HomeMy WebLinkAboutAgenda - 03-05-1997 - 10c o '
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ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: March 5, 1997
Action Agenda
Item# /0-�;
Subject: Report--A Living Wage for Orange County
Department: County Manager Public Hearing: Yes_X_No
Budget Amendment Required: Yes X_No
Attachment(s): Information Contact:
Report Manager's Office, Extension 2300
Telephone Numbers:
Hillsborough 732-8181
Durham 688-7331
Mebane 227-2031
Chapel Hill 967-9251
Purpose: To consider the appropriate nature, scope and wording of a possible living wage ordinance for
Orange County;to include the pros and cons of various living wage definitions.
Background: The attached report is provided by the Orange County Greens for the Board of Commissioners'
consideration. Dan Coleman representing the Greens will be present for the report.
Recommendation: The Manager recommends that the Board receive the report as information and instruct
the Manager and EDC Director to proceed with an analysis as described in the purpose
above.
02/18/97
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A Living Wage for Orange County
February 24, 1997
The Orange County Greens request that the Orange County Commissioners develop a living
wage ordinance for Orange County.
Background:
Last year, the County adopted, as part of its Economic Development Strategic Plan, a
"Statement of Corporate Citizenship" which states in part that good corporate citizens provide
"wages and benefits adequate to the well-being and dignity of all workers."A wage adequate to
the well-being of workers must be one that, at a minimum, keeps a full-time worker's family out
of poverty. The current federal minimum wage falls far below the poverty line.
A number of trends in the national and global economies contribute to the spread of
recent living wage campaigns: the growing gap between rich and poor, the growth of a
temporary workforce, mounting large scale lay-offs, declining real wages, the loss of union
membership, the failure of the federal government's minimum wage to keep pace, and the loss
of various governmental supports for the working poor.
What is a Living Wage?:
A living wage is typically defined as the amount that will keep a family of four above the
poverty line. The Department of Health and Human Services considers the poverty line to be
$15600 which, divided by 2080 hours of annual work, gives a living wage of $7.50. Some
communities have established a living wage comparable, in today's dollars, to the historic high
of the minimum wage. That amount is $6.56. Some areas try to adjust the living wage amount
with the consumer price index to reflect local conditions.
The Living Wage Ordinance:
A living wage ordinance would seek to improve the conditions of lower paid workers by
identifying the living wage and requiring businesses contracting with the County to pay at least
that wage. It would exemplify the County's commitment to the principles of corporate
citizenship. Living wage ordinances typically apply only to contracts over a certain threshold of
value so as to not over-burden small contractors or the County staff.
Attachments:
Attached you will find the Introduction to a recent report by the Preamble Center for
Public Policy which describes the living wage campaign in more detail. The Preamble Center
has analyzed the results of Baltimore's living wage ordinance and determined that the five
concerns most commonly raised by critics of such an ordinance have, in that case, not been
born out. Also attached are excerpts from sample ordinances from other areas.
Next steps:
The Greens urge you to direct the County Manager and the EDC to determine the
appropriate nature, scope, and wording of a living wage ordinance; also included should be the
pros and cons of various living wage definitions for Orange County.
We request that we be informed when the Manager's report comes back to you. There
are many organizations in Orange County, beyond those represented this evening, that work
with and are concerned with lower paid workers. They will want to appear before you to testify
as to the importance of such an ordinance for the well-being of workers in our county.
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Introduction
Observers from across the political spectrum now acknowledge that real wages have declined
for the majority of American workers over the last two decades. Wages for the bottom three-fifths
of wage-earners have been falling since 1979, and for four-fifths of wage-earners since 1989.
' The lowest wage workers have been the hardest hit. A worker at the 10th percentile (i.e.
earning less than 90%of wage earners and more than 40%) lost 17% of his or her real income from
1979-95, an hourly wage drop from $6.10 to $5.06 in 1995 dollars. Women in this category fared
even worse, with wages falling from $5.82 to $4.84 per hour.'
The minimum wage itself fell behind inflation from 1979-1989, losing 31% of its real
purchasing power during that period. This in itself was a significant cause of declining incomes for
the poorest workers.
