Living Wage Rhetoric Flowery but Flawed

By Tom Larmore

In their recent "Guest Editorial" ("The Truth About The Campaign to Kill the Living Wage, August 16"), Vivian Rothstein and Sandi Richards repeated most of the flowery but flawed rhetoric the law's proponents have used over the last two years.

1. Vivian and Sandi take us to task for entitling the petition a "Referendum Against an Ordinance Passed by the City Council." Perhaps a fundamental civics lesson is in order. Anyone who wishes to have the public be given an opportunity to vote on a measure passed by the legislature is required to gather signatures to "refer" the measure to the voters. The wording of the petition is governed by State and local law, not by anyone's creative forces.

That said, of course I oppose the Council's (or at least the Council majority's) actions in passing this ordinance. The reasons are simple.

Those proponents of the law who believe it will benefit the working poor as a group are living in a fantasy world where the lemonade springs and the bluebird sings. Anyone who thinks that a legislative body can simply order employers to increase wages by 50 percent or more without negative consequences are simply ignoring economic reality:

a. Many restaurants are already planning to shut down during a portion of the day to get their gross receipts below $5,000,000. This means many people will simply lose their jobs. Other businesses that can employ this technique will be highly motivated to do so. Those currently below the threshold will make sure they never get there. What is wise about a policy which discourages economic growth at the expense of current and future employees?

b. Businesses will also consider other options as well: raising prices, although I doubt this will be very widespread because of competition; reducing employment in general to cut labor costs, thereby requiring all remaining employees to be more efficient and work harder; and reducing employment through automation where feasible (does anyone else remember the days when service stations actually had people to fill your gas tank?)

c. Employers will attempt to hire more qualified employees to work in the coastal zone if they actually have to pay them the new minimum wage of $12.25. Workers who are currently employed by businesses with multiple locations may find themselves suddenly transferred to a new location and replaced by someone with greater skills and experience who, according to the market, are "worth" the higher wage. Businesses which cannot do this will certainly find more qualified employees as jobs turn over, whether through performance or attrition. The reality is that any
business which is told that it must pay its employees 150 percent or more of what
it currently pays will seek, and be able to attract, more qualified employees than those they currently employ.

d. The consequence will be lost job opportunities for the working poor who do not have the skills and experience to get these jobs, including many in our own community.

e. All of these problems are exacerbated by the arbitrary geographic and sales distinctions made in the ordinance. Why should one business virtually right next door or across the street from a competitor be forced to operate under vastly different economic rules? Why should Wild Oats Market at 5th and Wilshire be subject to the law while Von's at 7th and Broadway is not? How does it make sense to place a car wash at Lincoln and Ashland in a potentially different regulatory environment than a car wash at Lincoln and Colorado? Why should the last affordable department store in Santa Monica, Sears, be virtually forced out of business when it has no relationship to the tourism industry the proponents use as the basis for the
law?

2. Vivian and Sandi argue against the referendum because lawsuits have been threatened. Some believe that businesses should simply take the City to court. However, at least for me, the referendum is an effort to prevent the expensive litigation that would otherwise ensue to the detriment of taxpayers. Why should the City incur hundreds of thousands of dollars in legal fees (including those of the plaintiffs should the City lose) to defend yet another questionable ordinance without having at least given the voters an opportunity to consider the issue? Because I think this law represents bad policy, I would much prefer to give the voters an opportunity
to repeal the ordinance without having the courts do it.

Of course litigation is likely if the voters support the law. Courts are the last resort for people who feel that their government is treating them unfairly, a conclusion which is obviously logical where local businesses who fall on one side of an arbitrarily drawn line, whether regarding location or size, are treated differently from similar companies on the other side of the line.

3. Vivian and Sandi reject the fact that volunteers have been a big part of this campaign, apparently because they haven't been seen standing in front of markets and other public locations. The fact is, however, that probably around 2,000 signatures have been gathered by volunteers, like me, working their own neighborhoods, customers and friends. Simply because they weren't seen doesn't mean they weren't there -- the American army could never figure out where the Viet Cong were either.

