Like many economists who have studied it, I don't think the controversial "living wage" ordinance approved last week by the Los Angeles City Council is going to make all that much of a difference. It won't lift all of the working poor out of poverty. And it won't halt Los Angeles' recovery by driving away all new business.
Like other public debates driven by political symbolism, the arguments in City Hall over the living wage ordinance got out of hand and the issue was blown out of proportion. Proponents sold it as a cure for all the social ills that ail Los Angeles, and opponents warned against it like an impending earthquake.
That said, there was an important symbolic element to the unanimous City Council vote in favor of the ordinance. And if Mayor Richard Riordan is half as smart as I think he is, he'll join in the symbolism and let the ordinance become law. If the mayor stands by his petulant threat to veto the ordinance, he would only be inviting the political humiliation of a override by the council, which approved the measure 12-0.
The ordinance will affect businesses that have city contracts worth more than $25,000, or that receive significant amounts of city aid--$100,000 per year or at least $1 million in one-time assistance. These private employers will now be required to pay janitors, security guards, gardeners, food-service workers and the like more than the current federal minimum wage of $4.75 an hour. Their minimum pay will increase to $7.25 an hour, plus benefits such as health insurance, or $8.50 an hour without benefits.
Opponents of the measure, like the Central City Assn. and business groups that supported Riordan in his bid to become mayor four years ago, fear that this new ordinance will add to Los Angeles' image as a tough place to do business--a city where bureaucratic rules drive business people to neighboring cities like Glendale or nearby states like Arizona.
There is something to those arguments, and I would normally be more sympathetic to Riordan's stance that higher payroll costs could mean fewer jobs. But the mayor has already had four years to convince businessmen from Burbank to Beijing that L.A. is now a friendlier place. Near as I can tell, he's done a good job of it, so a modest living-wage ordinance won't have a terribly negative effect.
In fact, this new ordinance is very modest in scope. One study has estimated that only 5,000 workers will be impacted by the new rules. Another estimated that it will benefit 800 families currently living below the poverty line.
But even if only a handful of poor people are helped, that is still important. For we are not talking here about the destitute that liberals worry about, or the welfare cheats of right-wing rhetoric. We are talking about the working poor, people who must sometimes work very hard for very long hours, and even then barely make ends meet.
Low-wage jobs are the dark underbelly of Los Angeles' recent recovery. This region is again growing and creating jobs, but many of them--in the garment industry, in retail trade and in warehousing--pay low wages. Unless the people holding those jobs have more opportunity to move up to better jobs, this recovery will be short-lived.
Which brings me to where I differ with the living-wage argument. It is not the only answer to jobs that offer little upward mobility. It may not even be the best answer. That is most likely to be found in our education system, by making secondary schools and community colleges the training centers that turn out workers who can help Los Angeles compete not just in trade and tourism, but in the third big "T" of the new California economy: technology.
Consider that one of the California cities that has had a living-wage ordinance on the books for five years, and doesn't appear to have suffered for it, is the hub of Silicon Valley: San Jose.
Last year 24,000 new manufacturing jobs were created in San Jose, according to that city's economic development department. Not because of the living-wage ordinance, but because the private and public sectors--including community colleges--have worked in collaboration to develop education programs that train the workers needed by the electronics firms that are the base of the Silicon Valley economy.
Los Angeles can duplicate such success, but we must move past unproductive, and largely symbolic, arguments over issues like the living-wage ordinance.