What to do about the problem of declining wages, or indeed whether to do anything at all,
is a matter of heated debate. Business interests and conservative political leaders generally oppose
any direct government action to raise workers' wages. The argument is that government's role
should be limited to measures designed to increase business investment. This, it is claimed, will
ultimately lead to gains for workers.
From the political center to the left, there is support for some form of government action to
address the problem. One obvious mechanism is the minimum wage. On August 2, 1996, Congress
passed legislation raising the federal minimum wage to $5.15 by September of 1997. However, the
real value of the minimum wage after it is fully in effect will be about $4.89 in 1995 dollars. This is
still 24%below its value in 1968. The income of someone working 40 hours a week, 52 weeks a year
at this wage will still remain approximately 19%below the official poverty level for a family of three.
Furthermore, the political forces necessary to bring the minimum wage closer to its past real
value are not in evidence. Congressional Republicans fought hard against the recent increase,
filibustering in the Senate and attempting to gut the bill with amendments that, for example, excluded
millions of small businesses. Only five Senate Republicans broke ranks to vote against the latter
amendment that would have doomed the bill.
On the Democratic side, neither President Clinton nor the Democratic Congressional
leadership made any serious effort to increase the minimum wage when they had control of both
I Congress and the White House in 1993 and 1994. Further action to raise the minimum wage during
the next Congress seems unlikely, regardless of who controls the House and Senate.
The Living Wage
The decline in wages for low-income workers and the failure of the federal government to
t take stronger steps to address the problem have led to efforts to raise wages through legislation at
the state and local level. These efforts, commonly referred to as"living wage campaigns," have been
launched by grass-roots coalitions of community organizations, religious groups and labor unions—
led in many cases by the AFL-CIO's state labor federations and local central labor councils and the
1Mishel,Lawrence,Bernstein,Jared,and Schmitt,John. The State of Working America: 1996-97. Washington,
D.C.:Economic Policy Institute, 1996.
Association of Community Organizations for Reform Now (ACORN).' Living wage campaigns are
underway in more than a dozen states and municipalities.
In contrast to recent federal legislation, many state and local living wage campaigns make an
explicit effort to raise wages to the level necessary to keep the family of a full-time worker above the
poverty line. Some of the proposals would raise the minimum wage in a state or municipality to its
peak historical value under federal law ($6.47 per hour in 1995 dollars, achieved in 1968) and
thereafter index it to inflation. Others would mandate insurance benefits for low-wage workers. And
others would set wages according to local cost of living levels. The California Liveable Wage
Coalition, for example, took California's high cost of living into account when setting its minimum
wage goal above the federal level.
Many living wage campaigns do not seek to increase the minimum wage across the board in
a particular location. Instead they target only those employers who receive public money or public
contracts, requiring that these employers pay a certain wage as a condition of receiving these funds
or contracts. State and local programs that provide subsidies, tax abatements and other benefits to
private employers for the purpose of job creation and retention rarely distinguish between high and
low-wage employment. Nor do most cities and states that contract with private corporations for the
provision of public services impose any pay and benefits standards on contract recipients. As a result,
many companies receiving public subsidies and/or public contracts pay wages well below the poverty
level. The argument behind living wage laws is that governments should not be using tax dollars to
create or subsidize poverty-wage jobs, but rather should set a positive example by requiring
employers who receive public funds to pay a living wage.
Baltimore's living wage law is one of the first to compel contractors to pay employees enough
to keep a family of four above the poverty line. Other cities with such laws include San Jose, where
city contractors must pay employees union-scale wages. A Milwaukee ordinance requires city
contractors to pay employees $6.05 per hour, and increases yearly until the wage can raise a family
of three above the poverty line. Jersey City, New Jersey, requires a minimum wage of$7.50 per hour
be paid to employees of certain city contractors. And New York City recently established union-scale
wages and benefits requirements for some city service contractors.
Campaigns to ensure that beneficiaries of public funds pay employees a living wage are
underway in Los Angeles, Chicago, Boston and other locales. The Los Angeles Living Wage
Coalition drafted an ordinance that would require companies"that benefit from city taxpayer dollars"
(any business in receipt of a city contract, lease agreement, tax abatement or subsidy valued above
$25,000) to pay employees $7.50 per hour and provide them with health insurance benefits. The
estimated number of affected workers is over 14,000. A city council vote is expected this fall.
