Los Angeles Work Wages – How Raising the Minimum Wage Will Affect Workers
As the cost of living continues to rise, the Los Angeles region’s Work Wages are failing to keep up with that rising cost. With so many workers struggling to make ends meet, the region must continue to invest in job training and higher education to increase the number of workers in the most well-paid industries. If these efforts are to be successful, the City of Los Angeles must invest in more than just increasing the pay of workers, though.
Los Angeles minimum wage increases from $9 to $15
The city council of Los Angeles recently passed a measure to raise the minimum wage. This will make it the first major U.S. city to raise the minimum wage, and it will impact almost half of the workforce. The minimum wage in Los Angeles is currently $9. The increase is the result of years of campaigning and lobbying by labor groups and allies to improve living standards for workers. The increase will take effect on July 1, 2016.
The increase in the city minimum wage has divided the city’s business community. While the chamber argues that it will help businesses in Los Angeles, opponents say it will result in a wage “island effect” that will cause businesses to relocate to other cities with lower wages. The Valley Industry and Commerce Association, which represents businesses, also opposed the proposal. Some businesses say the increase will cause a downward spiral in wages and create a shortage of workers.
Three tiers of LA Work Wages
The U.S. Census Bureau’s LODES (longitudinal employer-household dynamics) data categorize monthly wages into three tiers, or pay levels. The bottom tier represents workers earning less than $1,250 per month. The top tier comprises those earning more than $3,333 per month. LODES data provide interesting insights into Los Angeles workers’ wages. Below is a breakdown of wages by tier.
Impact on businesses
The impact of a $15 minimum wage on the Los Angeles economy is enormous. Increasing the wage rate to $15 per hour would generate $9.2 billion in annual sales and 64,700 new jobs in the city. Not only would this increase the number of jobs, but the increased purchasing power of the local workforce would result in an overall increase of $1.3 billion in public revenue each year. Among that money, $331 million would go to social safety net programs, while the remaining one billion dollars would go to the general public, subject to legislative budget allocations.
Cherie McGraham, owner of Smokehouse on Main in Old Town Newhall, is one of those affected by the new minimum wage. Her business has already lost workers to larger companies that offer higher wages and incentives. However, she expects that the new minimum wage will raise her payroll by $3,000 per month. She isn’t likely to seek a new job anytime soon. Instead, she’ll be raising her salaries and expanding her business.
Impact on workers
According to the Department of Workforce Development, 42 percent of full-time low-wage employees in Los Angeles make less than $15 an hour. Of those, 41 percent are in the retail and service industries. Four out of five of these workers serve other residents of Los Angeles. By 2019, workers who make less than $15 an hour would expect to make $4,800 more per year. By comparison, businesses in Los Angeles will have to pay an additional 0.9 percent to cover these increased costs. This means that business owners can offset their higher costs by increasing prices to customers.
A study conducted by the University of California, Riverside, and the Los Angeles Alliance for a New Economy, found that the living wage ordinance had little effect on overall contract costs. Although the ordinance increased wage rates for 10,000 workers, it did not negatively impact business practices or city finances. Moreover, living wage workers are mostly low and middle-class, meaning that the increase in pay for these workers was immediate. Many of these workers joined city-contract firms, which accounted for the higher-paid workers.