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LA's $15 minimum wage hike: more cities to follow?
Los Angeles is now the latest major U.S. city to approve a $15 per hour minimum wage, a rate more than double the current federal minimum level of $7.25 per hour. The City Council on Wednesday passed the pay hike, which will incrementally increase the city's current $9 an hour minimum wage to $15 dollars by 2020. Advocates argue that the pay raises are crucial for minimum wage workers to cover living costs, while opponents say the higher wage impedes business and will cause job cuts. The wage hike won't apply to other areas of Los Angeles County, which has sparked concern that businesses could move operations outside of the city. Yahoo Finance Senior Columnist Michael Santoli notes that because the change will be gradual and localized, it is unlikely to have major ripple effects.
"I don't think it's very straightforward exactly what the effect on businesses is," he says. "Certain fast food franchisees are going to tell you this is a deal breaker for them, that they're going to move out of the central city areas. But how much can they really do that? I don't think it's going to be a huge swing factor for businesses." A UC Berkeley study, commissioned by the Los Angeles City Council, concluded that a minimum wage increase to $15.25 would boost the pay of approximately 609,000 workers, or 41% of the city’s total, and trigger about 3,472 job cuts, or 0.2% of employment. Get the Latest Market Data and News with the Yahoo Finance App
"The [wage increase] is coming at a time when we have a tightening job market," says Santoli. "These retail chains are not taking it upon themselves to go to a $9 or $10 an hour wage because they decided to become generous. It's because the labor market now demands this." Los Angeles follows Seattle and San Francisco in raising the wage floor to $15 within the next five years. Meanwhile, advocates are also pursuing changes on a statewide level. Proponents in Oregon, California and Washington, D.C. are working on ballot measures that call for a $15 per hour minimum wage. Santoli adds that he expects other cities and states to follow suit. "In Chicago there's been talk of doing it there," he says. "It is [happening] in central urban areas, where you can get this kind of vote to take hold. For statewide changes there are tremendous headwinds to getting the minimum wage increase, let alone at the federal level. But in cities you have a consensus that people should be paid a little bit more, where the cost of living is very high."