Study
Gauges Effect of Living Wage Law
The Report Says a 1997 L.A. Statute Didn't
Cause Heavy Job Losses
as Some Had Feared
Los Angeles Times - June 2, 2005
By Nancy Cleeland
The
controversial "living wage" law adopted in 1997
by the city of Los Angeles raised pay for about 10,000 workers
without producing the heavy job losses predicted by opponents,
according to a comprehensive study to be released today by
the law's original backers, the Los Angeles Alliance for a
New Economy.
But
the law, which applies to city contractors and firms doing
business on city property, failed to prompt any employers
to add health insurance plans, as advocates had hoped.
Indexed
to inflation, the living wage floor now stands at $10 an hour,
or $8.75 an hour if health insurance is included - significantly
higher than the California minimum wage of $6.75.
Skeptics
noted that the 10,000 affected jobs are a tiny share of the
more than 1.6 million workers in Los Angeles. Also, more than
half of the affected jobs are at Los Angeles International
Airport.
"This
doesn't give you an idea of how a living wage would work in
a broader context because airport workers are in somewhat
of a bubble," said Jack Kyser, chief economist at the
Los Angeles County Economic Development Corp.
He
said the airport was unique because it wasn't subject to competition
and the jobs couldn't be moved.
Asked
about the overall economic effect, Kyser said, "These
people might have a little more money to spend on housing,
transportation, maybe basics like food and clothing, but it's
really a very, very small sample."
The
four-year study by researchers from the alliance and the University
of California was based on interviews with 82 employers and
320 workers, all randomly selected. Researchers then compared
their experiences with similar companies that were not affected
by the law.
They
found an overall loss of 112 jobs, or about 1%, attributable
to the law. They also found that employers made up the wage
hikes, which amounted to more than 20% in some cases, in a
variety of ways. They cut overtime and fringe benefits, hired
more skilled, productive workers or passed on costs to the
city. Lower employee turnover and absenteeism also helped
offset the higher wage costs, making up 16% of the pay difference,
the study said.
As
the law was debated, opponents predicted a loss of 3,000 jobs
and said employers would leave the city. Then-Mayor Richard
Riordan vetoed the ordinance, but a labor-friendly City Council
overrode it.
"Documenting
the low employment loss was really important," said David
Fairris, an economist at UC Riverside and one of the study's
four authors. "Maybe even more important was getting
clear the benefits to firms that came from higher wages."
Fairris
touted the study as the most thorough look to date at laws
spawned by the energetic living wage movement of the late
1990s. More than 100 such laws have been adopted across the
country, including in San Francisco, Boston and New York.
Researchers
found that the Los Angeles law immediately increased wages
by about $1.50 an hour in about 8,000 minimum-wage jobs, amounting
to about a 20% increase. An additional 1,500 workers received
smaller raises.
Most
of the affected families were low-income, with about 40% officially
considered poor. Fewer than 4% of the workers were teenagers.
Most were older than 35, and about 70% had a high school education
or less, said David Runsten, associate director of the North
American Integration and Development Center at UCLA and one
of the study's authors.
"What
we found was that the kinds of workers we wanted to benefit
are, in fact, benefiting," he said.
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