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AH&LA Media Monitoring - 6/12 Report
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Hotel industry groups sue to stop $15 wage from taking effect
Jun 11, 2015 | My News LA
By Alexander Nguyen
A pair of hotel industry groups filed papers in federal court Thursday in a renewed attempt to stop a $15.37 per hour minimum wage from taking effect on July 1 for some hotel workers in Los Angeles. The American Hotel & Lodging Association, a national hotel industry group, and the Asian American Hotel Owners Association sued the city of Los Angeles in December, and have been seeking a preliminary injunction against the hotel wage ordinance before it takes effect this summer. -
Santa Monica Takes First Steps To Increase Minimum Wage
Jun 12, 2015 | Santa Monica Mirror
By Brandon Dupre
With the Los Angeles City Council passing an ordinance earlier this week that will raise the minimum wage to $15 an hour by 2020, Santa Monica City Council is taking steps to follow suit. -
LA Approves $15 Minimum Wage
Jun 11, 2015 | Canyon News
By Taryn Moore
On Wednesday, June 10 the Los Angeles City Council approved the raising of minimum wage to $15 per hour. The main argument made for raising the minimum wage is that it is impossible for anyone to live in Los Angeles on only $9 per hour, and that city residents are struggling to afford to take care of their families because the cost of living is too high compared to wages. -
Santa Monica accelerates passage of higher minimum wage
Jun 11, 2015 | KPCC
By Ben Bergman
Stirred by the Los Angeles City Council's decision to raise the city's minimum wage, the Santa Monica city council decided Tuesday night to start drafting a higher minimum wage ordinance for their city. “Frankly, I think Los Angeles moved a bit faster than we thought, and while they didn’t flesh out their ordinance entirely they certainly spurred us to move more quickly,” said Mayor Kevin McKeown. -
Los Angeles City Council gives final approval to raising minimum wage to $15 by 2020
Jun 11, 2015 | KABC 7 Los Angeles
The Los Angeles City Council gave final approval on Wednesday to an ordinance that raises the minimum wage to $15 an hour by 2020. -
How much will minimum wage hikes hurt restaurants?
Jun 12, 2015 | CBS Money Watch
By Kate Gibson
Hikes in the minimum wage in cities and states around the U.S. will dent profit margins at restaurants, particularly at casual-dining chains, according to Moody's Investors Service (MCO). -
Minimum Wage Increases Likely to Hit Restaurant Profits, Moody’s Says
Jun 11, 2015 | Wall Street Journal
By Julie Jargon
Minimum wage increases are expected to eat into restaurants’ profits, with casual dining chains affected the most, according to a report from Moody’s MCO 0.04 % Investors Service. In one of the first independent analyses on the impact of rising wages on restaurant companies, Moody’s estimates operating profit margins could shrink by one to four percentage points as a result of more cities and states raising starting pay for hourly workers. -
$15-an-hour minimum wage passed in L.A.
Jun 11, 2015 | USA Today
The Los Angeles City Council Wednesday approved a 66% hike in the minimum wage to $15 an hour, a widely watched move by companies already fearing a upward trend in labor costs. Los Angeles is following movements to push wages up to $15-an-hour over time in both Seattle and San Francisco. But the move by the nation's second's largest city has enormous potential ramifications for companies that do business here – and helps set a national message.
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Regional News
National News
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Hotel industry groups sue to stop $15 wage from taking effect
Jun 11, 2015 | My News LA
By Alexander Nguyen
A pair of hotel industry groups filed papers in federal court Thursday in a renewed attempt to stop a $15.37 per hour minimum wage from taking effect on July 1 for some hotel workers in Los Angeles.
The American Hotel & Lodging Association, a national hotel industry group, and the Asian American Hotel Owners Association sued the city of Los Angeles in December, and have been seeking a preliminary injunction against the hotel wage ordinance before it takes effect this summer.
The ordinance, approved by the City Council in October, raises the minimum wage to $15.37 an hour for workers at Los Angeles hotels with 300 or more rooms, starting July 1. For hotels with at least 150 rooms, the higher wage will take effect July 1, 2016.
