AUC Berkeley economist warned Pasadena officials that local workers could seek jobs in nearby communities like Altadena and Los Angeles if Pasadena enacts a freeze on the minimum wage.
Not only should city leaders consider the impacts of raising the minimum wage, “Policymakers should also take into account the effects of not continuing Pasadena’s minimum wage phase-ins,” wrote Michael Reich, a UC Berkeley economics professor, one of two consultants hired by the city to study the impacts of the increased minimum wage.
“If minimum wages are higher in nearby Los Angeles, some Pasadena businesses may find it more difficult to recruit and retain workers,” Reich wrote.
Los Angeles County, which governs unincorporated Altadena, is on a similar fee increase schedule with the cities of Los Angeles and Pasadena in raising the minimum wage to $15 an hour by 2020. California lawmakers adopted a schedule in which $15 an hour will become the minimum wage statewide in 2022.
Cities on the state schedule include Glendale, La Cañada Flintridge, South Pasadena, Alhambra, San Gabriel, Temple City, San Marino, Arcadia and Sierra Madre.
Some Pasadena business owners, mostly restaurateurs, are calling for the City Council to “pause” and review the ordinance, then adopt the state schedule.
The City Council will consider the issue on Feb. 11. The review is written into the city’s 2016 wage ordinance as a requirement. According to the law, the minimum wage will be raised from $13.25 to $14.25 on July 1 and to $15 on July 1, 2020. If during the review council members decide the increased wage is having a negative impact on the city’s economy, they could freeze the wage at its current rate and move to the state schedule. Such an action would require a two-year freeze on the city law while the state, currently at $12 an hour, increases to $14 an hour in 2021.
Teddy Bedjakian, a restaurant owner in Old Pasadena, said he no longer hires first-time workers, who would once work for much less money than an experienced employee.
“They want to paint the restaurant owners as cheapskates,” said Bedjakian. “Everybody I hire has to be experienced now. I cannot afford a first-time worker. It hurts the local workforce.”
According to Bedjakian, some of his employees make more than $100 a shift in tips, but some days, he said, the business, which has been in Pasadena for 22 years, doesn’t turn a profit.
At the council meeting, Reich will be joined by UCLA Economics Professor Edward Leamer in explaining minimum wage impacts.
Reich’s report is called “Pasadena’s Minimum Wage Policy Effects on Workers, Businesses and the Local Economy.” Leamer’s study is titled “Estimates of the Impact of Pasadena’s Minimum Wage Ordinance.” Reich, who was paid $38,000 for his efforts, and Leamer who earned $39,000, according to Public Information Officer Lisa Derderian, will both put on PowerPoint presentations at the Feb. 11 council meeting. Both reports can be viewed on the city’s website at cityofpasadena.net/planning/code-compliance/minimum-wage-information/.
Another academic report — one not commissioned by the city — is also available for the council and the public to review.
In “Pasadena’s Tale of Two Cities,” by Occidental College Political Science Professor Peter Drier and Glendale Community College Economics Professor Mark Maier, the authors examined such topics as income inequality, making ends meet in Pasadena, wages, and housing. They concluded that Pasadena possesses one of the widest income divides between rich and poor in the state; a place where the average income of the richest five percent of Pasadena households ($547,864) is more than 45 times greater than the average income of the poorest 20 percent of households ($12,153). The report can be viewed at pasadenaweekly.com/2019/01/24/a-critical-look-at-what-makes-pasadena-such-an-unequal-place-to-live/.
In his report, Leamer said his research “supports a significant negative estimate of the impact of minimum wages on the number of hair/nail salons and also a negative impact of the Pasadena increment on the number of jobs in limited service restaurants.”
Conversely, Reich wrote that “Minimum wages have increased the pay of Pasadena workers in these industries and has not thus far visibly reduced their employment levels.”
Both commissioned authors cited difficulty reaching conclusions based on a lack of data due to the short amount of time that has passed since the council unanimously passed the wage ordinance in 2016.
The consultants were operating on two sets of questions, the first aimed at finding the impact the minimum wage increase had on workers, including changes in hourly wages earned, changes in hours worked, net changes in income, job loss, and changes in public assistance.
The second question was aimed at the impact on businesses, including changes in payroll costs, total hours paid, gross revenue earned, changes in business models to accommodate higher hourly labor costs, changes in hiring practices, impacts on prices and profits, and an estimate of business closures or relocations due to this change.
Chamber of Commerce President Paul Little said the reports prove the chamber was correct when its members argued against the city implementing the $15 per wage by 2020.
“When I look at the data it seems to bear out what we said three years ago, when we said the minimum wage would have a negative impact on jobs,” Little said of Leamer’s findings. “Employers are looking at ways to reduce payroll expenses. They are being more particular with who they are hiring. They are not hiring young people for seasonal employment. People are getting by with fewer employees and the employees they have are working less.”
According to Little, no one is against the $15 an hour minimum wage. But business people would prefer the city slow down the increases and align with the state.
“They were hell bent on passing this thing,” Little said of the council. “Maybe now they’ll be a little more prudent.”
The chamber is running a 24-question survey that asks local business owners to assess the impact of the minimum wage increases on their businesses. The survey went out to 3,000 business owners, according to Little. The results were not in by presstime.
Some business owners and local progressives have taken opposing sides on the issue.
Last weekend, Pasadenans Organizing for Progress! (POP!) held a Pasadena Workers Justice Parade rally at the Pasadena Community Job Center on North Lake Avenue. More than 200 people decorated 78 cars as part of event.
“It is critical we keep up,” Ed Washatka of POP! said. “The rents in Pasadena continue to go up. The increase may not seem like a lot, but to a low-wage family it can make a big difference. The minimum wage increase is not hurting the Pasadena economy. Keep in mind the income gap in Pasadena continues to grow.”
Local housing costs continue to be some of the highest in the area, and even with a $15 minimum wage most low-income workers cannot afford to rent in Pasadena, where some one-bedroom apartments go for more than $2,000 a month.
“They show that wages are going up but it has not hurt jobs,” Dreier, also a member of POP!, said of the two reports. “There are some slight differences, more positives than negatives. As for negatives, Reich says there has been none,” Dreier said. “Leamer says there has been a decline in nail salons and some fast-food restaurants. But it’s the high-end restaurants that are complaining. It has not hurt the city’s business climate or its businesses. If the City Council reads the studies, and reads them objectively, they will see there is no need to freeze the minimum wage.”
Some business owners, however, insist the wage increase is having a different effect than what was intended.
Restaurants like Robin’s Woodfire BBQ, owned by community activist Robin Salzer, have reduced hours to offset costs.
Salzer, Bedjakian, who has also reduced hours of operation, and other local restaurant owners have been contacting council members in an effort to convince them to move to the state’s timeline.
“You can’t compare a worker at McDonald’s to somebody working in a high-end restaurant. They don’t do the same thing.” Bedjakian said. n