Reviving the living wage

In what recently has cooled into a subtle, gentlemanly fight for a living wage in the city of Sacramento, opponents seem to be counting on time as one of their main weapons.

Living-wage supporters insist the city is on the verge of joining more than 80 other cities nationwide in implementing an ordinance to raise the standard of living for employees covered by city contracts, but Sacramento has teetered so long on the brink that supporters are beginning to suspect the city of foot dragging.

Whether the delays are intentional or not, recommendations for a living-wage ordinance likely will clear the Law and Legislation Committee this November and head for a vote in front of the City Council soon after.

The city of Sacramento’s special projects manager, Mike Medema, admits that the process has taken longer than expected, but he says City Manager Bob Thomas wanted a thoroughly researched report on the potential effects of a living wage on the city’s overall economic health. A thorough analysis will allow supporters and opponents to debate the merits of the ordinance as opposed to details such as the cost to the city.

Both sides wait patiently for Economics Research Associates (ERA) of San Francisco’s analysis, which was scheduled for release in June of this year. It was delayed, ERA analyst Linda Chu said, by the complexity of the task. She said city staff needed to review numerous city contracts in order to provide ERA with the details that would help analysts understand the potential impact.

While ERA continues its work, a separate research group has completed its own report on the pros and cons of a living wage in Sacramento. That group, headed by Dr. Suzanne O’Keefe, an economics professor at California State University at Sacramento (CSUS), had been one of the two finalists in the bid to complete the city’s financial analysis. When the group lost the bid, it decided to continue with the research regardless.

O’Keefe’s group concluded that a living wage would increase the buying power of low-wage workers, but a substantial portion of their new income would go to replacing federal and state aid for which they would no longer qualify. At the same time, the report said the city would have to pay subsidies to its contractors to offset the costs of higher wages, making a living-wage ordinance an expensive answer to a very real problem.

In spite of O’Keefe’s group’s conclusions, living-wage advocates see their ordinance as an obvious and necessary change in city policy. While economists and analysts are asking if a living-wage ordinance is affordable, labor, religious and economic-justice advocates are asking if we want to live in a city where employers pay such low wages that working families can’t support themselves.

The living-wage movement in Sacramento can be traced back to the first discussions among members of the Sacramento Central Labor Council in September of 1999. A coalition of supporters from various churches and civil-rights organizations gathered together to approach the city of Sacramento with the idea in February of 2001. The Living Wage Coalition then submitted a draft ordinance in June of 2001.

Like those passed in Los Angeles, San Jose, San Francisco and seven other California cities, Sacramento’s ordinance insisted that companies contracted with the city pay their employees not just the standard minimum wage, but a wage high enough to keep an average family at or above the poverty level. Sacramento’s proposed ordinance called for a $10 per-hour wage plus health insurance or a $12.84 per-hour wage without.

Reviewing the proposed ordinance, Thomas, the city manager, asked a number of follow-up questions of living-wage advocates and then determined in late 2001 that the proposed ordinance needed a thorough economic analysis before being voted on by the City Council.

A year later, that report has yet to be completed.

Some delay is understandable. The city had to review bids and hire a research group. This process began in February of 2002, with a request for proposals, and ended in the spring, when Medema asked the two remaining competitors how quickly they could complete their research.

“We told them we’d be done June 21st,” said O’Keefe. Apparently, that was too late, she said, because the contract was awarded to ERA. But, almost three months past O’Keefe’s proposed deadline, ERA have not completed the analysis and have since heard from Medema that Thomas would like to expand the scope of their report to include analyses of alternatives to a living wage.

Medema defends the delays by saying that if the city’s going to spend some money on poverty reduction, officials should take the time to study the best way to spend that money. But, to living-wage advocates, it just seems like a stall tactic by city staffers who oppsoe the living-wage proposal.