“We were compelled to take this step in order to protect our member hotels from suffering irreparable harm before the court has the opportunity to fully consider the legality of the Hotel Workers Act,” AH&LA President Katherine Lugar said.
The hotel industry groups’ request for a preliminary injunction was rejected by a federal judge in May, but the group filed an appeal today in an attempt to overturn that decision.
“We continue to believe the evidence will show that the (Hotel Workers Act) improperly disrupts the balance of economic power between labor and management,” Lugar said. “This imbalance creates unprecedented bargaining leverage for labor, violating the National Labor Relations Act.”
Lugar contends that “union efforts, in recent weeks, to insert an opt-out provision for unionized workplaces into the citywide wage ordinance further demonstrate that labor is not focused on wages for its members, but rather is planning on using this opportunity ‘as a weapon to pressure companies to unionize,”‘ she said, quoting from a newspaper op/ed.
The City Attorney’s Office did not immediately respond to a request for comment.
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Santa Monica Takes First Steps To Increase Minimum Wage
Jun 12, 2015 | Santa Monica Mirror
By Brandon Dupre
With the Los Angeles City Council passing an ordinance earlier this week that will raise the minimum wage to $15 an hour by 2020, Santa Monica City Council is taking steps to follow suit.
City Council on Tuesday night voted 5-0 (Councilmembers Ted Winterer and Pan O’Connor were absent) to direct staff to prepare a similar minimum wage increase ordinance.
“The day I decided to put this on, there was an editorial in the LA Times saying that the City of Los Angeles is an island, and I thought the City of Los Angeles shouldn’t be an island,” Councilmember Sue Himmelrich said, introducing the item. “I’ve long believed that the $15.37 minimum wage that we have for City workers and contractors with the City is something that should be happening everywhere and in every business.”
The Council was all in agreement with the introduction of the item and spent the rest of the discussion talking about specifics they want staff to look at.
Mayor Kevin McKeown had three issues that he addressed in regards to the new law passed by L.A. City Council. One was that “we make sure we include tipped workers” and are transparent about it. His second concern was that City staff creates language to allow for union workers to trade pay increases for other benefits as they saw fit.
And “lastly,” McKeown said, “I am concerned about what I am hearing from some businesses, mostly in L.A., that they want to put something on the bill like say a service charge that may appear to the customer as a tip to the employees, but in reality, in the way they are planning to do it, that money will go to the restaurant so the employee would never see the tip. I hope that whatever we do has some language in it that any money as a service charge must go to the worker that provided that service.”
Last September, Santa Monica City Council had directed City Staff to track the progress of the Los Angeles minimum wage process, which just passed 12 to 1 on its second, procedural vote on Wednesday.
The move, as Santa Monica Councilmember Gleam Davis put it, was to closely monitor L.A. and consider an ordinance only once L.A.’s passed, so that “the City of Santa Monica was not at a competitive disadvantage” if they acted too soon.
Now that L.A.’s vote has passed, smaller cities around L.A. such as Santa Monica can move forward with legislation without the fear of competitively hurting businesses.
The minimum wage discussion is nothing new to Santa Monica, which 15 years ago passed a coastal zone living wage, only to have it rescinded in a business-funded referendum.
“We then passed a minimum wage for all City contractors [of $15.37] and have specified a minimum wage of $15.37 an hour in recent hotel Development Agreements,” McKeown said.
Jerry Rubin, the lone public speaker on this item at Tuesday’s City Council meeting, was in agreement with Council on the topic and applauded their swiftness of action.
As things move forward, City staff as well as the Santa Monica Chamber of Commerce will continue to study the topic and work together to craft something that fits Santa Monica.
“We have not yet taken a position on the minimum wage being raised in Los Angeles or potentially here in Santa Monica, but we will certainly be a strong voice in that dialogue,” said Laurel Rosen, President and CEO of the Santa Monica Chamber of Commerce. “We need to proceed cautiously on any minimum wage discussions—a rushed, one-size-fits all approach may not take into account the diversity of needs and challenges facing these businesses.”
