SUPPLEMENTAL AGENDA MATERIAL

Transcription

1 Council Members Capitelli, Droste, Maio and Moore SUPPLEMENTAL AGENDA MATERIAL Meeting Date: November 10, 2015 Item Number: 01 Item Description: Revisions to Minimum Wage Ordinance BMC Supplemental/Revision Submitted By: Council Members Capitelli, Droste, Maio, and Moore Good of the City Analysis: The analysis below must demonstrate how accepting this supplement/revision is for the good of the City and outweighs the lack of time for citizen review or evaluation by the Council. This proposal addresses the fundamental problem of working people living in poverty due to stagnant wages while considering the unique and varied business landscape in Berkeley. Berkeley will have one of the most progressive minimum wage policies in the United States if adopted. Consideration of supplemental or revised agenda material is subject to approval by a two-thirds vote of the City Council. (BMC ) A minimum of 42 copies must be submitted to the City Clerk for distribution at the Council meeting. This completed cover page must accompany every copy. Copies of the supplemental/revised agenda material may be delivered to the City Clerk Department by 12:00 p.m. the day of the meeting. Copies that are ready after 12:00 p.m. must be delivered directly to the City Clerk at Council Chambers prior to the start of the meeting. Supplements or Revisions submitted pursuant to BMC may only be revisions of the original report included in the Agenda Packet. 1

2 TO: FROM: Honorable Mayor and Members of the City Council Councilmembers Lori Droste, Darryl Moore, Linda Maio and Laurie Capitelli SUBJECT: Revisions to the Minimum Wage Ordinance B.M.C RECOMMENDATION Approve in concept and direct the City Manager to return with ordinance language amending Berkeley Municipal Code Chapter to raise the minimum wage to keep pace with the cost of living and median wage. As it is currently written, the current version of the Minimum Wage Ordinance lacks a long-term solution to the fundamental problem of working people living in poverty due to stagnant wages. This proposal would continue increases to the minimum wage after the currently scheduled rate increases through This proposal increases the minimum wage to $15/hour by 2018 and offers a slightly slower phase-in for small businesses. SUMMARY Increase the Minimum Wage Table 1: Proposed Minimum Wage Revisions for the City of Berkeley Year Current Berkeley wage schedule Small business wage schedule Yearly increase Large business wage schedule Yearly increase 2015 $11.00 $11.00 $ $12.53 $ % $ % 2017 $12.53 $ % $ % 2018 $12.53 $ % $ % 2019 $12.53 $ % + local CPI 2020 $12.53 $ % + local CPI In Designing Thoughtful Minimum Wage Policy at the State and Local Levels, economist Arindrajit Dube s recommends using median wage, local costs of living, and regional coordination as instruments to set an appropriate level of the minimum wage. (Dube, 2014). By raising Berkeley s minimum wage to an amount that takes into account regional wage 1 Berkeley s existing and proposed wages are incorporated in the month of October. 2 After 2020, we recommend an automatic cost of living adjustment based on the Bay Area CPI. 2