Chicago's Jobs and Living Wage Proposal, which would require a $7.60 per hour wage for
employees of city contractors or companies receiving city financial assistance, would affect 10,000
workers. The ordinance, introduced in the city council in May 1996, is now in the finance committee.
Community and labor groups in Boston plan to introduce a similar ordinance by the end of
the year. The Corporate Accountability and City Contracting proposal would tie financial assistance
and city contracts to business to community hiring requirements and a living wage of$7.49 per hour.
Table 1 lists living wage proposals under consideration around the country.
'ACORN is a national grass-roots community organization of low and moderate-income families.
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Proposals to require municipal contractors to pay a living wage have met with strong
opposition from business interests and some political leaders. Their most prominent arguments
include the following:
Higher Costs for Contracts. Critics argue that requiring city contractors to pay employees
wages substantially higher than the federal legal minimum will drive up the costs of city contracts,
imposing substantial new burdens on local taxpayers. The office of Los Angeles Mayor Richard
Riordan claims that the proposed Los Angeles living wage ordinance"will have a major impact on
the city's budget and may make it impossible to restructure the way the city delivers services."' The
Chicago Chamber of Commerce has advanced the same argument during the debate on the Chicago
living wage ordinance. A spokeswoman claimed that "[t]he new ordinance will. . . hurt the city by
creating artificially high wage rates. . . and increasing city procurement costs.0 In Baltimore, Mayor
Kurt Schmoke, contemplating a veto of the living wage ordinance passed by the City Council,
expressed fears that the contract cost increases would be so high the city would not have the funds
to pay for them.`
Fewer Workers Employed. Opponents also claim that because living wage laws will raise
labor costs, many contractors will seek to do the same work with fewer employees, thus costing
some low-wage workers their jobs. Economist Stephen J.K. Walters' arguments during the Baltimore
living wage campaign were fairly typical: "the big losers are all the states that have done the most to
make unionization easy and labor costly. . . . [The living wage would] price many of the workers right
out of their jobs."' According to the chief economist for the University of New Mexico Bureau of
Business and Economic Research,"the ones who are fortunate enough to keep their jobs will benefit
[from Albuquerque's proposed law], but we would see quite a few people at the minimum wage who
would lose their jobs.""
High Enforcement Costs. Critics claim that taxpayers will be further burdened by substantial
new costs to monitor and enforce employer compliance with the law. During the debate on the St.
Paul living wage proposal, a board member of the Chamber of Commerce stated, "The initiative
mandates that the city follow up on all projects after two years and impose fines and penalties for
noncompliance. Who do you think would end up paying to administer this ordinance? We would —
the taxpayers. . . . This new burden would be added at a time when taxpayers are demanding that we
reduce the price of government."'
Loss of Bidders. Opponents also claim that competition for city contracts will be reduced,
as fewer companies believe that they can place a competitive bid under the requirement of higher
ZThe"Living Wage"Issue-Fact Sheet,Office of Mayor Richard Riordan
3Foti,Ross."Group Wants City Contractors to Pay$7.60'Living Wage,"'The Press,June 19, 1996.
"Wage Bill Depends on Schmoke,"Baltimore Sun,December 4, 1994
5Walters,Stephen J.K."Is BUILD Trying to Tear Down?"The Baltimore Sun,June 22, 1994,p. 11 A.
6Domrzalski,Dennis. and Vukelich,Dan."6.50 City Minimum Wage Advocated,"Albuquerque Tribune,
August 15, 1996,p. 1.
'Given,William."Should City Jobs Initiative Pass?"Saint Paul Pioneer Press,October 10, 1995,p. 7A.