Whatever the route, it is clear that Council wants to make the minimum-wage-raise island that much bigger, perhaps in hopes of galvanizing other cities to follow, making it look less like an island and, hopefully, more like a unified country in support of workers.
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Jun 11, 2015 | Canyon News
By Taryn Moore
On Wednesday, June 10 the Los Angeles City Council approved the raising of minimum wage to $15 per hour.
The main argument made for raising the minimum wage is that it is impossible for anyone to live in Los Angeles on only $9 per hour, and that city residents are struggling to afford to take care of their families because the cost of living is too high compared to wages.
The Los Angeles City Council approved the raise with a vote of 12-1; the only one to vote against the increased wage law was Councilman Mitchell Englander. The bill still awaits final approval by Mayor Eric Garcetti, but he is expected to sign off on the bill. This is the second vote that had to be conducted by the city council because the first was not unanimous and it could not go ahead without majority approval.
The wage increase will be implemented steadily until 2020, which is when it will finally reach the full $15. By July of next year the minimum wage will be increased to $10.50 per hour and by 2017 it will be $12. This will continue in increments until the $15 is reached in 2020.
Another clause to the new minimum wage increase is that if a business has less than 26 employees then the wage increase will experience a one year delay. The $15 goal for those in small businesses will not be reached until 2021, instead of 2020.
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Santa Monica accelerates passage of higher minimum wage
Jun 11, 2015 | KPCC
By Ben Bergman
Stirred by the Los Angeles City Council's decision to raise the city's minimum wage, the Santa Monica city council decided Tuesday night to start drafting a higher minimum wage ordinance for their city.
“Frankly, I think Los Angeles moved a bit faster than we thought, and while they didn’t flesh out their ordinance entirely they certainly spurred us to move more quickly,” said Mayor Kevin McKeown.
Los Angeles and Santa Monica both embarked on a minimum wage hike in September of 2014. Los Angeles mayor Eric Garcetti proposed a $13.25 minimum wage on Labor Day, and Santa Monica’s city council voted in September to study what effect a higher wage would have on their town. That report was due back at the end of this year, which Mayor McKeown says is too far down the road.
"We've now accelerated the process," said McKeown.
McKeown says the council plans to decide on a minimum wage hike in September - if passed, it would be adopted on a similar timeline to Los Angeles, and he says it could be a higher than $15 an hour considering that Santa Monica already has a “living wage” of $15.37 an hour that applies to hotel workers, city employees and workers of contractors doing business with the city.
“We would like to be a leader on minimum wage issues, but we’d also like to achieve regional balance and not create undue tension with the business community,” said McKeown.
McKeown wants to solicit input from businesses over the summer, but he expects little resistance on the council to a higher wage.
"I’d say the history of actions by this council would show it is a progressive council, and it will almost certainly move in the direction of a substantial minimum wage,” said McKeown.
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Los Angeles City Council gives final approval to raising minimum wage to $15 by 2020
Jun 11, 2015 | KABC 7 Los Angeles
The Los Angeles City Council gave final approval on Wednesday to an ordinance that raises the minimum wage to $15 an hour by 2020.
The council voted 12-1 in favor of the wage hike, with Councilman Mitchell Englander casting the sole dissenting vote.
The ordinance is expected to be signed by Mayor Eric Garcetti on Saturday.
The current minimum wage in California is $9 an hour. The proposal raises it to $10.50 an hour by next July for businesses with 26 or more employees.
The wage would then increase to $12 by July 2017, $13.25 by July 2018, $14.25 by July 2019 and then $15 by July 2020.
Once the wage reaches $15 per hour for both small and large employers, the measure calls for the minimum wage in 2022 to continue increasing based on the cost of living. -
How much will minimum wage hikes hurt restaurants?
Jun 12, 2015 | CBS Money Watch
By Kate Gibson
Hikes in the minimum wage in cities and states around the U.S. will dent profit margins at restaurants, particularly at casual-dining chains, according to Moody's Investors Service (MCO).
"Clearly the restaurant industry is going to pay a price, or be among the sectors most affected by this," said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, a nonpartisan research group, citing the large numbers of restaurant workers at or below the minimum wage. "The question will be to what extent it will only bleed into margins or whether the prices will go up, and whether we still have the 99 cent burger."
