Wage-ordinance proponents say study of Los Angeles law proves policy good for Santa Fe

Proponents of living wage ordinances were given a boost last week with the release of a study that disputes arguments that city-mandated minimum wages are bad for businesses.

The study, which focuses solely on the impacts of a limited living wage law adopted by the city of Los Angeles in 1997, says that the living wage increased pay for 10,000 jobs and improved the quality of life for low-wage earners with minimal reductions in employment, minor impacts to smaller businesses and a 17 percent decrease in labor turnover.

Two University of California researchers are authors of the four-year study, which was conducted in conjunction with the Los Angeles Alliance for a New Economy, a backer of living wage laws.

Although Los Angeles has a different economic makeup than smaller cities with living wage ordinances, such as Santa Fe, authors of the study said many of the trends are universal, specifically reduced employee turnover and declines in absenteeism.

Funders of the study included the Ford Foundation, the University of California Institute for Industrial Relations and Los Angeles World Airports, which employs many of the workers who got higher wages after the Los Angeles living wage law was passed.

Carol Oppenheimer, a co-coordinator of Santa Fe's Living Wage Network, said the study validates what living wage advocates have long argued.

"I think we've sort of been combating visions of gloom and doom, but this study confirms what we've been saying all along," she said. "If you pay employees better wages, you have less turnover, less training costs for new employees and put more money in people's pockets, which they will spend on the local economy."

National trend

Numerous local governments have turned to living wage laws to improve the standard of living for low-income workers.

The nation's first living-wage law one was passed in Baltimore in 1994, according to the new report. Since then, more than 125 local governments have adopted living-wage laws.

Monday night, the Albuquerque City Council was scheduled to discuss whether to put a living wage measure before city voters in October.

The passing of living wage laws does not come easy. The city of Santa Fe's living wage currently faces a court challenge.

Approved by the Santa Fe City Council in 2003, the ordinance requires businesses with 25 employees or more to pay $8.50 per hour, which will increase to $9.50 starting Jan. 1, 2006, and $10.50 beginning Jan. 1, 2008.

The Santa Fe Chamber of Commerce and New Mexicans for Free Enterprise filed a lawsuit seeking to stop the Santa Fe Living Wage Ordinance, which is on appeal in state court. A hearing is scheduled later this month.

Santa Fe Chamber of Commerce President Marianne Pratt said she had not seen the Los Angeles study but would likely doubt its relevance to Santa Fe.

"The stories we're hearing don't jibe with that argument," Pratt said.

She said restaurants, nonprofits and other businesses here have laid people off to offset the cost of the living wage. Furthermore, those who are able to afford the current $8.50 requirement are "extremely concerned" about the planned jumps to $9.50 and $10.50.

Pat Hafner, executive director of New Mexicans for Free Enterprise, also disputed the Los Angeles study's pertinence to Santa Fe. Santa Fe's ordinance, he noted, is far more broad than that of Los Angeles.

Los Angeles' law applies only to businesses that have service contracts with the city, lease from the city, require city operating permits or receive city financial assistance.

"I don't really see the point. It's a small sampling of one of the largest economies in the nation," Hafner said.

Negative environment

According to Hafner, the living wage has created a negative business environment in Santa Fe, creating more roadblocks than opportunity. He says the law hurts the people it is intended to help because the higher wage scares new businesses away and drives up the price of goods and services.

The new report maintains that it is the most definitive analysis of a living wage's impact on workers and employees. It was based on a survey of 320 workers affected by the Los Angeles Living Wage ordinance and 82 employers, conducted after the pay increase had taken place.

Los Angeles' living wage law requires firms to pay either $10.03 per hour or $8.78 with a $1.25 per hour contribution to health benefits and to provide 12 paid days and 10 unpaid days off per year. Like other cities across the nation, the law was a reaction to the stagnation in state and federal minimum wages and increase.

In addition, Los Angeles lawmakers specifically wanted to address the increasing privatization of city services as a means to cut costs, a strategy that living wage advocates argue only shifts the costs, as low-wage subcontracted workers have to rely on government assistance to get by, the report says.

Most of the affected jobs are in firms that are service contractors to the city or service contractors to airline companies at Los Angeles International Airport or the Ontario, Calif., airport. The most prevalent jobs impacted by the ordinance include airline service workers, janitors, parking attendants, food service workers and retail clerks.

Better daily life

About 36 percent of affected workers in the study said that the pay increase had improved their daily life, from allowing them to quit a second job to purchasing a car, to being financially independent enough to leave an abusive spouse.

Despite this, more than 80 percent said the living wage was still not enough to allow them to meet their basic needs and more than 40 percent of affected workers rely on at least one government anti-poverty program, such as food stamps.

Oppenheimer said this trend is also apparent in Santa Fe, where even with the $8.50 living wage -- more than $3 over the federal minimum wage -- many struggle with the City Different's high cost of living.

"That's certainly true here," she said, explaining that some here have argued against the living wage for fear low-income families would lose access to government assistance.

With regard to impact on the workplace, the Los Angeles study showed that staff reductions due to the living wage were minimal, amounting to about 1 percent of affected jobs.

The survey also found no evidence of existing workers being fired or pushed out in order to hire different workers.

The majority of firms affected by the living wage had not engaged in major cost cutting, the report said.

The survey also suggested that the living wage had a slightly greater impact on employment for smaller businesses, although the difference was minor.

It did not contain firm information on business flight, although evidence suggests that flight of smaller or independent businesses was minimal.

"I talked to a number of small firms who were unfazed by the law," said study co-author David Runsten of the University of California Los Angeles' North American Integration and Development Center.

The study also did not address who bears the costs of the living wage, which may include employers, their customers, city government and local taxpayers.