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wages. Less competition will lead to further cost increases. A Chicago Sun-Times editorial asserted
that although "proponents argue that [Chicago's proposed living wage] ordinance would make the
' bidding process more equitable for companies already paying a living wage, it is likely that the higher
cost of doing business would instead reduce the number of companies bidding."' And the Boston
Herald claims that"for a business in a competitive industry (and most are), increasing the cost base
' with [a living wage] requirement could simply lead it to drop the city as a customer."9
Creation of a Hostile Business Climate. One of the most prominent arguments of critics is
that businesses in general, not just those bidding on city contracts, will interpret the passage of a
' living wage law as a "bad signal" in terms of the city's overall business climate, leading to capital
flight from the city. At a time of bitter competition for job-creating investment, the argument goes,
a municipality would be placing itself at a grave disadvantage by passing a law that implies a lack of
commitment to keeping costs for businesses under control. According to a Boston Herald editorial,
"the [Boston ] proposal couldn't be better calculated to drive business out of the city.s10 The Los
1 Angeles Business Journal opined, "Simply put, the living wage threatens to derail the economic
revival that the City of L.A. has been enjoying," referring to the proposal as, Ja]nother bad,job-
killing idea."" The Minnesota Retail Merchants Association claims that "mandating wages like this
' will have a chilling effect on business development."12 Concerning Denver's ballot initiative to raise
the city's minimum wage, a City Councilman called it "retail suicide. . . . What we're going to do is
watch a lot of our economic base walk out of the city to the suburbs.""
I These arguments, and their variants, have been raised wherever living wage legislation is
under consideration. If they are correct, the case for this legislation would be severely weakened.
The purpose of this study is to determine, based on the experience of one of the first cities to
pass a living wage requirement for municipal contractors, whether the stated concerns of critics about
negative economic and fiscal consequences are or are not well-founded. We assessed the impact of
Baltimore City Ordinance 442, which went into effect on July 1 of 1995, in the following areas: the
cost of city contracts, the numbers of bidders seeking city contracts, the number of workers employed
by city contractors, administrative costs, and the overall business climate of the city of Baltimore.
It is our hope that the results of this analysis will be of use not only to the citizens of Baltimore, but
to elected officials and members of the public in other locales as they evaluate present and future
proposals for living wage requirements.
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'June 23, 1996.
9September 5, 1996.
""bid.
i I "Another bad,job killing idea,"Los Angeles Business Journal,September 30, 1996
12 Judy Cook,Main Retail Merchants Association,quoted in"Can Government Ensure a"Living Wage,"'
Investor's Business Daily,April 3, 1996, in reference to proposed state-wide Minnesota living wage law
13 Bartels,Lynn."Voters Will Decide on Wages,"Rocky Mountain News,August 6, 1996,p. 1.
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Excerpts from the Baltimore City Code Article 1, 26A
(d)(1)(i) A service worker shall not be paid less than the amount established by the
Board of Estimates for the prevailing minimum hourly wage rate for a service contract.
(d)(1)(ii) A copy of the prevailing minimum hourly wage rate for the service contract
shall be kept posted by the service contractor at the site of the work in a prominent
place where it can be easily seen and read by the service workers...
(d)(2) The service contractor shall pay the service worker compensation at the overtime
rates established by the Board of Estimates, which shall not be less than one and one-
half times the regular hourly rate of pay, for all hours worked in excess of eight hours in
any work day, or forty hours in any work week.
(d)(3) In the event that any service worker is paid less than the compensation to which
the service worker is entitled to under this section, the service contractor shall make
restitution to the service worker for the amount due, and shall forfeit and pay to the City
a penalty in the amount of$50 per day for each employee so underpaid...
(d)(4) On recommendation of the Wage Commission when a service contractor has
paid fines on more than 3 contracts in a 2 year period, the Board of Estimates may
prohibit a service contract vendor from participating in the bid process for.up to 3 years.
(d)(5) Any service worker may within 1 year from the date of the incident file a protest in
writing with the Wage Commission objecting to the amount of wages paid for services
performed by the service worker on a service contract as being less than the prevailing
minimum hourly wage rate for such services.
(d)(5)(i) A service contractor shall not discharge, reduce the compensation or otherwise
discriminate against any such service worker for making a complaint to the Wage
Commission, participating in any of its proceedings or using any civil remedies.
(g)(3) In the event the Board of Estimates shall determine upon recommendation from
the Wage Commission after note and hearing that any service contractor has failed to
pay the minimum wage rate or has otherwise violated the provisions of this heading and
that such failure was intentional, no contract shall be awarded to such service
contractor, or to any person in which such service contractor has an interest until 1 year
has elapsed from the date of determination, and provided, further, that any such
intentional violation of the provisions of this heading shall be a misdemeanor,
punishable upon conviction by a fine of not more than $500...