Seattle helped set the stage last year by approving a $15-an-hour minimum wage, and the mayor of Los Angeles on Saturday signed an ordinance gradually raising the city's minimum pay to $15 an hour, making it the biggest U.S. city to do so.
"Wages are a big issue that are going to continue to play out," William Fahy, a senior credit officer at Moody's, which stated in the report on Thursday that operating profit margins for restaurants could contract by one to four percentage points as cities and states increase workers' base pay. "It's going to be another cost that they have to deal with that could hurt profitability."
The biggest challenge for the industry could be the prospect of having to increase pay for valued employees already earning more than the minimum wage, as they would likely expect the spread between them and entry-level employees to continue. "Do you maintain the gap with the rest of your employees -- that's a decision that companies will have to make," Fahy said.
Olive Garden, Applebee's and other casual restaurants are likely to take the greatest hit because they are typically more labor-intensive than fast-food outlets, Moody's said. Such restaurants must also often make up the difference for servers between the minimum wage and tipped wages, which are lower.
For instance, a restaurant operator in which 20 percent of its workforce gets a minimum wage hike will see its operating margins contract by 2.3 percentage points, to 9.7 percent from 12 percent, should the baseline wage climb to $10.10, Moody's found.
"Increases in the minimum wage will result in fewer jobs being created, higher prices for consumers and fewer opportunities for people to become small-business owners as franchisees," Matt Haller, a spokesman for the International Franchise Association, said. "You need to have employers in order to have employees, and as the Moody's report demonstrates, the profit margins in the restaurant industry are razor thin. Something is going to have to give."
The Moody's report offers an "overly simplistic view of the situation" in that it fails to take into account the decreased costs that come with higher employee retain and productivity rates that result with increased pay, said Judy Conti, the federal advocacy coordinator for the National Employment Law Project, or NELP.
At an event related to Walmart's (WMT) annual shareholder meeting earlier this month, CEO Doug McMillon offered anecdotal evidence, saying the discount retailer's decision to increase wages for 500,000 of its workers to at least $9 in April has already yielded dividends, with job applications rising and turnover on the decline.
The Congressional Budget Office in 2014 projected that increasing the federal minimum wage to $10.15 an hour from $7.25 would result in the loss of 500,000 jobs as companies tried to offset the increase by cutting costs. The nonpartisan CBO also estimated it would lift 900,000 low-income workers out of poverty.
Perhaps seeing the handwriting on the wall, McDonald's (MCD) plans to increase pay at least $1 more than the local minimum wage on July 1 for the 90,000 employees at corporate-owned restaurants. The increase doesn't affect the roughly 1.5 million employees of McDonald's franchisees.
For McDonald's and other publicly traded companies, "their margins are appropriate for the industries they are in," said Fahy, who added that individually owned franchisees are harder to gauge since the numbers are not public. That said, the restaurant industry is already contending with weak sales, which could weaken further if menu costs climb, he added.
The Peterson Institute's Kirkegaard believes the increased labor costs will initially eat into restaurant's margins, but in the longer run will be covered largely by higher prices.
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Minimum Wage Increases Likely to Hit Restaurant Profits, Moody’s Says
Jun 11, 2015 | Wall Street Journal
By Julie Jargon
Minimum wage increases are expected to eat into restaurants’ profits, with casual dining chains affected the most, according to a report from Moody’s MCO 0.04 % Investors Service.
In one of the first independent analyses on the impact of rising wages on restaurant companies, Moody’s estimates operating profit margins could shrink by one to four percentage points as a result of more cities and states raising starting pay for hourly workers.
Casual dining chains such as Olive Garden or Applebee’s, which provide table service, are likely to feel the biggest impact because they generally require more servers than fast-food restaurants, and have to make up for shortfalls between the minimum wage and tip wages in certain states.
For casual dining companies with 20% of their labor pool affected by the minimum wage, for example, Moody’s said operating margins could narrow by 2.3 percentage points, to an average of 9.7% from 12%, if the minimum wage rose to $10.10.
