Commerce and LB Non-Profit Partnership. The survey's methodology used a sample pool "comprised of 408 organizations from Long Beach of varying sizes, revenues and industries of work...[T]he majority of those surveyed were organizations of less than nine employees with revenue less than $1 million dollars per year. The largest portion of participants belonged in the "food services/accommodation/entertainment/tourism" industry of work.
Release of the survey precedes a Jan. 6, 2016 scheduled meeting (3:00 p.m. in Council Chamber) of LB's Economic Development Commission, which may make recommendation(s) at that time on Long Beach minimum wage policy for Council consideration. The Commission, whose members were chosen by Mayor Garcia and approved by the Council without dissent, consists of [our brackets for identification] Becky Blair [commercial real estate broker], Blair Cohn [Exec. Dir Bixby Knolls Business Improvement Ass'n], Cyrus Parker-Jeannette [CSULB College of Arts], Frank Colonna [realtor and retired 3rd dist. Councilman/Vice Mayor], Kristi Allen [VP Ops/Ensemble Hotel Partners], Michelle Molina [Millworks, DLBA Board President, spouse is Molina Health Care CFO], Paul Romero [Long Beach Convention & Visitors Bureau], Ralph Holguin [RMD Group CEO], Randal Hernandez [Gov't Relations Union Bank], Robert Olvera [President ILWU Local 13] and Walter Larkins [CDR Benefits].
Meanwhile, the Los Angeles County Federation of Labor -- a politically active group that has applied its ample resources in Long Beach City Council elections -- has advocated setting a Long Beach minimum wage of $15 an hour tied to the cost of living, plus sick days beyond the state mandated the days and wage enforcement. In October 2015, the group released a report by Economic Roundtable that contended raising the minimum wage to that level would "have a broad stimulus effect on the region and would benefit businesses, workers, and the economy" (full report here.)
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In May 2015, the L.A. City Council voted 14-1 (Englander dissenting) to adopt a minimum wage that will rise to $15 an hour by 2020, making L.A. the largest city in the nation to do so. In September 2015, an L.A. County Board of Supervisors majority voted 3-2 (Knabe and Antonovich dissenting) to raise the minimum wage in unincorporated areas by $15 an hour by 2020 tied to the Consumer Price Index.
Against this backdrop, on Aug. 11, 2015, LB Vice Mayor Suja Lowenthal, joined by Councilmembers Lena Gonzalez, Dee Andrews and Rex Richardson agendized an item to "direct City Manager to request a report from the Los Angeles County Economic Development Corporation (LAEDC) regarding 1) the feasibility of and potential benefits and risks of implementing a citywide minimum wage in Long Beach; 2) proposals for incentives, tax breaks, fee reductions and/or process improvements to assist businesses and non-profit organizations in complying with a higher minimum wage; and to work with the City's Economic Development Commission to take public input and review the study's findings and make recommendations to the City Council."
Their agendizing memo stated in part: "The report should include data and survey work about the minimum wage and possible incentives for businesses. If a minimum wage increase is to be considered, incentives for businesses and or non-profits in the city should also be considered and discussed."
The Council responded by voting 9-0 the hire the non-profit, privately run LAEDC to conduct the study at a LB taxpayer cost of $65,000.
On November 13, 2015 City Hall released the results of the LAEDC study. In pertinent part the study stated:
[LAEDC report, Exec. Summary, p. 2] In the "best case" scenario, approximately 33,000 workers would be affected by 2017 if the minimum wage were $12.00 per hour, receiving an increase in annual earnings on average of $940 (over current earnings), and approximately 45,700 workers would be affected as the minimum wage reaches $15.00 per hour in 2020, receiving an increase in annual earnings on average of $5,160 (over current earnings);
In the "worst case" scenario, up to 14,000 workers would be most at risk of being negatively impacted through reduced hours, job loss or substitution by 2017; this number would grow to 20,700 by 2020.
Firms that currently employ minimum wage workers and who will be impacted by future increases will likely respond to their increased labor costs using one or more of the following strategies:
Increasing prices, as 93 percent of all business with minimum wage workers responding to our survey state is likely;
Absorbing cost increases through reduced profits, as 90 percent of employers with minimum wage workers responding to
our survey say is likely
Substituting the lowest skilled workers with employees that are more productive, as 70 percent of employers of minimum wage workers responding to the survey say they will expect their employees to take on additional duties;
Reducing employment by eliminating jobs, as ten percent of employers with minimum wage workers responding to our survey believe is likely or by cutting hours of existing employees, as three percent of such employers believe is likely
Reducing or delaying future employment by not replacing voluntarily separated workers;
Smaller firms have the fewest options for managing cost increases and impacts will be more
pronounced.
Over the long term, the relative costs of capital and labor may encourage more automation. At the time the LAEDC survey was fielded, 29 percent of employers of minimum wage workers were undecided about the likelihood of substituting capital for labor. However, this is a trend that has been underway for most of the twentieth century and will continue into the twenty first as well.
If this were to occur, transitioning displaced workers into other occupations may be challenging if such workers face skills mismatches;
Employment opportunities for those at the bottom of the skills ladder will be diminished including youth;
Business operations will become more efficient as marginal firms close or relocate.
Developing into 2016. Further to follow on LBREPORT.com.
An earlier version of this story misstated the name of the Council of Business Associations as the Council of Business Organizations, corrected in the text above.