“Their commitment was to analyze our proposal, not alternatives,” said Brian Kettenring of the Association of Citizen Organizations for Reform Now, popularly known as ACORN. In his opinion, the delays are meant to hold off the inevitable. Kettenring believes he’s already gained the support of a majority of the City Council members, so the extended analysis is irrelevant to the outcome.

A living wage is an emotionally appealing strategy for poverty reduction. It allows working families to increase wages while decreasing families’ dependence on state and federal aid. It would be difficult to oppose a living wage without appearing to be insensitive to the difficulties of Sacramento’s working poor—even though the ordinance would apply only to city contracts and therefore only would affect somewhere between 1,500 and 5,000 workers, depending on who is considered eligible.

Kettenring, who has championed many progressive issues that have gone nowhere, said the politics are on his side for a change. “Elected officials can’t afford to vote against a living wage in this modern era,” he said.

Though the living-wage ordinance makes for appealing policy, it does have important critics, who argue that it has a negligible effect on poverty. Medema noted in an informational sheet prepared for ERA, “Studies exist that indicate the living wage has adverse, neutral or positive financial impact depending on the author.”

Though important reports have found consistent improvements in the rate of poverty, other reports have focused on the job losses due to higher-skilled workers displacing lower-skilled workers in jobs that traditionally earn low wages.

Critics also are concerned that when wages are increased, the employer has to increase costs to the consumer. In some cases, that means Sacramentans might have to pay more to visit nonprofits like the Sacramento Zoo or Fairytale Town that contract with the city.

A more controversial element of living-wage ordinances is how well they serve the people they seek to help.

O’Keefe found that a living-wage ordinance would offer Sacramento families with one working adult between $2,813 and $5,040 more per year based on a living wage of between $8.50 and $10 an hour. She also found that that increase would dwindle to slightly more than half that much because of the loss of childcare credits, food stamps, earned income-tax credits and other state and federal aid.

A living wage would save federal and state dollars, but the city might have to offer subsidies to its contractors in order to remain competitive, asserts O’Keefe.

Is that a good enough reason to try another alternative to a living wage? It’s something to consider, O’Keefe believes. She suggests earned income-tax credits, vouchers for childcare services and health-care services would be less expensive to the city.

But Kettenring and others assert that the living wage isn’t only about improving buying power for the working poor.

“Living wage isn’t just about poverty reduction,” said Kettenring. “It’s about economic development. Do we want a two-tier economy or a high-wage economy?”

Living-wage advocates believe employers have an obligation to pay their employees a living wage and that, by doing so, employers improve the buying power of poor working families, which boosts local economies. But O’Keefe says she’s never seen any research proving that high-wage economies grow faster than economies with larger gaps between low-wage and high-wage earners.

A couple thousand dollars a year would be an important change in the lives of Sacramento families, but can the city afford it?

“That’s for the City Council to decide,” said O’Keefe, “not me.”

When will the City Council get to decide?

ERA has been tasked with analyzing other alternatives to a living wage, but the scope of their research has yet to be determined, and some of the most basic issues for a living-wage analysis, including an appropriate hourly wage, the number of employees affected and whether part-time workers should be included, have yet to be determined, according to Chu, the ERA analyst.

Councilman Steve Cohn has insisted that November 19 is the latest possible date to hear the city’s recommendations based on ERA’s report.

“The Law and Legislation Committee was always in control of the timeline,” said Medema.

But ERA’s Steve Spickard said that even if the city staff answered all standing questions immediately, the earliest ERA could complete its analysis would be early to mid-November. With such a tight timeline, living-wage supporters will have very little opportunity to analyze the report and its methodology before Thomas makes his recommendations to the council.

The process of drafting a living-wage ordinance has been characterized as cordial collaboration between the Living Wage Coalition, the city and living-wage critics in recent months, but the creeping pace of the economic analysis could change this relationship come November.

Activists like Kettenring already are preparing to “raise holy hell” if the report is not to be the fair and accurate analysis the coalition was promised.