Oakland City Council Staff Reports Reveal True Impact of Minimum Wage Increases
Controversy continues at the Los Angeles City Council about the selection of the University of California Institute for Labor and Employment (part of the University of California Miguel Contreras Labor Program) to produce a second taxpayer-funded study to prove again that adopting a city minimum wage ordinance would be a wonderful exercise in Progressive compassion. That study is expected to be released soon.
Meanwhile, staff reports for the Oakland City Council about the costs and implications of minimum wage increases on the city’s own operations are available for free on the web. These reports don’t pull any punches, even in one of the country’s most leftist cities.
Yes, some city employees and contract employees will make more money, including unionized city employees who are already making more than minimum wage. But others will lose hours or jobs. It is even possible that the City of Oakland will have more trash on its streets and highways because of the minimum wage increase. Here are some conclusions from the staff reports:
1. Increased Public Costs and Job Losses for Youth and Seniors
In June 2014, the Oakland City Council had to enact a relatively mild ordinance to adjust the salary rates for all classifications for which the lowest step was less than $9.00 per hour, the new California minimum wage as of July 1, 2014. Three classifications were changed: part-time Recreation Aide, part-time Senior Aide, and part-time Student Trainee.
A staff report provided a summary of costs and implications to the city:
Two City departments are directly impacted by the change to the base rate for certain classifications. The Human Services Department (HSD), through a federal grant, provides employment opportunities to Oakland seniors. Funding for the Senior Aides program is determined by the federal government and staff have confirmed that additional funding will not be allocated to account for the change in the California minimum wage. The impact of the minimum rate change, then, is that fewer individual seniors can be hired into positions funded by the program.
The Oakland Parks & Recreation Department (OPR) employs many Recreation Aides, particularly during the summer months. If OPR were to continue to employ the same number of people in those roles, the increase to the budgeted cost of those positions is estimated to be approximately $24,500 per year, $18,155 in fund 1820 (OPR Self-Sustaining Programs Fund), and $6,345 in fund 1010 (General Purpose Fund). The proposed legislation does not include a recommendation for increased funding for Recreation Aide positions. Without additional funding, OPR will have to employ fewer Recreation Aides or schedule them for fewer hours.
A more substantial local minimum wage increase would soon do more damage. On November 4, 2014, 82% of Oakland voters approved Measure FF, which raised the minimum wage in Oakland for anyone who works in the city for two hours or more per week to twelve dollars and twenty-five cents ($12.25), effective March 2, 2015. It also imposed paid sick leave.
Here is what staff estimates as the cost and implications of this local minimum wage increase to the city:
Two City departments are directly impacted by the change to the base wage rate for certain classifications. HSD, through a federal grant, provides employment opportunities to Oakland seniors. Funding for the Senior Aides program is determined by the federal government, and staff has confirmed that additional funding will not be allocated to account for the change in Oakland’s increased minimum wage. As a result, the impact of the minimum wage increase rate change is that fewer individual seniors can be hired into positions funded by the program. Currently, the program targets to provide 148 seniors with twenty (20) hours per week of employment. With the new MWL, the program is expected to reduce the number of seniors employed by twenty-five (25) and reduce the hours per week to sixteen (16) for all remaining participants.
OPR employs many people in the classifications of Recreation Aide, PT; Recreation Attendant I, PT; Recreation Attendant II, PPT; Recreation Attendant II, PT; Recreation Leader I, PT; Recreation Leader II, PPT; and Recreation Leader II, PT; particularly during the summer months. Using FY 2013-14 data, if OPR were to continue to employ the same number of employees, in the same classifications and utilizing the same number of annual hours, the increase to the fully-burdened cost is estimated to be $625,000 per year.
Two departments (Public Works Department and Human Services Department) currently employ a combined total of five TPT Student Trainees at hourly rates below the proposed Oakland’s increased minimum wage of $12.25 per hour. Although the impacts will be nominal, each department will either adjust the salaries in accordance with the new minimum wage or cease to employ these five impacted employees.
