Study of Living Wage Ordinance in the City of Study of Living Wage Ordinance in the City of Ventura: The Economic Impact on Workers, Ventura: The Economic Impact on Workers,

Contractors and the CityContractors and the City

Jamshid Damooei, PhDJamshid Damooei, PhDProfessor of Economics and Chair Professor of Economics and Chair

Department of Economics, Finance and AccountingDepartment of Economics, Finance and AccountingCalifornia Lutheran UniversityCalifornia Lutheran University

September 28September 28thth, 2009, 2009

Components of the PresentationComponents of the Presentation

Study BackgroundStudy Background Arguments for and Against Living Wage Arguments for and Against Living Wage

OrdinanceOrdinance Examining the Impact of LWO in City of Examining the Impact of LWO in City of

VenturaVentura Findings and Possible Policy ImplicationsFindings and Possible Policy Implications Q and AQ and A

Study BackgroundStudy Background The Rational Behind the Ordinance:The Rational Behind the Ordinance:

– A city government should not contract with or subsidize employers A city government should not contract with or subsidize employers who pay poverty-level wages.who pay poverty-level wages.

Ventura City Followed, the County (2001) , Oxnard Ventura City Followed, the County (2001) , Oxnard (2002), Port Hueneme (2003) in May of 2006.(2002), Port Hueneme (2003) in May of 2006.

Created agreement by providing exceptions and Created agreement by providing exceptions and exclusions.exclusions.

Important vote for protection of low wage workers.Important vote for protection of low wage workers. Need for more comprehensive study in 2008.Need for more comprehensive study in 2008.

Arguments for and Against Living Arguments for and Against Living Wage OrdinanceWage Ordinance

Arguments Against:Arguments Against:– Increase in wage reduces the number of jobs offered .Increase in wage reduces the number of jobs offered .– Substitution of more skilled workers.Substitution of more skilled workers.– Use of capital-intensive methods of production.Use of capital-intensive methods of production.– Cost of Contracts to cities and counties go up. Cost of Contracts to cities and counties go up. – Companies may increase prices to consumers. Companies may increase prices to consumers. – Companies may bill the City at a higher level.Companies may bill the City at a higher level.– Companies may leave the City.Companies may leave the City.– Reduction of wages within the companies.Reduction of wages within the companies.– Greater restriction for upward mobility within companies Greater restriction for upward mobility within companies

Arguments for and Against Living Arguments for and Against Living Wage Ordinance….ContinuedWage Ordinance….Continued

Arguments For:Arguments For:– Living wage laws benefit working families. Living wage laws benefit working families. – Increased productivity by reduction in workers’ turnover.Increased productivity by reduction in workers’ turnover.– Increased productivity by reduction in absenteeism.Increased productivity by reduction in absenteeism.– Competitive bidding process may reduce growth in Competitive bidding process may reduce growth in

contract prices. contract prices. – Improvement in bidding by keeping low wage bidders Improvement in bidding by keeping low wage bidders

out.out.– Long-term relationships versus competitive bidding.Long-term relationships versus competitive bidding.– Higher wages is a good discipline and create stable Higher wages is a good discipline and create stable

businesses.businesses.

Examining the Impact of LWO in City Examining the Impact of LWO in City of Venturaof Ventura

Developed three separate Developed three separate questionnaires:questionnaires:– The employees’ questionnaire with 35 items of The employees’ questionnaire with 35 items of

inquiries.inquiries.– The owner/manager questionnaire with 50 The owner/manager questionnaire with 50

strings of questions.strings of questions.– The Municipality questionnaire included 25 The Municipality questionnaire included 25

strings of informationstrings of information

Examining the Impact of LWO in City Examining the Impact of LWO in City of Ventura….continuedof Ventura….continued

In total, 47 employees were interviewedIn total, 47 employees were interviewed– Quality Landscape Care (30)Quality Landscape Care (30) – Sunridge Landscape (5 employees)Sunridge Landscape (5 employees)

– US Metro (9 employees)US Metro (9 employees)

– City of Ventura (3 employees)City of Ventura (3 employees)