3 schedules, the potential negative impacts cross-jurisdictional competition and business relocations are reduced significantly (Dube, 2014). This proposal mirrors approaches from Emeryville, Los Angeles, and Seattle in that we have recommended a tiered approach. The rationale for such an approach is to address concerns surrounding the livelihood of small businesses which make up over half of our businesses. We also request that staff returns to City Council in 2019 to present recommendations to merge the smaller business minimum wage with the large business minimum wage. Incorporate a Cost of Living Adjustment The Minimum Wage Ordinance went into effect on October 1, 2014 and provides a minimum pay requirement for all employees working at least two hours per week within the geographic limits of Berkeley. As of October 1, 2015, the minimum wage increased to $ The Minimum Wage Ordinance stipulates an increase to $12.53 on October 1, 2016, but does not provide changes after that date. The Minimum Wage Ordinance provides a floor wage, not a ceiling, for compensation and currently does not increase annually with the Consumer Price Index (CPI). We recommend adding an automatic Cost of Living Adjustment based on the local Consumer Price Index after the specified minimum wage floors are reached. Define Small Business Size For the purpose of the minimum wage schedule, we propose expanding the small business definition to 55 Full Time Equivalent (FTE) who work for compensation. We also don t want to define small businesses according to establishment size because many large multinational firms have several small establishments. Therefore, we recommend using firm size as the major determinant. In determining firm size, franchises must be counted at the national or multinational firm size. 3 Notwithstanding the above, nonprofits shall be subject to the small business wage schedule. Direct Service Charges to Workers This proposal also recommends that service charges should be directed to workers in hospitality (food services, hotels, etc.) businesses. Some businesses charge customers a service fee. In many instances, this fee is presented by the employer or perceived by the customer as replacing the optional gratuity. While California labor law precludes distributing tips to anyone except the service provider (typically the server), there are no such limits on service charges. We recommend staff create a policy to ensure that service charges are directed to the employee either in the form of cash or some other benefit, so long as it directly benefits the employee. The service fees should not be used in substitute of an appropriate minimum wage. Furthermore, for employers who charge a service fee, there shall be no reduction in wages or existing benefits. 3 Jacobs et al, Contra Costa s Proposed Minimum Wage Law: A Prospective Impact Study 3

4 Special Cases In order to address small business concerns, we recommend a ramp up period for smaller businesses under 55 employees. Additionally, we want to ensure that our youth (21 and under) have access to job training as well. Training wages should be no less than 80% of the minimum wage. Youth-in-training programs shall be clarified to specify its application only to temporary job-training positions. Temporary is defined as no more than 1,040 working hours in any 365- day period. Maintain existing job-training exemption provided that there is a set duration not to exceed one year, stated learning objectives and skills training, and close supervision and guidance. Individuals younger than 21 cannot do the same work while getting paid less. The exemption for on-call workers should be removed in its entirety. Additionally, staff should clarify the exemption for collective-bargaining agreements to properly reference federal law. OBJECTIVES AND RATIONALE In regions such as the Bay Area, where the cost of living is extraordinarily higher than the national average, municipalities like Berkeley have adopted local minimum wage standards that are significantly higher than both the federal and state minimum wage requirements. Although Berkeley has already taken a progressive step forward, we can do more. In devising a thoughtful minimum wage policy, we have analyzed the benefits and impacts to both workers and businesses and have consulted with dozens of concerned stakeholders, leading economists, union organizers, affected workers, and local business owners. The Councilmembers who have written this proposal represent a wide cross-section of our community we have worked minimum wage jobs, owned small businesses, joined unions, and share the desire to raise wages while valuing our community s economic diversity. The policy objectives of the revisions are as follows: 1. Expand the wage schedule in order to make the minimum wage keep pace with the cost of living and the median wage. 2. Include an automatic cost of living adjustment based on the local Consumer Price Index in order to keep the policy in step with the regional economy. 3. Establish clear rules and regulations around service charges in order to provide clear guidelines for local business owners and to ensure workers benefit. 4. Recommend and pursue regional coordination. We recommend that Berkeley City Council writes letters to State Senator Loni Hancock, State Assemblymember Tony Thurmond, and the City Council and mayors of Alameda, Albany, Lafayette, Oakland, Orinda, Piedmont, and Richmond urging a regional approach and asking them to match our commitment to raising the minimum wage to $15. We also want to urge local elected officials to convene a meeting to address minimum wage. 4

