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Santa Monica Businesses Get Primer on Impact of Proposed Minimum Wage Hike

Santa Monica Real Estate Company, Roque and Mark

Pacific Park, Santa Monica Pier

Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore
Kutcher & Kozal, LLP

Convention and Visitors Bureau Santa Monica

By Niki Cervantes
Staff Writer

August 13, 2015 -- A national economics expert told Santa Monica business owners Wednesday that the impact of a City proposal to raise the minimum wage to $15-an-hour by 2020 would probably be minimal to the bottom line.

Michael Reich, a professor of economics and director of the Institute for Research on Labor and Employment at the University of California at Berkeley, told the audience that hiking the minimum wage does not cause the economy to “blow up.”

Researchers, he added, were “surprised to find out how small these impacts were.”

Reich and the institute researched the impact of the raising the minimum wage for Los Angeles City and were asked by Santa Monica officials to share  those findings -- and any that might apply specifically to the bayside city -- with the business sector.

In its study, the institute found that increases to the bottom line are offset by such factors as improved productivity and a decrease in the high turnover that plagues many businesses that rely heavily on low-wage workers, Reich said. 

Equally important is that as other cities, including Los Angeles, raise pay for low-income earners, Santa Monica risks losing its workers to them, he added.

Even without an ordinance bumping up the minimum wage, “Santa Monica low-wage employers will start to pay higher wages to keep the best workers from going to Los Angeles,” he said.

The Los Angeles ordinance, which goes into effect next July, raises the minimum wage incrementally from $10.50 an hour to $15-an-hour by 2020. The statewide minimum wage of $9 an hour is scheduled to increase to $10 an hour next year. The Los Angeles County Board of Supervisors is also hiking the minimum wage.

Santa Monica is expected to take up an ordinance modeled after the one recently approved in the Los Angeles sometime next month.

Reich’s presentation focused largely on the broader economic impacts of the wage hike, and he noted that specific impacts for Santa Monica might differ from Los Angeles because the two municipalities are so different.

Aside from being much smaller than the city of Los Angeles, Santa Monica is much more a tourism destination, he said.

The private sector associated with tourism – businesses such as hotels and restaurants – employs about 1.5 million workers in the city of Los Angeles, which has a population of nearly 4 million. The number is around 80,000 for Santa Monica, which has a population of less than 93,000.

In Los Angeles, the average low-wage worker makes $648 a week; in Santa Monica, the paycheck is $737, Reich said.

“I suspect the impact will be less to Santa Monica businesses,” he said.

Still, audience members expressed concern about whether they will face big cost hikes, a scenario that includes both a rise in prices and a resulting decrease in business.

Some asked whether there had been specific research on the impact to Mom and Pop businesses of raising the minimum wage. Reich said little had been conducted on that specific sector.

Jerry Rosenstein, head of Pioneer Magnetics, a manufacturer of switching power supplies, said his company has seen stiff competition from overseas competitors during its half century in Santa Monica. But he said he is supportive of the move to raise the minimum wage.

“We’re definitely in favor of increasing the minimum wage,” he said.

Wednesday's session at the Main Santa Monica Main Library was the first of three slated with businesses in the coming weeks to discuss the minimum wage and to collect input from that sector of the community. The next meeting will be held Tuesday from 2 to 4 p.m.

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