Weekly Report – April 27, 2015 – Part Two – Is Raising the Minimum Wage in L.A. a Good Idea?
Part Two – Is Raising the Minimum Wage in L.A. a Good Idea?
Labor Force Data for the City of L.A.
Population: 3.88 million (By 2017 the share of residents aged 65 years and older will increases to 12.2 percent from 6%)
Foreign born residents: 1.49 million
Working age population: 2.7 million (15 to 65 years-old)
Education level 25 + year olds: 27% have no H.S. diploma, 21% have a H.S. diploma but no other education, 29% have a bachelor’s degree or higher
Labor Force: 2,017,000
Unemployment rate: 7.7%
Employment-to-population ratio: For every 100 people of working age, 55 have jobs
Median household income: $44,116 (66% goes to food, housing & transportation)
Per capita income: $26,000
Residents of L.A. who work in other cities: ~700,000
Residents from other cities who commute to L.A.: ~900,000 (they typically hold higher paying jobs than workers living in the city)
Public sector employment (federal, state & local): 305,060
Private sector employment: 1,557,340
Informal economy: ~14% (Milken Institute)
Data by City Council District: *See table at the end of the weekly.
Workforce Trends in the City of L.A.
In general, the City of L.A. reflects the national pattern of a largely service-oriented economy, which accounts for almost three-quarters of all nonfarm employment, and a government sector accounting for 18% of all nonfarm employment (including local,
state and federal government employment). Manufacturing employment has been on a long-term decline and accounts for less than 10% of employment today.
According to the LAEDC, overall, the City of L.A. is projected to add 181,196 new jobs from 2012 through 2017. The largest numbers of jobs will be added in service providing industries, such as professional and business services, educational and health services and leisure and hospitality. Financial activities and the information sector will also be significant sources of job creation during the next five years. Construction will also add jobs as it rebounds from catastrophic losses during the recession. Wholesale trade will grow quite slowly, as will transportation, warehousing and utilities, which are more likely to add jobs in outlying regions. The industry with the largest expected new job creation potential is the administrative and support services industry, expected to add 23,740 jobs between 2012 and 2017.
This is largely a result of the increase in temporary employment services, which accounts for 40 percent of the industry. Other large segments include security services and janitorial/landscape services. The industry with the second largest expected employment gains is food services and drinking places, projected to add 22,180 jobs between 2012 and 2017. This is a very large industry that includes restaurants of all service types, including fast food, full service, catering and mobile food service, as well as bars and nightclubs. Local government is projected to add 17,720 jobs, mostly in educational services, as population growth demands more local services. Fourth on the list is professional and technical services, another large and diverse industry, with relatively high growth potential.
Some good news. Retail wages have been growing faster than most lately. The average hourly wage of $17.33 an hour in February was up 2.8% from a year earlier, according to the Labor Department, compared with overall wage growth of 2% during that same period.
How Would a Wage Increase Impact the City’s Economy – Three Studies State their Case
Current Minimum Wage Proposals above and beyond the current rate of $9 per hour:
- Mayor Garcetti’s wage increase proposal is $13.25 by 2017, equivalent of $27, 560 per year.
- Labor and six L.A. City Councilmembers want a wage increase to $15.25 by 2019, equivalent to $31,720 per year.
Los Angeles Rising: A City That Works for Everyone (L.A. Economic Roundtable, UCLA Labor Center &Institute for Research on Labor and Employment)
- A phased-in increase to $15.25 by 2019 will put $5.9 billion more into the pockets of 723,000 working people, which will generate $6.4 billion in increased sales. That means that every dollar increase in the minimum wage generates $1.12 in economic stimulus.
- Businesses will hire more in response to the greater demand, creating 46,400 new jobs.
- Why $15.25? There are 784,300 families, almost 144,300 (19%) living under the poverty level and 54% of households earn less than $50,000 per year On average, a U.S. household that earns $34,000 spends about $36,000 on living expenses. The wages earned by low- and moderate-income workers, therefore, go quickly back into circulation after pay day. The direct beneficiaries are place-based businesses, that cater to households within the immediate geographic vicinity. This includes real estate, health care, restaurants, and retail stores. These local businesses will reap increased sales, which allows them to grow and expand the economy. Therefore, a raise to $15.25 by 2019 is an investment in Los Angeles.
Cost-Benefit Analysis: Los Angeles Minimum Wage Proposal (Beacon Economics/L.A. Chamber)
- The focus of this debate should be on whether a higher minimum wage is an efficient way of lifting Angelenos out of poverty.
- A citywide minimum wage isn’t targeted well enough to have much of an effect.
- Half of such workers that would be impacted by the wage live in households where total earnings are above $55,000 per year. They may be teenagers working part-time jobs, or servers or salespeople who earn much more in commissions or tips.
- Many working poor Angelenos hold jobs outside the city limits, and they wouldn’t see any benefits from a higher minimum wage.
- Similarly, half of those who would get a wage hike don’t live within the city of Los Angeles. While the latter are indeed among the working poor, helping them should be the purview of their local government, not L.A.’s.
