Study of Living Wage Ordinance in the City of Ventura: The Economic Impact on Workers, Contractors and the City Jamshid Damooei, PhD Professor of Economics and Chair Department of Economics, Finance and Accounting California Lutheran University September 28 th, 2009

Components of the Presentation  Study Background  Arguments for and Against Living Wage Ordinance  Examining the Impact of LWO in City of Ventura  Findings and Possible Policy Implications  Q and A

Study Background  The Rational Behind the Ordinance: –A city government should not contract with or subsidize employers who pay poverty-level wages.  Ventura City Followed, the County (2001), Oxnard (2002), Port Hueneme (2003) in May of  Created agreement by providing exceptions and exclusions.  Important vote for protection of low wage workers.  Need for more comprehensive study in 2008.

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

Arguments for and Against Living Wage Ordinance….Continued  Arguments For: –Living wage laws benefit working families. –Increased productivity by reduction in workers’ turnover. –Increased productivity by reduction in absenteeism. –Competitive bidding process may reduce growth in contract prices. –Improvement in bidding by keeping low wage bidders out. –Long-term relationships versus competitive bidding. –Higher wages is a good discipline and create stable businesses.

Examining the Impact of LWO in City of Ventura  Developed three separate questionnaires: –The employees’ questionnaire with 35 items of inquiries. –The owner/manager questionnaire with 50 strings of questions. –The Municipality questionnaire included 25 strings of information

Examining the Impact of LWO in City of Ventura….continued  In total, 47 employees were interviewed –Quality Landscape Care (30) –Sunridge Landscape (5 employees) –US Metro (9 employees) –City of Ventura (3 employees)  50% of the employees have been with their companies less than 3 years.  38.3% between three to ten years.  8.4% more than ten years.  95.7% Hispanic, 2.1% White, 2.1% Indian American  74% married, 26% not married, More than 80% have children  89% male and 11% female  23% have other family members in addition of children living with them  27.7% live in the City of Ventura

Findings and Possible Policy Implications  Workers Survey: –17 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. –Health Insurance before Passage of LWO: 88.2% no, 11.8% yes (17 observation). –Health insurance after the passage: 19.1% yes, 72.4% No, and 8.5% not answered (total observation 47). –Health insurance for family members: 0.0% before, 6.4% after. –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 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 used (total observation 17).

Findings and Possible Policy Implications…continued  In the following areas total percentages of strongly agree or agreed exceeded the total of disagreed or strongly disagreed: –Having a LWO made me work harder –I feel that I am more valued by my company because of the LWO –Increase in my pay through the LWO makes me miss work less  In the following areas total percentages of strongly agree or agree was less the disagree or strongly disagree: –A living wage made my company look for more skilled workers. –Without the LWO, I would not be able to receive health insurance. –I feel my working hours are reduced because of the LWO.

Findings and Possible Policy Implications…continued  Employers/Companies Survey: –Two of companies are involved in landscaping and one provides janitorial services. –One of the three has been doing business in the City for the last five to ten years. –Other two more than ten years. –All three companies have City contractors for three to five years. –None of the companies were either franchised or part of a national or regional chain. –One of the three had branches in other cities without LWO. –None have any plans to move away from the City of Ventura.

Findings and Possible Policy Implications…continued  Based on the pattern of responses we can come to the following conclusions: –Living wage ordinances make workers work harder. –Workers are less likely to miss work. –A LWO works good for those who are up for promotion. –Passage of a living wage ordinance may create greater demand for a skilled 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 most companies concerned. –The LWO marginally impacted the overall payroll as for a number of them the pay level was close the living wage level. –Most companies did not increase their bid for their contracts significantly.

Findings and Possible Policy Implications…continued –Charging the City more in order to make up for the higher wages is not a regular practice. –Some companies liked the ordinance as it reduced the number of contractors paying low wages out of bidding process. –Most companies did not increase their prices to customers in the City. –LWO attracts more efficient companies to the City. –LWO reduces employees’ turnover and companies benefit from a greater learning curve effect. –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 bidding for contracts. –Some succeeded to make up for the increase in their costs through increase in their workers’ productivity. –With some doubt about one company, the other two are not deterred and will be seeking other contracts with the City. –Most companies have not experienced any reduction in their profitability.

Findings and Possible Policy Implications…continued  Possible Policy Recommendations: –The City of Ventura brought a policy that benefits its workers, their families, attracts more efficient companies to contract with the City and these companies provide greater stability for themselves and for their workers. –The study finds that at least one of the City contractors provides health insurance for a number of its living wage workers. –The study shows LWO in a city can be more successful if other nearby cities adopt the same policy –Bringing such transformation to other cities is outside the ability of the City of Ventura, expanding this good policy to other departments is a good reconsideration.

Findings and Possible Policy Implications…continued –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 more. –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 relevance or the strength of the findings of this study. –We conducted a census of all workers and managed to interview a majority of them. –We interviewed all three managers of the workers who have contracts with the City. –Burden of LOW as a deterrent not to bid for contracts has no concrete foundation. –A big drop in companies’ profit is not a sound conclusion. –Finally, although a city might have some budgetary expenses, the benefits of having this ordinance outweigh the drawbacks by a clear margin of positive difference.

The End Q and A Thanks and will be happy to answer any questions that you may have