Senate Bill 3, jointly authored by state Senator Mark Leno, D-San Francisco, and Senator Connie M. Leyva, D-Chino, would raise the minimum wage to $11 per hour in 2016 and $13 per hour in 2017. The bill also adds a requirement, starting in 2019, for automatic adjustment of the minimum wage based on the California Consumer Price Index. According to bill text, the minimum wage rule applies “to all industries, including public and private employment.”

“Despite our recovering economy, millions of Californians, many of them children, continue to live in poverty,” Sen. Leno wrote in a press release. “Full-time workers in this state should not be forced onto public assistance simply because they earn the minimum wage. It is time to lift up poor Californians and reward all hardworking employees with the resources they need to put food on the table for their families. Sub-poverty wages should not be legal in California.”

“California’s economic resurgence hasn’t changed the fact that we still have the highest poverty rate in the nation,” Senate President pro Tem Kevin de León, D-Los Angeles, principal co-author of SB3, also wrote in the release. “Senator Leno’s SB3 to raise the state’s minimum wage from $9 an hour to $13 by 2017 is a necessary first step in combating poverty in the swollen ranks of our state’s working poor.”

The release continued with several data points:

California has the highest poverty rate in the nation. The U.S. Census Bureau reports that nearly a quarter of the state’s 38 million residents live in poverty. An employee working full time earning $9 an hour brings home just $18,000 annually before taxes, which is just 75 percent of the federal poverty line for a family of four. As a result, many cities have taken the matter into their own hands, raising local minimum wages either by government action or at the ballot box. San Francisco has approved a minimum wage hike of $15, and Oakland has a $12.25 minimum wage. In addition, the Los Angeles City Council has approved a preliminary plan to pay its lowest-earning workers $15 an hour by 2020.

SB3 is “co-sponsored by the Western Center on Law and Poverty, United Food and Commercial Workers and the SEIU California State Council.” The bill also touts support from various other organizations, such as the Women’s Foundation of California, California Teachers Association, Children’s Defense Fund of California, California Association of Food Banks and California Catholic Conference of Bishops.

Sen. John Moorlach, R-Costa Mesa, opposed the minimum wage hike and made the following comments during the Senate floor debate:

“What kind of society are we running? It’s a capitalistic society. And we need to honor work. We need to honor the work of those that are creating the jobs; that are paying the taxes that allow us to subsidize the transportation and everything else. And it’s the risk takers, it’s the small business people that have to figure out and do the quantifying and analysis. And they sit down and say how much is it going to cost to do the job of running this small business.  Whether they are a franchisee or starting their own professional business, they’ve got to sit down and say, ‘what am I going to have to pay for rent, and what am I paying for utilities, and what am I paying for all the other expenses, and then what am I paying for payroll, payroll taxes, unemployment insurance, workers comp, benefits, all the rest?'”

Sen. Moorlach added, “We have to be real careful. With a minimum wage increase, you’re attacking business people that are subsidizing this state and this nation. And, I encourage a no vote.”

Hicks released a statement praising the City Council’s decision on May 19:

“We are one step closer to making history in Los Angeles by adopting a comprehensive minimum wage policy that will change the lives of hundreds of thousands of hard-working Angelenos. The City Council’s action today creates a path for workers to succeed and gives our economy the boost it needs to grow.”

But early last week, Hicks released another statement following his request for union exemption:

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them. This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

The L.A. Times came out in full swing against the request, calling the request “stunning” and “hypocrisy at its worst”:

“No, employers with a unionized workforce should not be allowed to pay less than Los Angeles’ proposed minimum wage. It’s stunning that after leading the fight for a $15 citywide minimum wage and vehemently opposing efforts to exempt restaurant workers, nonprofits and small businesses from the full wage hike, the Los Angeles County Federation of Labor is now lobbying for an exemption for employers with union contracts. That’s right — labor leaders are advocating that an employer should have the right to pay union members less than the minimum wage.

 

“This is hypocrisy at its worst, and it plays into the cynical view that the federation is more interested in unionizing companies and boosting its rolls of dues-paying members than in helping poor workers.”

Diana Furchtgott-Roth, the director Economics21 at the Manhattan Institute, provided insight on why union would campaign aggressively for a minimum wage hike and then request to be exempted:

“Although the union-funded Raise the Wage campaigned so vociferously in favor of a $15.25 minimum wage, unions are seeking exemptions from the higher wages for their members. The exemption, or escape clause, would allow them greater strength in organizing workplaces. Unions can tell fast food chains, hotels, and hospitals that if they agree to union representation, their wage bill will be substantially lower. That will persuade employers to allow the unions to move in. …

 

“Once the higher minimum wage bill is signed into law, with the exemption for unions, then organizing becomes a win-win for employers and unions. Unions get initiation fees of about $50 per worker and a stream of dues totaling 2 percent to 4 percent of the workers’ paychecks. Employers get a lower wage bill.

 

“The losers in this scheme are employees, who have to pay union dues out of their paychecks. Jobs become more scarce as wage levels rise and some less-skilled workers become unemployed.”

The wage increase is to be phased in over time, so the immediate impact may not be felt. But businesses ought to keep score when the effects hit so that officials will be cognizant of the consequences. If the wage increase does not cause economic disruptions and businesses do not actually leave Los Angeles, the business community’s credibility will suffer in the face of a mere exercise in rhetoric.

The vote to pass the minimum wage increase was 14 to 1. The council gets to vote once more on the measure after an ordinance is drafted by the city attorney, but the lopsided vote indicates there is no turning back. The council even set the wage above the recommended level offered by Mayor Eric Garcetti, who initially proposed an increase to $13.25 an hour.

The city council’s version contains an inflation clause and offers an extra year for small businesses and nonprofits to comply.

However, the business community does not consider these admissions enough. Ruben Gonzalez of the Los Angeles Chamber of Commerce said, “There is simply not enough room, enough margin to absorb a 50 percent increase in labor costs over a short period of time.”

The chamber’s president and CEO Gary Toebben wrote to his members about the many small business owners who testified in various hearings on the measure. He wrote, “They also talked about the likelihood that in order to provide a wage increase for some employees, they would have to reduce hours for others.”

Toebben noted wryly, “Last week, there were banners hanging throughout City Hall celebrating Small Business Week. There are many small business owners in L.A. who don’t feel like the city is celebrating them today.”

Earlier on the day of the vote, the Los Angeles County Business Federation (BizFed) released a survey on business conditions in the area. According to a release from BizFed, “The city of Los Angeles stood out again as being cited most frequently by employers as unfriendly.  Santa Clarita and Glendale were ranked in the top 5 most business friendly cities, which is notable because officials from those two cities are actively courting city of Los Angeles businesses in light of the proposed city of Los Angeles minimum wage increase.” (Author’s emphasis.)

So what will Los Angeles businesses do? Once the minimum wage law takes effect will there be jobs lost or hours cut? How many businesses move to a different location? Business credibility is on the line. Crying wolf and not acting will damage efforts to turn around what many decry as unfriendly business policies.