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September, 1999


Sustainability, Liveability and the Living Wage

By Michael Feinstein, Santa Monica City Councilmember
Pro/Con Opinion Piece written for the Santa Monica Sun

September 3rd-9th, 1999


‘Is it acceptable that large businesses profit significantly from public investment, then pay wages so low, that their employees must receive food stamps or some other public assistance, just to survive?’

‘Are we Santa Monicans comfortable with the fact that tax dollars that pay for our parks and police are generated on the backs of these underpaid workers?’

The City Council will consider these and other questions on September 7th, when it hears a presentation requesting the city to study the concept of a local living wage ordinance.

Why study the liveable wage?
As a matter of public policy, our community would benefit from conducting such a study. Why?

Santa Monica seeks to embody sustainability on many levels. We are already well known for our environmental programs. But the ability to earn a sufficient living from one’s work is just as critical to achieving sustainability as having clean air to breath.

When people receive a liveable wage for a hard days work, it is not only fair, but it goes a long way towards addressing society’s ills, because people can afford basic necessities. The real question is not whether we should try to achieve such an economy , but rather ‘how do we get there’. That’s why we need to look at the living wage, as one of possible strategies.

What is a living wage ordinance? It is an ordinance that guarantees that businesses that profit significantly from public resources and investment will pay the real cost for work, and not rely on additional public subsidies to support their employees' unmet basic needs. The living wage movement has grown rapidly in recent years, and is part of a larger movement promoting accountability in the investment of public dollars (and the stewardship of public resources).

Thirty-nine cities have already enacted some form of living wage ordinance, from Baltimore, Chicago, Detroit, Los Angeles, Oakland, and Philadelphia, to cities more Santa Monica’s size, like Cambridge, MA, Duluth, MN and Madison, WI. All of these cities have chosen to establish a nexus around a similar focus, linking the payment of living wages to the receipt of large government contracts, subsidies and tax abatements.

The rationale behind these ordinances is that limited public dollars should not subsidize poverty-wage work. or poverty-wage-paying employers. When subsidized employers don’t pay a living wage, taxpayers are stuck paying a double subsidy - the initial subsidy to the employer, and the hidden, ongoing subsidy of food stamps, emergency medical care, subsidized affordable housing and other social services. In many cases, low wage earners also can not afford to live close to work to make effective use of public transit, bringing about unecological, auto-dependent commutes and increased parking demand.

The City Council is already investigating a living wage ordinance for city-based contracting. The community group Santa Monicans Allied for Responsible Tourism (SMART) is asking that the study be extended to consider large businesses in the coastal zone - the highly successful visitor industry doesn’t contract directly with the city, but it nevertheless benefits substantially from the extraordinary public investment and natural resources there.

How is business in the coastal zone?
The spectacular success of business in the coastal zone owes much to governmental land use, zoning and investment choices made in the early 1980s, and continuing to this day. These choices concentrated visitor-oriented development, services and infrastructure in the coastal zone, creating the conditions for today’s vibrant visitor-serving industry

According to the Los Angeles Business Journal, Santa Monica’s economy is ‘booming’ and ‘the envy of most cities’. The visitor-serving industry is thriving in particular, with 2.5 million people visiting the city annually.

Over the last several years, Santa Monica hotels have among the highest room rates and occupancy rates in the county. In 1997 (the most recent year for which data is available). visitors spent $516.2 million, a 44.5% jump just since 1994. Total taxable retail sales reached $1.9 billion in 1998, a 26.7% increase since 1994. Rents on the Third Street Promenade have increased five fold since 1989. Andthe city this year gave close to $1 million to the Convention & Visitors Bureau for further promotion.

Ironically, while the coastal zone is home to some of the most profitable corporations in Santa Monica, it also has the highest concentration of low-paying jobs.