- Under the city’s current proposal, less than one dollar out of every four would end up in low-income households in the city of Los Angeles. No matter how you look at it, that’s a low rate of return.
- More than one-third of businesses in Los Angeles are within two miles of the city’s border. Companies considering opening or expanding business in the region will, over time, settle where labor costs are lower.
The Proposed Minimum Wage Law for Los Angeles: Economic Impacts and Policy Options (Michael Reich, Ken Jacobs, Annette Bernhardt & Ian Perry – Institute for Research on Labor and Employment Center on Wage and Employment Dynamics University of California, Berkeley)
- The proposed policy would result in significant benefits to workers and their families. By 2017, we estimate that 542,000 workers in Los Angeles, or 37.8 percent of the covered workforce, will receive a wage increase from the proposed law. These estimates include a ripple effect in which some workers who earn above the new minimum wage also receive an increase. Average annual earnings will increase by 20.4 percent, or $3,200 (in 2014 dollars).
- By 2019, we estimate that 609,000, or 41.3 percent of the covered workforce, will receive a wage increase from the proposed law. Average annual earnings will increase by 30.2 percent, or $4,800 (in 2014 dollars).
- The large majority of affected workers will be adults with a median age of 33 (only 3 percent are teens).
- The proposed minimum wage increase will disproportionately benefit workers of color, who represent over 80 percent of affected workers. In particular, we estimate that more than half of Latino/a workers in Los Angeles will receive a pay increase.
- The median annual earnings of affected workers ($16,600 in 2014 dollars) is about half of the median income for all workers in Los Angeles. Affected workers are disproportionately employed in part-time and part-year jobs, and are also less likely to have health insurance through their employer.
- Affected workers disproportionately live in low-income families; on average, affected workers bring home more than half of their family’s income.
- Affected workers live disproportionately in the lower-income areas of the city. These areas will experience much greater earnings gains than the city as a whole.
- The research literature suggests that there may be downstream benefits from the proposed wage increase, such as improved health outcomes for both workers and their children, and increases in children’s school achievement and cognitive and behavioral outcomes.
Final Thoughts Heading into Part Three
Raising the minimum wage is not, by any stretch, a poverty panacea. Its economic effects are in fact complex, its redistributive aim less well targeted at the working poor than, say, the earned-income tax credit. Raising the wage in L.A. would not lift anywhere near that many people out of poverty but it would somewhat ease present hardship.
Next week’s piece will address other ways to grow L.A.’s economy and create more quality jobs and other long discussed ideas to bring households out of poverty.
* Data By Council District: Average Population per District is 250,000 residents.
|District||Jobs||Top Occupations||Median Income||Per Capita Income||Households|
|Jose Huizar (14th)||332,758||
1. Public Administration: 28.1%
2. Professional, Scientific & Technical Services: 8.9%
3. Wholesale Trade: 7.2%
|Paul Koretz (5th)||188,286||
1. Health & Social Assistance: 15.5%
2. Professional, Scientific & Technical Services: 14.6%
3. Education Services: 13.6%
|Mike Bonin (11th)||139,500||
1. Transportation & Warehousing: 19.9%
2. Accommodation & Food Services: 13.1%
3. Professional, Scientific & Technical Services: 12.1%
|Tom LaBonge (4th)||102,969||
1. Information: 17.5%
2. Retail Trade: 13.1%
3. Accommodation & Food Services:10.7%
|Bob Blumenfield (3rd)||93,850||
1. Health & Social Assistance: 14.7%
2. Retail Trade: 13.3%
3. Finance & Insurance: 12.3%
|Mitch O’Farrell (13th)||93,141||
1. Health & Social Assistance: 29.5%
2. Informational: 12.2%
3. Accommodation & Food Services: 9.2%
|Mitch Englander (12th)||91,107||
1. Health & Social Assistance: 15%
2. Manufacturing: 14.3%
3. Retail Trade: 12.8%
|Gil Cedillo (1st)||82,147||
1. Education Services: 25%
2. Healthcare & Social Assistance: 12.9%
|Nury Martinez (6th)||67,073||
1. Health & Social Assistance: 15.6%
2. Manufacturing: 13.5%
3. Retail Trade: 12.9%
|Curren Price (9th)||63,451||
1. Educational Services: 36.9%
2. Manufacturing: 13.7%
|Herb Wesson (10th)||61,052||
1. Administration & Support: 13.5%
2. Health & Social Assistance: 11.2%
3. Retail Trade: 9.8%
|Paul Krekorian (2nd)||57,072||
1. Retail Trade: 13%
2. Manufacturing: 11%
3. Educational Services: 10.8%
|Joe Busciano (15th)||54,282||
1. Manufacturing: 14.1%
2. Health & Social Assistance: 11.6%
3. Retail Trade: 9.6%
|Felipe Fuentes (7th)||46,350||
1. Manufacturing: 24.6%
2. Health & Social Assistance: 15.2%
3. Retail Trade: 11.5%
|Bernard Parks (8th)||18,890||
1. Other Services: 22%
2. Educational Services: 17.3%
3. Retail Trade: 15.2%