5 In September of 2015, UC s Institute for Research on Labor and Employment released a prospective impact study on Contra Costa s proposed minimum wage increase to $15 in This study is applicable to Berkeley for several reasons. First, the median annual earnings for workers in Contra Costa County and Berkeley are comparable. Secondly, the self-sufficiency hourly wage is almost identical. This research, like most minimum wage research, indicates that raising the minimum wage in an appropriate manner has a positive net benefit on all workers, particularly women and people of color. Additionally, minimum wage increases tend to affect those ages thirty and older and not teenagers (Cooper, 2013). Previous economic research has found little measurable effect on employment or hours from minimum wage policies. Most of the costs can be absorbed through reduced worker turnover, improved worker performance, and incremental increases to prices. Operational costs and restaurant prices would increase slightly (Reich, Jacobs, Bernhardt, & Perry, 2014). Prices would also likely increase in industries that typically employ low-wage workers (Dube, 2014). BACKGROUND As shown in the graph East Bay Minimum Wage Schedules, if this proposal is adopted, Berkeley would join San Francisco, El Cerrito, and Emeryville in leading our nation to address income inequality in a meaningful way. 5 4 Ibid. 5 Projections use CPI rates based on CA Department of Finance 5 year average. 5

6 Wage Per Hour East Bay Minimum Wage Schedules (5 year average Bay Area CPI) $17.00 $16.00 All other cities $15.00 Current Berkeley $14.00 Proposed Berkeley small business wage $13.00 Proposed Berkeley big business El Cerrito $12.00 Emeryville small biz Emeryville large biz $11.00 Oakland $10.00 Richmond $9.00 $

7 Table 2: Regional Minimum Wage Schedules shows a comparison of other Bay Area cities in close proximity (7 miles) to Berkeley and their respective minimum wage regulations. The statemandated minimum wage will increase to $10.00 in Table 2: Regional Minimum Wage Schedules Alameda $9.00 $10.00 $10.00 $10.00 $10.00 $10.00 Albany $9.00 $10.00 $10.00 $10.00 $10.00 $10.00 Berkeley current Berkeley small biz Berkeley big biz $11.00 $12.53 $12.53 $12.53 $12.53 $12.53 $11.00 $12.53 $13.00 $13.60 $14.25 $15.00 $11.00 $12.53 $13.70 $15.00 $ $ El Cerrito 7 $9.00 $11.60 $12.25 $13.60 $15.00 $15.30-$15.45 Emeryville small biz $12.25 $13.00 $14.00 $15.00 $15.63-$ $15.94-$16.74 Emeryville large biz $14.44 $ $14.87 $ $15.32 $ $15.78 $15.63-$16.25 $15.94-$16.74 Lafayette $9.00 $10.00 $10.00 $10.00 $10.00 $10.00 Oakland $12.25 $ $12.62 $ $13.00 $ $13.39 $13.26-$13.79 $13.52-$14.20 Orinda $9.00 $10.00 $10.00 $10.00 $10.00 $10.00 Piedmont $9.00 $10.00 $10.00 $10.00 $10.00 $10.00 Richmond $9.60 $11.52 $12.30 $13.00 $ $ San Francisco $12.25 $13.00 $14.00 $15.00 $15.30-$15.45 $15.61-$ Ranges include estimates of 2%-3% CPI. 7 El Cerrito Council decided not to address sick leave or service charges at this time. 8 In 2019, Emeryville small business will match large business wages. 7

8 Other Cities in the United States that Have Voted to Reach/Exceed $15/hour 9 El Cerrito (2019) Emeryville (2018 all businesses) Los Angeles (2021 all businesses) Mountain View (2018)* San Francisco (2018) Seattle (2021 all businesses without minimum compensation) *phase-in and exemptions yet to be determined Other Cities Considering $15/hour 10 Beverly Hills Davis New York (2019) Olympia Palo Alto Pasadena St. Louis (2020) Santa Monica (2020) Tacoma Washington, D.C. (2020) FISCAL IMPACTS OF THE RECOMMENDATION To be determined. 9 SeaTac, Washington voted to raise the minimum wage to $15 for hospitality and transportation workers at large businesses but did not apply to the entire city. 10 List is subject to change. City Minimum Wage Laws: Recent Trends and Economic Evidence National Employment Law Project Economic-Evidence.pdf 8