Recently released internal government documents measuring the cost of San Diego’s “living wage” ordinance added another piece to the mountain of evidence that shows that there is no such thing as a free lunch. The report indicates that the ordinance has increased the City’s contracting costs by at least $900,000 and the total bill is likely to go much higher. The findings should spark a reexamination of the ordinance when the City Council reconvenes in September.
Enacted with great fanfare in 2005 after intense lobbying by labor organizers and social activists, this ordinance mandates that to do business with the City of San Diego, contractors must pay their employees at least $10 an hour if they offer health benefits or $12 an hour if they do not.
Anyone interested in having a frank and honest discussion about this ordinance needs to acknowledge that the wages it mandates are paltry, especially in a region like San Diego that has a high cost of living. Indeed, these wages would barely raise a family of four above the federal poverty line. The daily struggles of working San Diegans were a key reason five members of the Council passed the ordinance in 2005. Poverty is a real problem and some would argue that the City should absorb extra costs and provide taxpayers with less so that a few hundred employees of contractors can get higher wages.
However, the ordinance’s proponents went further. Typical were the claims made by the former political director of the San Diego-Imperial County Labor Council, who was reported as saying, “Work has to be done. Workers are already on the job. What you get (with the higher wage) are better paid workers who are happier workers and better workers." The implicit argument seems to have been that the increased wages would lead to higher productivity, greater efficiencies and hence minimal impacts on taxpayers.
As first reported in the Voice of San Diego and as detailed in an internal city report posted on SDI’s web site (“Living Wage Ordinance Semi-Annual Status Report: July – December 2006”), the hoped-for productivity savings have not materialized. Taxpayers have had to increase spending by over $900,000 on services ranging from landscape maintenance around the Imperial Marketplace to security guards at the City’s wastewater facilities. On average, the living wage ordinance has increased the cost of relevant City contracts by more than 24%.
Unfortunately this is likely just the tip of the iceberg, since the report looked at only those contracts which have been renewed or subject to renegotiations through December 2006. In 2005, the City Manager estimated that if the living wage ordinance was enacted, the City’s cost for all of its contracted services would increase by an estimated $5.2 million. According to the current budget, $5.2 million would allow the City to hire at least 35 additional police officers, give firefighters a 2.5% to 3% raise, or double the Mayor’s “Facilities Maintenance Program.” $5.2 million could also be spent on fighting poverty in a way that helps more San Diego families. In a recent “View from SDI” editorial in this publication (“Cutting the Tax Burden on San Diego’s Working Poor”), SDI Senior Policy Analyst Vince Vasquez showed how a City investment of $5 to $6 million would allow for an enhancement of the Earned Income Tax Credit that could benefit tens of thousands of city residents.
But this isn’t just about dry numbers in a budget. The living wage ordinance can end up hurting the San Diegans it was intended to help. Consider the City’s landscape maintenance districts. In some communities, particularly those with little new development, maintenance district revenues are not growing. At some point, increased costs, like those imposed by the living wage ordinance, cannot be absorbed and either property owners will have to raise maintenance district assessments or, more likely, the amount of landscape work will have to be scaled back. That, in turn, will result in a reduction in the number of workers employed by City contractors. Those that keep their jobs will see a modest increase in wages but some workers are likely to be out of work.
So what happens next? The ordinance requires that, “on July 1, 2007, or as soon thereafter as is practicable, the City Managershall submit a report to the City Council generally describing the effects of the City of San Diego Living Wage Ordinance upon the City.” [SDMC 22.4235 (c)]. We would urge the Council to docket a report on this matter soon after they return from recess. If that report, which will examine all of the contracts renewed during fiscal year 2007, shows that the ordinance’s costs are over 20%, the Mayor should propose a suspension of the ordinance. If proponents object, the burden should be on them to identify the cuts they would make or the revenue they would find to fund this program. Acknowledging trade-offs and debating alternative ways to spend money is a hallmark of good government. It would be a welcome change from the “fuzzy math” that all too often has gotten our City into financial trouble.
Reader Feedback
There are no comments yet for this article. Be the first to post!
Post a Comment
Feedback Rules:
Users may post more than one comment, but should not pose as multiple users. Multiple posts from the same IP address but with a different user name on each will be reviewed to determine whether abuse has occurred.
Posts with personal attacks or unsubstantiated allegations may be edited or deleted.
If you have not posted before, you will be required to verify your email address before your post is displayed.