50% of the employees have been with their companies less than 3 years.50% of the employees have been with their companies less than 3 years. 38.3% between three to ten years.38.3% between three to ten years. 8.4% more than ten years.8.4% more than ten years. 95.7% Hispanic, 2.1% White, 2.1% Indian American95.7% Hispanic, 2.1% White, 2.1% Indian American 74% married, 26% not married, More than 80% have children74% married, 26% not married, More than 80% have children 89% male and 11% female89% male and 11% female 23% have other family members in addition of children living with them23% have other family members in addition of children living with them 27.7% live in the City of Ventura 27.7% live in the City of Ventura

Findings and Possible Policy Findings and Possible Policy ImplicationsImplications

Workers Survey:Workers Survey:– 17 workers out of 47 worked in their companies before LWO was Passed17 workers out of 47 worked in their companies before LWO was Passed– Some 90% of workers are working for 40 or more hours a week.Some 90% of workers are working for 40 or more hours a week.– Health Insurance before Passage of LWO: 88.2% no, 11.8% yes (17 Health Insurance before Passage of LWO: 88.2% no, 11.8% yes (17

observation).observation).– Health insurance after the passage: 19.1% yes, 72.4% No, and 8.5% not Health insurance after the passage: 19.1% yes, 72.4% No, and 8.5% not

answered (total observation 47). answered (total observation 47). – Health insurance for family members: 0.0% before, 6.4% after.Health insurance for family members: 0.0% before, 6.4% after.– Wages on average improved by 30.8% over a period of three years. Wages on average improved by 30.8% over a period of three years. – Similar percentage based on wage comparison of those that are working for Similar percentage based on wage comparison of those that are working for

the same companies in the City of Ventura and other cities without LWO.the same companies in the City of Ventura and other cities without LWO.– Wages of 64.7% went up immediately other had to wait for the policy to be Wages of 64.7% went up immediately other had to wait for the policy to be

used (total observation 17). used (total observation 17).

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

In the following areas total percentages of strongly agree or In the following areas total percentages of strongly agree or agreed exceeded the total of disagreed or strongly disagreedagreed exceeded the total of disagreed or strongly disagreed ::– Having a LWO made me work harder Having a LWO made me work harder – I feel that I am more valued by my company because of the LWOI feel that I am more valued by my company because of the LWO– Increase in my pay through the LWO makes me miss work lessIncrease in my pay through the LWO makes me miss work less

In the following areas total percentages of strongly agree or agree was In the following areas total percentages of strongly agree or agree was less the disagree or strongly disagree:less the disagree or strongly disagree:– A living wage made my company look for more skilled workers.A living wage made my company look for more skilled workers.– Without the LWO, I would not be able to receive health insurance.Without the LWO, I would not be able to receive health insurance.– I feel my working hours are reduced because of the LWO.I feel my working hours are reduced because of the LWO.

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

Employers/Companies SurveyEmployers/Companies Survey::– Two of companies are involved in landscaping and one provides Two of companies are involved in landscaping and one provides

janitorial services.janitorial services. – One of the three has been doing business in the City for the last One of the three has been doing business in the City for the last

five to ten years. five to ten years. – Other two more than ten years.Other two more than ten years.– All three companies have City contractors for three to five years.All three companies have City contractors for three to five years.– None of the companies were either franchised or part of a national None of the companies were either franchised or part of a national

or regional chain. or regional chain.

– One of the three had branches in other cities without LWO.One of the three had branches in other cities without LWO. – None have any plans to move away from the City of Ventura.None have any plans to move away from the City of Ventura.

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

Based on the pattern of responses we can come to the following Based on the pattern of responses we can come to the following conclusions:conclusions:– Living wage ordinances make workers work harder.Living wage ordinances make workers work harder.– Workers are less likely to miss work.Workers are less likely to miss work.– A LWO works good for those who are up for promotion.A LWO works good for those who are up for promotion.– Passage of a living wage ordinance may create greater demand for a skilled Passage of a living wage ordinance may create greater demand for a skilled

workforce and therefore greater competition in the unskilled labor market.workforce and therefore greater competition in the unskilled labor market.– The LWO did not negatively impact the increase in pay for non-living wage jobs in The LWO did not negatively impact the increase in pay for non-living wage jobs in

most companies concerned.most companies concerned.– The LWO marginally impacted the overall payroll as for a number of them the pay The LWO marginally impacted the overall payroll as for a number of them the pay

level was close the living wage level.level was close the living wage level.

