Copyright 2001 Gannett Company, Inc.

USA TODAY

August 21, 2001, Tuesday, FINAL EDITION

SECTION: NEWS; Pg. 2A

LENGTH: 1140 words

HEADLINE: 'Living wage' to some, 'business killer' to others

BYLINE: Martin Kasindorf

DATELINE: SANTA MONICA, Calif.

BODY:
SANTA MONICA, Calif. -- In this seaside city of 84,000, owners of restaurants
and luxury hotels are drawing a line in the sand. The thriving tourist industry
is fighting a new ordinance that forces employers to nearly double the wages of
the workers who make the beds and wash the dishes.


The $ 10.50-an-hour wage mandate, approved last month by a 5-2 City Council
majority, is at the cutting edge of a nationwide labor-union-backed campaign for
a "living wage." Proponents define a living wage as one that allows a worker to
support a family of four without food stamps or other public aid.


Since Baltimore pioneered the concept in 1994, 57 city and county governments
have gone beyond federal and state minimum wage laws -- the current federal
level is $ 5.15 an hour -- to enact a local living wage. Whether to expand New
York's living wage law is a lively issue in this year's mayoral race. Harvard
University students supporting living wage raises for the school's service
employees staged a lengthy sit-in last spring.


Santa Monica's law breaks new ground. Elsewhere, living wage laws have only
affected businesses with a financial link to the government -- contracts, tax
breaks or leases of public land. The Santa Monica policy applies to any business
with more than $ 5 million in annual revenue within a 1.5-square-mile coastal
tourism zone and the downtown core. The rationale is that employers of large
numbers of minimum wage workers have benefited from city investment of $ 183
million in improvements in the district, Mayor Michael Feinstein says.


But opponents of the law say it discriminates by raising an affected
company's labor costs over its nearby competitors. "This is a business killer,"
says Jeff King, chairman of the company that owns the Ocean Avenue Seafood
restaurant.


At least two restaurants that gross more than $ 5 million are considering
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USA TODAY, August 21, 2001

closing for lunch and subsequently laying off people to get under the law's
threshold. Sears has hinted that it might relocate.


After losing a 3-year City Hall battle, employers are trying to get voters to
overturn the ordinance. Monday, business interests submitted petitions to the
city clerk with thousands of signatures requesting a repeal be placed on the
2002 ballot. Petition circulators, financed by $ 250,000 in business
contributions, had blanketed supermarket parking lots and farmers' street
markets.


Clergy-led street rallies and a recorded telephone message from actors Martin
Sheen and Ed Asner had urged voters not to sign the petitions. Businesses say
they will go to court to invalidate the law if the petition drive or a public
vote fails.


The ordinance covers 2,000 workers in 40 businesses. Included are 11 hotels,
four restaurants and three department stores. Only "15 or 20" of the targeted
workers live in Santa Monica, says Vivian Rothstein of the Hotel Employees and
Restaurant Employees Union. Many others ride commuter buses 2 hours from distant
Latino immigrant communities, she says.


Santa Monica is a wealthy city. Room rates at the plushest shoreline hotels
start at more than $ 300 a night. Celebrities with homes here include Arnold
Schwarzenegger, Dustin Hoffman, Mel Brooks, Eric Clapton and Sally Field. Amid
the affluence, "we were not comfortable with getting tax income, including $ 20
million a year from the hotel bed tax, from companies that are underpaying their
workers," says Feinstein, one of two Green Party members on the council.


Alfredo Ramirez, 35, a waiter making the California minimum of $ 6.25 an hour
plus tips at the Broadway Deli, stands to get $ 10.50 an hour, plus $ 1.75 an
hour to help buy health insurance, if the living wage law takes effect next
July. He says his bosses "can afford to pay a little more."


But Marvin Zeidler, a co-owner of the Broadway Deli, says he'd have to raise
prices nearly 20% or apply for a hardship exemption from the new wage scale. "It
would add $ 1 million in labor expense, effectively putting us out of business,"
he says.


The reach of Santa Monica's law was no surprise to conservatives. They have
long dubbed the city the People's Republic of Santa Monica. The city passed a
rent-control law favoring tenants in 1978. A recent ordinance prohibiting banks
from charging fees for using ATMs is stalled by an attack in court.


The council approved the living wage law after receiving a favorable study by
University of Massachusetts economist Robert Pollin. He said that a 1990 city
ballot measure capping the number of beach resorts gives each existing hotel
about $ 1 million a year in extra profits. The bulk of wage increases will come
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USA TODAY, August 21, 2001

out of the hotels' windfall, Harvard University economist Richard Freeman says.


Business leaders say the wage hikes would cause replacement of some
low-skilled Latino immigrants by applicants with more education and English
skills.


But union official Rothstein says immigrants would keep their entry-level
jobs. "Not many Americans will do these jobs no matter how much they get paid,"
she says.


Michigan State University economist David Neumark, who has studied living
wage laws in 12 cities, concludes that "minor" replacements are outweighed by
substantial reductions in family poverty rates. Employers adjust by trimming
profit margins and finding efficiency gains from improved morale and lower
employee turnover, he says.


Activists in other cities with tourist districts are exploring the Santa
Monica prototype, but "because of the severity of the opposition here, they will
wait and see what happens," says Madeline Janis-Aparicio, executive director of
Los Angeles Alliance for a New Economy, which spearheaded Los Angeles' 1997
living wage law.


TEXT OF INFO BOX BEGINS HERE

Ordinances elsewhere in the USA

Some other communities that have adopted or considered "living wage"
measures:


Local governments requiring living wages of their private-sector contractors:
Baltimore; Boston; San Francisco; Allegheny County, Pa.; Miami-Dade County,
Fla.; New Haven, Conn.; Alexandria, Va.


Local governments requiring living wages of businesses receiving tax breaks
or subsidies: St. Paul; Minneapolis; St. Louis; Rochester, N.Y.; Ann Arbor,
Mich.; Cleveland; Santa Clara County, Calif.; San Antonio.


Local governments that guarantee their employees a living wage: Dayton, Ohio;
James City County, Va.; Orange County, N.C.; Travis County, Texas.


Communities that have rejected living wage proposals: Albuquerque; Dallas;
Knoxville, Tenn.; Missoula, Mont.; Montgomery and Prince George's County, Md.;
Nashville; New Orleans.


Communities in which campaigns for a living wage are underway: Ashland, Ore.;
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USA TODAY, August 21, 2001

Providence; Sacramento; San Diego; Santa Barbara, Calif.


Source: Employment Policies Institute