New Minimum Wage's Tie to Inflation Is Inflating the Opposition - Voice of San Diego

Minimum Wage

New Minimum Wage's Tie to Inflation Is Inflating the Opposition

Beginning in 2018, the city’s minimum wage would adjust as much as the Consumer Price Index changes. Businesses crave predictability in wages, but Todd Gloria says the provision would be more predictable than big hikes enacted by politicians.

Last week, when City Council President Todd Gloria lowered his target for increasing the minimum wage in the city, a hardware store owner and vocal critic dropped his opposition.

But he was alone. Even with the dramatic change — Gloria lowered his sights from $13.09 to $11.50 — the coalition mobilizing against Gloria’s proposal only got more fired up, as did Gloria’s supporting cast.

That’s probably because Gloria did not eliminate this part of his proposal:

minwageord

With Gloria’s modified proposal, beginning in 2019, the city’s minimum wage would adjust each year as much as the Consumer Price Index changes.

This may be the hardest part of the new minimum wage for some businesses to stomach. They would not know until August what the minimum wage would be for the following year.

A guide for what this might be like can be found in the Living Wage Ordinance for city contractors. Any contractor performing work for the city must pay the living wage, which this year is $14.17 an hour for employees who do not get health care benefits.

Here’s how that living wage has changed over the years, with fluctuations from 1 percent to 3.9 percent.

livwagechange

But Gloria wants to tie the minimum wage for everyone else to a slightly different measure of inflation. The living wage for city contractors is tied to the Consumer Price Index for All Urban Consumers, or CPI-U in San Diego. For the minimum wage proposal, however, Gloria wants tie it to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, and its average of all cities, not just San Diego.

Gloria’s spokewoman, Katie Keach, said this decision was made in consultation with the Center on Policy Initiatives, or CPI. (Yes, CPI is deciding what CPI to use.)

She said CPI-W would more accurately reflect the market conditions minimum wage workers deal with and that using the full national measure offered more flexibility for the city in deciding what time of the year to force businesses to adjust.

Here’s a comparison of what the last few years of CPI-U inflation looks like next to CPI-W inflation, which the city would use for determining the minimum wage adjustments.

cpiuw2

The concern from business leaders is about predictability. They wouldn’t know each year what they have to pay. Yet Gloria said he’s doing this precisely to help businesses with predictability. His theory is that if you’re going to have a minimum wage, you should probably figure out a way to adjust it over time rather than wait for progressive majorities to make dramatic upward adjustments.

“If you have to amortize years or a decade’s worth of wages overnight because suddenly we have the political will to do a minimum wage increase, that’s harmful for businesses,” Gloria said at a recent press conference. He appeared with Harry Schwartz, the owner of Downtown Ace Hardware, who said he was now OK with the proposal because it will be manageable for business.

Not all agree. In a letter to Gloria, the California Restaurant Association’s Chris Duggan wrote that indexing would be “disastrous” for the city.

“By tying increases in the minimum wage to a single economic factor (inflation) and ignoring other factors such as the strength of the job market, indexing will inevitably result in increases in the minimum wage at times when the local economy is ill suited to absorb new cost pressures,” Duggan wrote.

Arturo Kassel, CEO of the restaurant group Whisknladle Hospitality, said he supports minimum wage increases if they could count the tips many servers already get. But indexing it to inflation is adding to an array of concerns.

“I’m very young into my career but if you talk to some of the local seasoned operators, they’ll tell you they’ve never seen a perfect storm of events like what are affecting our industry now. The costs of goods are going through the roof. SDG&E raised their rates 19 percent. There’s the Affordable Care Act coming into full effect and now the state and city minimum wages.  It’s frightening,” he said.

Update: Gloria modified his proposal so that indexing the minimum wage to inflation would begin 2019, not 2018. I’ve updated the story accordingly.

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