4. Accusations of misrepresentation abound, as is normal in campaigns such as this. How do they defend statements by the "blockers" that the City's law will take 10,000 people off welfare and reduce taxes? Or that by signing the referendum, the law will be repealed? Or even the fundamental premise of the pro-ordinance campaign which is that the referendum is simply an effort of the luxury beach hotels to pay poverty wages?

This last is the greatest misrepresentation of all. Do Vivian and Sandi actually believe
that long-time community leaders such as Nat Trives, Bob Holbrook, Herb Katz, Allan Young, Irene Zivi and many others are involved in the referendum effort in order to allow large, proftable hotels to pay lower wages? This line of attack is simple nonsense and they know it. While I disagree with them about the wisdom of this law, at least I do not question their motives or attack them for supporting a law which I believe will cause the loss of many jobs and the denial of future jobs to many of the youth of our community.

5. Vivian and Sandi apparently concede that the large beach hotels they have been demonizing for the last two years do, in fact, pay wages consistent with the law's requirements. Their response is that this policy was the result of their campaign. However, Casa del Mar and Shutters on the Beach have consistently maintained a high-wage policy, well before the phrase "living wage" was a sparkle in a union organizer's eye. Their assertion to the contrary is self-serving nonsense and is an ineffective response to the fact that the union settled for a wage schedule well below
the so-called "living wage" level at the Pacific Shore Hotel.

6. Vivian and Sandi argue that the law will affect only "about 40 large, successful companies," which, presumably, makes it OK. The facts, however, are otherwise:

a. No one outside of the City's Finance Department actually knows how many businesses will be covered. This is because a business' revenue is proprietary information and is given to the City, presumably on a confidential basis, with business license tax reports. Particularly, no one knows which businesses will be covered or whether they are, in fact, "large" and "successful." Obviously some large and successful companies, such as the beachfront hotels, will be covered by the law; however, this does not mean that all, or even most, of the businesses are equally successful. Having $5,000,000 in revenue does not mean that one is a large business and it certainly does not translate necessarily into profitability.

b. Businesses which are successful did not get there by making stupid economic decisions. The City can legislate a minimum wage which is double that applicable to other employers but it cannot make a business pay that wage to an employee who cannot perform to that level. To say that a business can "afford" to pay more is a wish which reflects ignorance about the way in which the market works, particularly when a business is being asked to pay more than its direct competitors.

c. Many more employers will be affected by the law than the "large, successful" businesses Vivian and Sandi refer to. For example, every single store in Santa Monica Place will experience a rent increase because the law will govern the shopping center's owner, thereby driving up its costs which then are passed through to the tenants under the terms of the leases. This same effect will occur with respect to every single tenant in any major office, retail or residential building in the affected zone.

Vivian and Sandi conclude by saying that the real issue is full-time workers living in poverty. I agree and have always said that our society has a major problem regarding low-wage workers with which it must deal.

Attempting to force wages up for employees of select businesses in a small part of a small town is not, however, a rational solution. While a few workers may benefit, many others will suffer through a loss of their job as businesses reduce operations, refuse to hire people whose skill and experience level do not match the mandated salary, or even close and leave Santa Monica (as almost 30 percent told the City's economic consultant they would be likely to do).

The answer lies in improving our educational system so that students leave school with real marketable skills, expanding training programs (such as the English classes provided free of charge by Casa del Mar and Shutters on the Beach to its employees) and adopting policies that reduce the cost of living, such as those which encourage rather than discourage the development of housing and working on more cost-efficient means of mass transportation, child care and health care.

As Alan Blinder, economic consultant to Al Gore in his 2000 campaign, wrote: "Raising the minimum wage . . . simply raises the price of unskilled and inexperienced workers. Employers naturally react by hiring fewer of them. And so society succeeds in raising the wages of some by forcing others to pay the ultimate economic penalty; loss of their jobs. That swap is not an obvious improvement in economic justice." (Blinder, Hard Heads, Soft Hearts, p. 195). While Dr. Blinder was writing about the minimum wage generally, his words have particular resonance for an ill-advised measure like the City's minimum wage law.