Publication

August 26, 2015Client Alert

California Dreamin’

The minimum wage movement appears to be having a domino effect. In June 2015, Los Angeles Mayor Eric Garcetti signed into law a bill raising the minimum wage from $9 an hour to $15 over the next five years after the City Council had passed the legislation by a near unanimous vote in May. Los Angeles became the largest city in America to guarantee workers at least $15 an hour. Ironically, Los Angeles labor leaders are pushing the City Council to exempt unionized employees from the new minimum wage.

 

According to a recent Los Angeles Times article, Mike Casey, the outgoing president of Unite Here Local 2 in San Francisco — a city whose $15 minimum wage law includes a collective-bargaining exemption — rejected suggestions that such clauses are intended to pressure businesses to unionize. "This is not some cynical thing," Casey said. "It gives us more latitude and more flexibility at the bargaining table. It will be difficult for unions to justify having some of its own members earn a subminimum wage while at the same time lobbying for an overall increase in the minimum wage.

 

In July, Los Angeles County Board of Supervisors voted to increase the minimum wage to $15 by 2021, impacting County-controlled areas, including its 100,000 or so employees. According to Chris Tilly, director of the UCLA Institute for Research on Labor and Employment, the County’s move puts “both economic and political pressure” on smaller cities in Los Angeles County. Areas with a higher minimum wage, he said, will attract “the most talented of the low end of the work force” away from lower-wage areas. Some manufacturing operations could move to areas with cheaper labor costs, he said, but restaurant and retail businesses that choose sites based on customer demand are not likely to relocate.

 

Sung Won Sohn, an economist at Cal State Channel Islands, said municipalities that do not raise the minimum wage could entice companies to relocate within their boundaries. But the increased demand for labor would probably lead to a rise in the minimum wage in those communities, Sohn said, though not likely as high as $15 an hour. “In purely economic terms, it's simply a matter of supply and demand,” he said.

 

The economic impact of such large minimum wage increases is not fully known, but there is no doubt that such increases will have a major impact on unions and businesses.

 

For more information, please contact your Michael Best attorney; Robert W. Mulcahy at rwmulcahy@michaelbest.com  or 414.225.2761; Brian P. Paul at bppaul@michaelbest.com or 312.527.6843; or Miguel A. Manriquez at mamanriquez@michaelbest.com or 608.257.3062.

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