Perhaps the biggest cost of minimum wage increases will involve raising wages for veteran employees who already make more than the minimum and may push to widen the gap between themselves and entry-level workers. Moody’s says that adjustment “could prove to be as or more costly than simply raising all hourly workers to mandated minimums.”
The restaurant industry is already struggling with soft sales as consumers choose to eat at home, so restaurants risk losing more customers if they raise menu prices too much in an effort to offset higher labor costs.
Labor groups such as the Service Employees International Union, and some politicians and economists say higher pay could lead to more-loyal employees, and lower turnover could result in more consistent customer service. Some companies, including McDonald’s Corp. MCD -0.48 % , already have decided to raise wages.
The nonpartisan Congressional Budget Office last year estimated that raising the federal minimum wage to $10.10 an hour would reduce U.S. employment by 500,000 as employers try to cut costs, but that it would lift 900,000 Americans out of poverty.
In San Jose, Calif., where the minimum wage increased by $2 to $10.15 an hour in 2013, the number of fast-food workers rose at a faster pace than the rest of the state in the year after the increase. Some restaurant owners easily absorbed the wage increase and others didn't.
Moody’s analysis was based on the federal minimum wage rising to $10.10 an hour from $7.25, as President Obama proposed last year in an effort that ultimately failed in Congress. If more cities or states follow the lead of Los Angeles and Seattle—where $15-an-hour minimums have been approved—restaurant companies could experience more than double the margin declines Moody’s projected.
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$15-an-hour minimum wage passed in L.A.
Jun 11, 2015 | USA Today
The Los Angeles City Council Wednesday approved a 66% hike in the minimum wage to $15 an hour, a widely watched move by companies already fearing a upward trend in labor costs.
Los Angeles is following movements to push wages up to $15-an-hour over time in both Seattle and San Francisco. But the move by the nation's second's largest city has enormous potential ramifications for companies that do business here – and helps set a national message.
Los Angeles is the largest city yet to push through a broad and orchestrated increase in wages. Plus, wages account for a large slice of the expenses faced by companies that do business in industries with large employee head counts. The increase could directly impact big employers ranging from McDonald's (MCD) to Wal-Mart (WMT) and Target (TGT).
Specifically, the Los Angeles City Council approved an ordinance that would take the minimum wage from $9 an hour to $15 an hour in five years. The rule would require companies with more than 25 employees to comply over time in small increments until hitting $15 an hour by 2020. Smaller businesses would get an extra year to comply. The ordinance still must be signed into law by Democratic Mayor Eric Garcetti. Garcetti is expected to sign the ordinance by this weekend.
Opponents of the rule say a higher minimum wage will hurt companies forcing some to layoff employees or move out of Los Angeles, altogether. But the movement to pay higher wages is already taking hold across the nation as the federal minimum wage has been stuck at $7.25 an hour since 2009.
Not only is Los Angeles following movements to push wages up to $15-an-hour over time in both Seattle and San Francisco, but also some individual companies. Both Wal-Mart and Target have also already announced plans to start pushing wages higher. Wal-Mart in February announced it would boost minimum wages for entry level and long-term hourly workers to $10 an hour or more by early next year.
Shares of Wal-Mart closed up 46 cents to $72.93, Target shares are up 77 cents to $79.67 and shares of McDonald's closed 57 cents higher to $95.30.
A number of the Los Angeles area's largest employers are based outside of Los Angeles city limits, so won't be directly affected. Walt Disney (DIS) has more than 180,000 total employees worldwide, including a large number throughout southern California. But its headquarters is located outside of Los Angeles in Burbank, Calif. and Disneyland is based in Anaheim, Calif. Several large apparel makers, though, are based in Los Angeles including Guess (GES) and American Apparel (APP), who reported most recent worldwide employee counts of 13,700 and 10,000, respectively.
"This is nothing short of historic. Historic for our city. Historic for the economic equality movement. And historic for full-time workers and their families who live on poverty wages. We couldn't have done it without you. And we can't thank you enough," said Laphonza Butler and Rusty Hicks of the Los Angeles County Federation of Labor, AFL-CIO in a joint written statement.
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