(h)(3) The ongoing goal is to achieve a rate which exceeds the poverty level as
defined in the index. For the first four years of the effective date of the ordinance,
the City's goal is to phase in an hourly wage rate of$7.70 by fiscal year 1999,
using the following timetable:
1996 $6.10
1997 $6.60
1998 $7.10
1999 $7.70
(additional sections describe monitoring, reporting, investigations, and sanctions.)
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Excerpts from the Milwaukee Ordinance (950181 subst 9, secs 310-13)
This ordinance requires any business holding a contract to provide services to the city
awarded after December 31, 1995, to pay its workers, both temporary and permanent,
a minimum of$6.05 per hour. On March 1, 1996, and each March 1 thereafter, this
minimum wage shall be adjusted to the level necessary to produce an annual income
equal to the U.S. Department of Health and Social Services' poverty guideline for a
family of 3. The minimum wage requirement applies to part-time, as well as full-time,
employees, and only to service contracts valued at more than $5000.
This ordinance also stipulates that a service contract must contain language stating that
the contractor agrees to pay the specified minimum wage...
the following sanctions may be imposed on a service contractor who provides false
information to the city or fails to comply with the provisions of the ordinance:
1. Withholding of payments.
2. Termination, suspension, or cancellation of the contract in whole or in part.
3. After a due process hearing, denial of the right of the contractor or
subcontractor to bid on future city contracts, by himself or herself, partner or
agent, or any corporation of which he or she is a member, for a period of one
year after the first violation is found and for a period of 3 years after a second
violation is found.
The minimum hourly wage shall be kept posted by the contractor at the site of the work
in a prominent place where it can be easily seen and read by persons employed...
Any person employed in the performance of a service contract... may within one year
from the date of an alleged failure to comply, file a written complaint...
(Additional sections describe monitoring, enforcement, and sanctions in more detail.)
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Table l: Examples of Proposed Living Wage Legislation
ICity or State Route to Description of Measure Status
Enactment
Albuquerque Ballot Initiative Raise minimum wage to Gathered required signatures;waiting to
$6.501hour qualify for December special election
Boston Legislative Require city contractors and Possible introduction of city council
subsidized businesses to pay ordinance by the end of the year.
$7.49/hour and hire from the
community
Chicago Legislative Require city contractors and Ordinance introduced to city council in May
subsidized businesses to pay 1996
$7.60/hour and hire from the
icommunity
Denver Ballot Initiative Raise minimum wage to Supporters gathered required signatures to
$6.50/hour in 1997;$6.85/hour in qualify for the November 1996 ballot.
1998;ST 151hour in 1999;indexed
to cost of living thereafter
Houston Ballot Initiative Raise minimum wage to Will begin gathering signatures in Fall for
56.50/hour city wide January 1997 ballot.
Los Angeles Legislative Require city contractors and Possible council vote Fall 1996
subsidized businesses to pay
$7.50/hour plus family health
benefits or$9.50/hour without
benefits
Minneapolis/ Legislative Joint Twin Cities Task Force is Possible introduction of proposed ordinance
St.Paul drafting living wage policies for by the end of the year; public hearing
city contractors and subsidized expected in the fall.
businesses
New Orleans Ballot Initiative Set city-wide minimum wage at Supporters have gathered 14,000
S 1.00/hour above the federal level signatures; 1997 timeline to be determined
California Ballot Initiative Raise the state minimum wage to Supporters gathered required signatures to
S5.00/hour in 1997 and qualify for the November 1996 ballot.
$5.75/hour in 1998
Minnesota Legislative Require state and city contractors Passed MN.House and Senate;vetoed by
and subsidized businesses to pay Governor
57.28/hour and hire from the
community
Montana Ballot Initiative Raise the state minimum wage to Supporters gathered required signatures to
54.75/hour in 1997;$5.25/hour in qualify for the November 1996 ballot.
1998;55.75/hour in 1999;
S6.25/hour in 2000.
Missouri Ballot Initiative Raise the state minimum wage to Supporters gathered required signatures to
$6.25/hour in 1997;$6.50/hour in qualify for the November 1996 ballot.
1998;56.75/hour in 1999;and
increase S.15 each year thereafter
Oregon Ballot Initiative Raise the state minimum wage Supporters gathered required signatures to
from$4.75 to$6.50/hour over qualify for the November 1996 ballot.
three years.
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