– Most companies did not increaseMost companies did not increase their bid for their contracts significantly. their bid for their contracts significantly.

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

– Charging the City more in order to make up for the higher wages is not a Charging the City more in order to make up for the higher wages is not a regular practice.regular practice.

– Some companies liked the ordinance as it reduced the number of Some companies liked the ordinance as it reduced the number of contractors paying low wages out of bidding process. contractors paying low wages out of bidding process.

– Most companies did not increase their prices to customers in the City.Most companies did not increase their prices to customers in the City.– LWO attracts more efficient companies to the City. LWO attracts more efficient companies to the City. – LWO reduces employees’ turnover and companies benefit from a greater LWO reduces employees’ turnover and companies benefit from a greater

learning curve effect. learning curve effect. – LWO created a significant positive impact on the wellbeing of their workers. LWO created a significant positive impact on the wellbeing of their workers. – Most of the companies agreed that the LWO did not discourage them from Most of the companies agreed that the LWO did not discourage them from

bidding for contracts. bidding for contracts. – Some succeeded to make up for the increase in their costs through Some succeeded to make up for the increase in their costs through

increase in their workers’ productivity. increase in their workers’ productivity. – With some doubt about one company, the other two are not deterred and With some doubt about one company, the other two are not deterred and

will be seeking other contracts with the City. will be seeking other contracts with the City. – Most companies have not experienced any reduction in their profitability. Most companies have not experienced any reduction in their profitability.

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

Possible Policy Recommendations:Possible Policy Recommendations:– The City of Ventura brought a policy that benefits its workers, their The City of Ventura brought a policy that benefits its workers, their

families, attracts more efficient companies to contract with the City families, attracts more efficient companies to contract with the City and these companies provide greater stability for themselves and and these companies provide greater stability for themselves and

for their workers.for their workers. – The study finds that at least one of the City contractors provides The study finds that at least one of the City contractors provides

health insurance for a number of its living wage workers. health insurance for a number of its living wage workers. – The study shows LWO in a city can be more successful if other The study shows LWO in a city can be more successful if other

nearby cities adopt the same policynearby cities adopt the same policy– Bringing such transformation to other cities is outside the ability of Bringing such transformation to other cities is outside the ability of

the City of Ventura, expanding this good policy to other the City of Ventura, expanding this good policy to other departments is a good reconsideration.departments is a good reconsideration.

Findings and Possible Policy Findings and Possible Policy Implications…continuedImplications…continued

– LWO is most likely to increase efficiency through harder work, missing work LWO is most likely to increase efficiency through harder work, missing work less and a better feeling among the workers that their work is appreciated less and a better feeling among the workers that their work is appreciated more. more.

– We had a small number of workers and managers whom we interviewed, this We had a small number of workers and managers whom we interviewed, this should not be considered as a reason to undermine, reject or belittle the should not be considered as a reason to undermine, reject or belittle the relevance or the strength of the findings of this study.relevance or the strength of the findings of this study.

– We conducted a census of all workers and managed to interview a majority of We conducted a census of all workers and managed to interview a majority of them. them.

– We interviewed all three managers of the workers who have contracts with the We interviewed all three managers of the workers who have contracts with the City. City.

– Burden of LOW as a deterrent not to bid for contracts has no concrete Burden of LOW as a deterrent not to bid for contracts has no concrete foundation. foundation.

– A big drop in companies’ profit is not a sound conclusion.A big drop in companies’ profit is not a sound conclusion.

– Finally, although a city might have some budgetary expenses, the benefits of Finally, although a city might have some budgetary expenses, the benefits of having this ordinance outweigh the drawbacks by a clear margin of positive having this ordinance outweigh the drawbacks by a clear margin of positive difference. difference.

The EndThe End

Q and AQ and A

Thanks and will be happy to answer any Thanks and will be happy to answer any questions that you may havequestions that you may have