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Santa Monica Leaseholders Get Break as Minimum Wage Hike Kicks In


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SMTT tourism and economy

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Harding, Larmore
Kutcher & Kozal, LLP

By Jorge Casuso

July 2, 2018 -- The Santa Monica City Council on Tuesday put to rest a brewing battle with the local business community by nixing a motion that would require restaurants to sign labor peace agreements on all City leases.

The council's decision came five days before Santa Monica's hourly minimum wage rose on July 1 from $12 to $13.50.

Some council members worried the requirement -- which would have applied to 27 City lease-holders that pay a total of $4.5 million a year in rent -- placed union interests above the interests of the community.

Opponents argued the proposed requirement was unnecessary because the City’s leasing guidelines already protect workers seeking to organize ("Santa Monica Business Leaders Seek to Block Proposed Labor Peace Agreements," June 25, 2018).

They also worried the restaurants already are facing a minimum wage hike that went into effect in Santa Monica, Los Angeles and Pasadena on Sunday.

Approved in 2016, Santa Monica's law raises the minimum wage to $15 per hour by 2020, two years before the the State ("Santa Monica City Council Votes to Hike Hourly Minimum Wage to $15 an Hour by 2020," January 14, 2016)

Sunday's wage hike comes at a time when California's unemployment rates have hit a record low of 4.2 percent.

That is projected to fall further to a low of 3.7 percent in 2019 before gradually increasing, according to a report released last week by the Center for Business and Policy Research at the University of the Pacific.

The record-low state unemployment rate is reflected in Southern California and is fueled in large part by the tourism industry, according to the report.

Santa Monica has added 300 jobs supported by tourism this year -- from 13,000 jobs to 13,300, according to Santa Monica Travel and Tourism (SMTT).

But the economic upswing could could see a downturn by the time Santa Monica's next wage hike takes effect in 2020, the report predicted.

"While (the tourism) sector has added as many as 75,000 jobs in recent years, it is projected to fall below 20,000 new jobs this year and experience even slower job growth in 2020 as rising labor costs and low labor availability drives change in the hospitality sector," the report found.

Some restaurants already are struggling to pay the rising minimum wage, according to an article last week in the LA Times.

It cited the closure in May of Farida, a popular Hollywood restaurant that employed about 20 workers.

Owner George Abou-Daoud said he was "barely breaking even as it was, and if he had to pay a minimum of $12 an hour, it would have put him in the red," the article said.

While many restaurants are passing the wage hike on to customers, Abou-Daoud feared his customers -- who are middle and upper middle-class -- would not pay enough to cover the increased costs, according to the Times.


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