Los Angeles Economic Roundtable Study Provides Person-Centric View of Higher Wages in Long Beach

Tonight, the Economic Development Commission meets, concluding the public hearing portion of the city’s multi-step process to determine if a potential minimum wage hike is appropriate for the city. The focus will be on the study released by the Los Angeles Economic Development Corporation (LAEDC) earlier this month. 

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The study, while comprehensive, was void of a definitive suggestion to city officials about which direction to take on the controversial issue that has pitted business owners against workers.

A separate 106-page study published in October by the the Los Angeles Economic Roundtable —a non-profit economic consulting firm that has published studies for Los Angeles and Pasadena during their pursuit of changes to the minimum wage—focused much more on the people who would be affected by a potential vote to raise the minimum wage in Long Beach. The report also offered a clearer path of action: raise the wages of “low-paid” workers to $15 an hour to improve the quality of life of families and the economic health of the region.

The major findings of the group’s study suggested that an incremental path to a $15 per hour minimum wage would result in an estimated $442 million in increased sales and generate nearly $70 million dollars in increased public revenue by 2020. The report also showed that higher wages could also help over 6,500 workers and their families—estimated to be over 9,000 additional people—rise out of poverty by 2020 and severely reduce the depths of poverty for tens of thousands more Long Beach residents.

In total, the study estimates that 54,000 workers would be affected by a higher minimum wage by the year 2020, an important figure as nearly 10 percent of the city currently lives in poverty.

The report’s author, and Economic Roundtable President Daniel Flaming, said that Long Beach’s wage troubles can be traced back to the aerospace industry all but abandoning the city decades ago. With it, exited good higher-paying jobs than currently exist in the city. Additionally, industries that are growing in the city, like the restaurant and service sectors, typically offer lower paid, part-time jobs. This, compounded with the dwindling purchasing power that has affected each generation of Americans for almost half a century, has Flaming and advocates calling for changes to the wage structure.

“Most workers have at best seen their wages stagnate and more typically lost buying power, and LA has become a more expensive place,” Flaming said. “There used to be some pretty cheap housing, and that’s just not there anymore. Our cost of living is 37 percent higher than the national average, so we’re an expensive city with a lot of low-paid workers.”

Just how many low-wage workers does the city have? Long Beach has nearly 82,000 workers who would potentially be affected by a $15 minimum wage, with over 22,000 of those workers having a family income that is below the poverty level, according to the study.

The districts most impacted by low wage earners are Districts One, Two and Six with 46 percent of those residents earning less than $15 per hour, 37 percent of whom are head of households. Districts Seven, Eight and Nine at 39 percent of workers below $15 per hour were closer to the citywide average, but still had 28 percent of those workers listed as head of household. Districts Three, Four and Five would be the least affected by a wage increase, as only 22 percent of workers make less than $15 per hour, and 13 percent of those are head of household.

As the LAEDC study noted, only 23 percent of Long Beach residents work within the city, eliciting an argument from some business owners that a wage hike in the city would mostly benefit people who commute to the city for work. However, the Economic Roundtable’s assessment shows that while that statistic is accurate, Long Beach residents represent a disproportionate amount (31 percent) of the low-paying jobs in the city, while commuting workers take up nearly 80 percent of the high-paying jobs in the city.

Low-paying jobs were categorized as those topping out at $15,000 annually, while high-paying jobs were those earning over $40,000 annually.

However, the LAEDC study did note that a wage raise in Long Beach could result in an influx of skilled workers into the worker pool as they seek higher wages. In an attempt to stay competitive, the report suggested that surrounding cities—the same ones that opponents of a higher minimum wage have vowed to leave Long Beach for—would be compelled to raise their wages to retain workers. Flaming noted that already over 11,000 Long Beach residents hold employment in the city of Los Angeles, a number he expects to climb as their wage-hike schedule progresses.

“You’re competing with other employers,” Flaming said. “And already what Los Angeles and the County of Los Angeles have done are going to have ripple effects because employers in neighboring cities are competing for the same workers that they are and this will also be true as Long Beach hopefully enacts a higher minimum wage, that they bring cities that want to have a strong staff, they’ll have to pay wages that are competitive with Long Beach.”

Flaming said that the LAEDC study did provide something that he deemed “interesting and reassuring” in the form of the survey it conducted on 600 Long Beach businesses. The survey gauged the feelings of local business owners on a higher minimum wage and how they might react to it. Despite what some business owners have expressed—some doing so multiple times at the city’s series of public outreach meetings—the survey did not paint a “doomsday” scenario if wages increased.

A majority of employers with workers making less than the proposed minimum wage responded that it was likely that sales would increase because customers would have more money to spend (31 percent) versus those who thought high wages would increase revenues (24 percent). Ten percent of those surveyed said it was likely they would reduce their staff size while just three percent replied it was likely hours would be reduced for minimum wage workers.

An overwhelming 71 percent of respondents said their workers would be happier and probably do a better job because they were being paid more. Flaming’s report showed that for every $1 wages rise, the county’s output increased by $1.12, something he felt was reflected in business owner’s anticipation of a stimulus effect from a wage raise.

“I think that we're hearing the most pessimistic voices, and that by and large Long Beach businesses are resilient and adaptable,” Flaming said.

A higher minimum wage wouldn’t come without some growing pains, though. The study noted that the most vulnerable group of businesses would be those with one to four employees—a segment that represents about 63 percent of the Long Beach economy in terms of businesses, but just 8 percent of employees. However, Flaming said that the “survival rate” of these types of small businesses doesn’t hinge on the proposed minimum wage, stating that turnover of these sized businesses is part of the normal course of events in the economy.

It also tabbed six industries in the city as being sensitive to a potential wage hike, including administrative support, home health care services, residential nursing, child day care services, restaurants and bars and personal repair services. Together they represent about 22 percent of the city’s wage and salary jobs. However, the study concluded that while these industries should be carefully monitored, there is little evidence that suggests job attrition would offset the stimulus effects from keeping more revenue within the region and adding income into the pockets of those likely to quickly recycle it back into the local economy.

Above all else, raising the wage will improve the lives of both the workers and the families they often support, according to the study. Stresses caused by overcrowding, rent burden and living in poverty would be alleviated by having a “fairer” economy and will allow for children to perform better in school and parents to have a better capacity to buy basic necessities. For Flaming, the issue is as much about people as it is crunching numbers and economic theory. 

“We’re talking about people with real hardship in their lives and real hardship in their family’s lives, their kids’ lives,” Flaming said. “So, the first issue before getting into the money is that we will be making very significant improvements in people’s well-being by paying them something closer to a living wage. That’s really the driver of raising the minimum wage. It’s not just because it seems like a fancy idea; it’s because people really, really do have a hard time affording basic necessities.” 

The Economic Development Commission meets Tuesday at 6:30PM inside the City Council chambers, where the last of the scheduled public testimonies regarding the potential wage increase is expected to draw hundreds of people to City Hall. 



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