The City funds several workforce training programs through the Workforce Investment Act (“WIA”) (Fund 2195), the Oakland Fund for Children and Youth (“OFCY”) (Fund 1780), Oakland Unite (Fund 2251 ), Team Oakland (Fund 1720) and OPR (Funds 1010 and 1820). Combined these programs serve over 1,000 youth year-round and during the summer. In addition, Alameda County and the Oakland Housing Authority (Fund 7999) fund programs that serve a total of 650 Oakland youth year-round and during the summer. Currently, these programs pay an average of approximately $10.00 per hour. At $12.25, the 22.5% increase in wages and related withholding taxes could result in a service level reduction of roughly 20%, assuming no increases in funding allocations. For Workforce Development, the WIA funded youth service providers may have to reduce service levels between 10% and 30%, depending on their respective program models…
ASSETS Senior Employment – Senior Services of America Inc. (SSAI) is clear that they must comply with local wage laws and the OCA concurs. SSAI will reduce the required number of participants and the number of hours worked per week…
2. Ripple Effect: Public Employees With Higher Wages Get a Raise, Too
Staff in the Human Resources Management Department had analyzed the earlier state-mandated minimum wage increase to determine whether raising the wage rates for the impacted classifications would result in creating “compaction” with the other related classifications. It did not. But the voter-approved minimum wage increase did:
Measure FF impacts the wages and sick leave accrual of employees represented by SEIU 1021. Employee Relations sent official written notice to SEIU 1021 on December 19, 2014, informing the Union that the wages of certain classifications and sick leave accruals for TPT employees would be increasing once the Oakland Municipal Code Chapter 5.92 goes into effect on March 2, 2015. This notice also offered SEIU 1021 the opportunity to meet and confer with the City regarding the impact of the legislation on wages and sick leave accrual for affected employees. The Union responded to the notice and Employee Relations will meet and confer in good faith with SEIU 1021, as required under state law.
There is validity to the claim that unions support minimum wage increases in part because they increase wage rates for other employees represented in the affected bargaining unit. The Service Employees International Union (SEIU) Local 1021 was a leading supporter of Measure FF.
3. You May End Up Paying for the Minimum Wage Increase Even If You Never Venture Near Oakland
A cryptic paragraph appeared in a December 4, 2014 memorandum from the City of Oakland’s lobbying firm in Sacramento (Townsend & Associates) to the Oakland City Council entitled “City of Oakland Proposed 2015 State and Federal Legislative Agenda.”
Legislative solution for direct care services to pay for higher city minimum wages. The City of Oakland recently passed an increase to the local minimum wage. Additionally, a growing number of cities are enacting minimum wage ordinances, too. Currently there are no procedures to address the required rate increases. The goal of this proposal would be to create legislation that sets rate and distribution policies.
Few ordinary people would understand the meaning of this paragraph, although they would probably feel good about the word “solution.” A December 22, 2014 memorandum to the Los Angeles City Council’s Rules, Elections, & Intergovernmental Relations Committee from its Chief Legislative Analyst was more clear about the plan:
RECOMMENDATION: Adopt revised Resolution to include in the City’s 2015-2016 State and Federal legislative programs support or sponsorship of legislation or administrative action to require an adjustment of reimbursement formulas for social service and healthcare providers to provide adequate funding to meet the requirements of local wage and benefit programs
SUMMARY; Resolution recognizes that many non-profit organizations serve vulnerable populations and that these organizations face certain financial limitations that result from their federal and State funding sources. Resolution recognizes that operational costs in local jurisdictions can be higher as a result of wage and benefit requirements. Resolution, therefore, recommends that the City support legislation or administrative action at both the State and Federal levels to ensure that governmental reimbursement formulas be structured to provide adequate funding to meet the requirements of local wage and benefit programs.
BACKGROUND: Cities across the nation, and particularly in California, have adopted minimum wage requirements that are higher than those required by federal and state laws. Certain non-profit organizations may have difficulty meeting these local wage and benefit requirements due to their originating source of funds. Many social services and health care services are provided through non-profit organizations that receive reimbursements from federal or state governments. These reimbursements may be set according to state and federal wage and benefit requirements, without adjustments to recognize local laws. Without adjustments to meet local requirements, these nonprofit organizations may need to reduce their payroll and services in order to continue to operate. Resolution seeks federal and state action to ensure that reimbursement rates reflect local wage and benefit requirements. Such an adjustment would ensure that services could continue to be provided in these jurisdications (sic).
4. More Litter on the Highways and Roads if Parolees Are Covered by the City’s Minimum Wage Law
There are also ambiguities about whether or not the Oakland minimum wage preempts the state minimum wage for parolees picking up litter from the roads:
Golden State Works/ California Department of Corrections (“CDCR”) – These work crews of individuals on parole conduct beautification projects on CalTrans right-of-ways and receive job placement support. Participants currently receive $10.00 per hour. The OCA initially ruled Measure FF is applicable for work performed within the City of Oakland. CDCR is conferring with their contracts unit, which initially indicated that state minimum wage law would prevail…
Voters of Oakland may have inadvertently given themselves more litter on the roads of Oakland when they approved a city minimum wage increase.
Sources
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.