Small Business

LA union wants to be exempt from $15 minimum wage

Protesters on the steps of Los Angeles City Hall, June 3, 2015, before the City Council voted on an ordinance that would raise the minimum wage in Los Angeles to $15 per hour by 2020.
Al Seib | Los Angeles Times | Getty Images

As cities and states move independently to raise mandated pay for workers, the role of unions has emerged in the national fight for $15 an hour.

In May, the Los Angeles City Council voted to lift the minimum wage to $15 an hour by 2020. As the council reconvenes this week after a summer recess, the group is expected to take action on a union-backed clause in the wage bill that would exempt unionized workers.

Union officials argue the exception would allow them to negotiate better overall contracts, while some critics say the exemption would create an uneven playing field for mandated wages.

"The argument for a union exemption for minimum wage is that workers represented by unions have the ability to bargain for a combination of wages, benefits and working conditions that works best for them," says Chris Tilly, an urban planning professor at the University of California, Los Angeles.

"The idea is that their interests are being met," said Tilly, also director of the UCLA Institute for Research on Labor and Employment.

City by city

I would never do anything to undermine the rights of any worker.
Rusty Hicks
Los Angeles County Federation of Labor, AFL-CIO
Rusty Hicks
Glenn Koenig | Los Angeles Times | Getty Images

The exemption proposal was made by Rusty Hicks, executive secretary-treasurer at the Los Angeles County Federation of Labor, AFL-CIO. Similar exemption clauses are not uncommon in laws passed to raise local minimum pay.

The collective bargaining clause in the wage bill "preserves and protects basic worker rights, and that is why nearly every city in California that has ever passed a minimum wage ordinance has included these protections," said Hicks in a prepared statement. "I recognize it needs additional time for debate in front of lawmakers and the public, and I support that.

"I would never do anything to undermine the rights of any worker," said Hicks, also a leader in the local "Raise the Wage" campaign that fought for the $15 minimum wage.

Some of the queasiness about a union clause in the L.A. wage bill may stem from shifting attitudes about unions over the decades. Are unions something every American worker should have access to, or a special interest group issue?

"I think unions are a standard piece of American democracy," said Tilly of UCLA. "But I think that's disappeared from public discourse."

Bigger picture, the fight in Los Angeles for $15 demonstrates the growing power that select cities have in shaping the national wage fight.

Seattle led the charge last year, when the city council voted to boost the city's minimum hourly rate to $15—more than twice the federal amount of $7.25 an hour. In November, San Francisco voters decided to lift the city's minimum pay to $15.

Read MoreThe $15 wage fight just got a whole lot more interesting

And in New York last week, a wage board—appointed by Democratic Gov. Andrew Cuomo—moved to raise the pay floor to $15 for thousands of fast-food workers throughout the state. Cuomo used existing wage laws and bypassed legislative approval. New York state's workforce has 180,000 fast-food workers—the fourth highest in the nation.

The broader strategy at play here, among wage advocates, includes cities planting the $15 wage stake first. The hope is that states will follow.

"At this point, cities are taking the pioneering role," said Tilly of UCLA. "We're going to see states prompted into increased action. It won't be too much longer before there's a higher federal minimum wage."

Fast food wages rising
Fast food wages rising

The role of individual cities in shaping the national wage fight dates back to the push for living wages.

'Trickle-up effect'

The modern living wage movement can be traced to Baltimore about 20 years ago. In 1994, the city passed an ordinance requiring firms to pay employees a rate above the minimum wage while working on city contracts. "That built momentum for states to push higher state wages," Tilly said.

A living wage is based on the amount someone needs to earn to cover basic costs of living. A minimum wage is the lowest amount an employer may pay legally that's established by the government.

Fast forward to when the federal minimum wage was last raised, six years ago last week. "To some extent there's a trickle-up effect," Tilly said.

But what about the "real" value of the minimum wage?

A common reference point in the wage debate is the real—or inflation-adjusted—value of the minimum wage. If the minimum wage had kept pace with price increases since 1968, by 2014 it would have stood at $9.54—about 32 percent higher than its actual level, according to analysis from the Economic Policy Institute, a nonprofit think tank.

According to institute analysis, a federal minimum wage of $12 in 2020 would return the wage floor to about the same position in the overall wage distribution that it had in 1968.

Opinions on both sides

But some businesses including franchise groups oppose higher mandated pay.

The International Franchise Association in a statement last week said Cuomo's decision on fast-food worker wages discriminates against the quick-service food industry.

"Applying a new mandatory minimum wage increase to a narrow group of businesses creates an unlevel playing field for owners that provide important entry-level jobs and valuable experience for millions of workers across the state of New York," said Steve Caldeira, president and chief executive of the franchise association.

Sherry Stewart Deutschmann, founder and chief executive of LetterLogic in Nashville, Tennessee.
Photo: Michael W. Bunch

Mandated higher pay, of course, is a divisive issue and some small business owners say raised wages can lift employee retention and ultimately profits.

At 55-employee LetterLogic, a commercial printer in Nashville, Tennessee, starting pay for workers is around $14 an hour—roughly double the state's minimum of $7.25. Printing is a low-margin business, and great service allows LetterLogic to charge more than its peers.

LetterLogic founder and CEO Sherry Stewart Deutschmann does public speaking on wages and company culture. The most common question she's asked is: How she can afford to pay $14 an hour?

"We're not successful in spite of [higher wages], we're successful because of it," Deutschmann said.

Her wage decisions are based on what her lowest-paid employees could live on in the Nashville area. Deutschmann looks around her factory floor, does the wage math in her mind and asks, "In what neighborhood could I afford to live? What school could the kids go to, what college?"