Economists disagree over effects of L.A.'s minimum wage hike

The Los Angeles City Council voted overwhelmingly Tuesday to raise the city's minimum wage to $15 an hour by 2020, up from the current $9 an hour, becoming the largest American city to set a target that has gone from almost absurdly ambitious to mainstream in the span of a few years.

The bill, which will need to clear a final vote, passed by a margin of 14 to 1. It comes in the wake of similar measures in Seattle and San Francisco, and as cities including New York and Washington consider raising their minimum wages to $15 as well. All of the $15 minimum wages enacted thus far will be phased in over time -- Los Angeles' would start by stepping up to $10.50 by July 1, 2016, and give businesses and nonprofits with fewer than 25 employees an extra year to comply.

The council's vote is another victory for a powerful coalition composed of labor unions, immigrant groups, community activists and newly elected council members who only seven months ago pushed through a $15.37 minimum wage for workers at large hotels. That move put those hotels in the position of arguing that the higher minimum should apply to all of the city's 3.88 million people.

Various economists have studied the effects of the higher minimum wage, and they disagree about what the actual impact will be.

One analysis commissioned by Mayor Eric Garcetti of an earlier, similar proposal -- to boost the minimum to $15.25 by 2019 -- found that 542,000 workers would receive a raise, taking into account the ripple effects on those who already make more than that amount. The average wage would increase by 20.4 percent, said researchers from the University of California at Berkeley, with the largest increases in the food-service, health-care, retail, administrative and waste-management industries. The study anticipated minimal job losses, causing a decrease of only 0.2 percent of the employment base by 2019.

Then there is the Los Angeles County Federation of Labor, which funded a study in 2013 that looked at the impact of a $15 minimum. That analysis sets the proposal against the backdrop of the city's mounting income inequality and argues that low-income workers would quickly reinvest all of the $7.6 billion extra in wages they could receive with a higher wage floor. It would also have a positive impact on public finances, adding $152 million per year to the city's coffers.

The story is a little different when you ask the Chamber of Commerce, which ordered up an analysis of a plan to raise the minimum to $13.25 an hour. The business group highlighted Los Angeles City's position within a larger metropolitan area, which allows the higher wage to benefit people who commute into the city to work while paying taxes elsewhere. Businesses might choose to locate in the suburbs to avoid pricier labor. They forecasted that even that smaller increase would kill between 70,000 and 140,000 jobs over the next five years.

Employers did negotiate one major concession, avoiding a proposed requirement that they offer 12 days of paid leave as well -- although that idea might come back before the end of the year.