What are some of the questions to be looked at in the study?
First, it’s important to clarify that the Council will not be voting on an actual living wage ordinance on September 7th. Rather, it could vote on whether to do a study of the concept of the living wage as it might apply in Santa Monica. SMART does have its own proposal and that could be part of what is studied. But it wouldn’t be the only possibility considered. Part of why we do a study, is to hear everyone’s ideas.

In the study, some of the basic economic questions to look at are:
• what size businesses should a living wage ordinance apply to?
• what should be the boundaries of the applicable zone? how do these boundaries coincide with other city planning goals (like keeping restaurants on or around the Promenade)
• what is the appropriate level at which a living wage should be set’?
• which businesses have a high ratio of labor costs to their total costs (for whom a living wage would arguably be more significant) and which do not?

Some other concerns have been expressed, but they don’t seem to offer real threats, as some claim:

• The ‘capital flight fright’ scenario may play in some disadvantaged cities, but not in Santa Monica. Living wage or not, sound business practice dictates staying in town, based on access to markets and transportation, infrastructure, education and skill of the workforce, and the overall quality of life, including the spectacular ocean, beaches, palisades, mountain vistas, and on-shore breezes.

On all of these counts, Santa Monica is exemplary. That’s why the City is one of the handful of municipalities nationally to receive a AAA bond rating year after year. It is also important to point out that the kind of businesses that normally try to escape regulation by leaving cities are manufacturing businesses, not destination-based service industries like hotels.

Finally, studies show living wages don’t seem to hurt hotels, and often don’t even raise room rates. A comparison of Sheraton Hotels in similarly vibrant tourist areas like Las Vegas, Los Angeles, San Francisco, Waikiki and Manhattan, shows that they pay their starting housekeepers between $10.30 to $17.07 an hour, and seem to successfully absorb the difference. For example, the Radisson Huntley in Santa Monica pays housekeepers $5.75 an hour without health benefits, and the Radisson Miyako in San Francisco pays $12.09 plus full family medical benefits - yet both charge $189 for a king-size room.

• The argument that low wage jobs are for ‘entry-level workers’ who don’t need to earn a living wage is also not true. If it ever was - perhaps it was on ‘Leave it to Beaver - it is no longer so. In today’s economy, breadwinners are increasingly the ones dependent upon low to very-low wage jobs. In the state of California, 42% of food bank clients are working families. In Los Angeles County, 40% of residents live on less than $20,000.

We can’t forget the federal welfare reform plan of 1996, which has flooded the workplace with additional people seeking a living. With this mandate in place, it makes sense for our local government to ensure there are decent-paying jobs out there to find.

• Finally, the characterization of the level of the living wage as if it were the same as a compartable rise in the minimum wage is fallacious, like comparing apples to oranges. Minimum wages are meant to be economy-wide, low common denominators, applying to millions of businesses. A living wage on the other hand, is a high common denominator applicable to a very small class of businesses, based on conditions very specific to that small class - i.e. that they receive substantial public subsidies.

A living wage can actually improve conditions for business. Higher wages usually mean happier employees, increased productivity, reduced turnover and reduced training costs. Within the hotel industry, living wages could level the playing field, so that competition would be based on quality of service, not who pays the lowest wages. In general, living wage earners have more money to spend in the overall local economy, which is a good thing, as even Henry Ford recognized in the 1920s, when he paid his own workers enough to be able to buy his cars.

What are the next steps?

If the Council votes to study the living wage, our community will have the extraordinary opportunity to consider one of the most critical and challenging questions about how we are organized as a society.

The logic of sustainability suggests that we are better off when we reduce or eliminate problems from the outset, rather than trying to fix them later, and suffer the environmental, social and economic consequences.

Environmental sustainability reminds us to respect natural resources. Economic and social sustainability reminds us to respect human resources. Santa Monica is already committed to reflecting social and environmental values in our purchasing, investment and planning policies. If we tie the receipt of substantial public subsidies to the payment of a living wage, we will take a further step forward as a community, towards bring our means and ends into alignment.

Michael Feinstein is a Santa Monica City Councilmember, and can be reached via his web site at www.feinstein.org

 

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