HomeMy WebLinkAboutliving wage ordinanceApr-28-05 11:08am From- T-116 P.01 F-058
THE IMPACT OF A LIVING WAGE
ORDINANCE ON THE CITY OF MIAMI
by Bruce Nissen and Theodore Carmen
Florida International University
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Apr-20-08 11:08am From- T-110 P.02 F-088
Acknowledgements:
We would like to acknowledge the financial assistance of the Dade Foundation atnd the
Community Coalition for a Living Wage, which made this research possible. We stress,
however, that neither of these institutions bears any responsibility for the analysis or conclusions
contained herein, and neither has influenced its contents or methodology.
•
Contact Information t
$ruse Nissen, Director of Research
Caner for Labor Research and Studies
Florida International University
University Park
Miami, FL 33199
Iliffenti@Au.edu
305-348-2616
Theodore Ca'rrasao
Florida International University
University Park
Miiami, FL 33199
ppp78@msn.com
305-609.3391
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THE IMPACT OF A LIVING WAGE ORDINANCE ON THE
CITY OF MIAMI
by Bruce Nissen and Theodore Carrasco
Florida International University
EXECUTIVE SUMMARY
I. Proposed Living Wage Ordinance for the City of Miami
A coalition of local organizations and individuals has urged the city of Miami to pass a living
wage ordinance to reuse the wages of the lowest paid workers on the city's payroll and on the
payrolls of the city's contractors. Miami Dade County, Miami Beach, froward County, and
others have passed such ordinances. A living wage ordinance ordinarily requires that wages be
paid at or above the poverty lime far a family of four, and that health care coverage (or its
equivalent in monetary payment) be provided,
This study assumes that a city ordinance would closely parallel the Miami -Dade County
ordinance. The proposed ordinance would cover (1) all employees of the city, and (2) employees
of locally based service contractors conducting city business through a contract with the city.
The required pay levels would be $9.44 per hour if health care coverage is provided, and $10.81
per hour if it is not. This amount would be adjusted yearly for inflation. We use these pay levels
as "baseline" hourly wage figures, and calculate costs for a few intermediate levels of $9,25,
$9.50, $10.00, $10.50 and $10.59 perhour,
II. Previous Research on Living Wage Ordinances
Research on what has occurred elsewhere after implementation of living wage ordinances is
briefly reviewed. Two studies of Baltimore, one of the cities of Boston, New Haven, and
Hartford, and care of a number of California entice are reviewed. All deliver positive
assessments: costs to the city rise very little or sometimes even decline, poverty is reduced,
"disemployment" (increased unemployment) impacts are insignificant, etc. No major negative
impacts have been found (es opposed to predicted), to the best knowledge of the authors.
1II. Likely Costa to the City of Miami of a Living Wage Ordinance
Analysis reveals that 43 city contracts, costing a littfle over $6 million, would be covered by the
proposed ordinance, Using a methodology relying on government statistics far Miaaai. we
estimate the number, types, and pay levels of city contractor employees who would win wage
increases under a living wage ordinance. We find that nearly 58 rrEs of city contractors would
win wage ems. depending on the pay level chosen. These workers are in a wide variety of
industries. Depending on the pay level chosen, final increased payroll costs to these
contractors range from $3881632.64 (at $9.44/hr.) to $473,778.89 (at $10,81/hr.) per year.
The following table gives details:
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T-116 P.04 F-066
Total ear$t% to contractors at various living wage amounts
Liv W e
W Increcse
PIA Increase
Total
$9.25/br.
$344,932.56
$26,387.34 _
$371,319.90 ,
$9,4allar. T
$361,014.99 -
S27,617.65
S3 632.64
$9.50/hr.
$365,022.94
S27,924.26
$392,947.20 .
$10.00/ r.
$3867485.88
$29,566.17
$416,052.05
$10.5011r.
$414,106.47
$31,679.15
$445,7E15.62
$10.59/br. ,_
$418 304.02
$31,86/.06
$450,171.08
$10.81/1r.
$440410.44
$33,668.45
$473,778.89
Analysis of city payrolls reveals that between 458 city employees (265 port -time and 193 -
time) and 524 (286 part-time and 238 full-time) would receive pay increaaes,,,depending on
the pay level chosen. Additional payroll costs to 'the city range from $1.91 million to $3.26
million, depending on the pay level chosen. The following table gives details.
Total city emplo ee pay income costs
Living Wage
' Part-time
Full-time
$584;701.41
Total
$1,742,11.1.49
$9.25lhr.
$1,157,410.08
$9.44/hr.
$1,249,994.90
$664,703.15
- _ . $69Qr744.12--.
$912,883.39
$1,914,698.05
$1969,976.33
$25,757.84
$9,50/hr.
$1,279,232.21.
$1,522,876.45
$10.00/hr.
$10.50/1 .
$1,780,015.59
$1,155,448.16
$2,935,463.75
$10.59/hr.
$1,827,158.87
$1,201,193.38
$3,023,352.25
$10.81/11r.
$1,942,770.2.3
$1,313,545.94
$3,256,316.17
Combining the last two tables, we arrive at total additional payroll costs to all employers, should
a living wage ordinance be passed and implemented.
Total additional ►roll costs at differing living wage
rates
Living Wage
Contracts
Employees
Total _
$9.25/hr.
S371,315.89
$1,742,11149
_ S2,113t427.38
$9,44/lu.
$388,632.64
$1,914,698.05
$213033330 69
$9.50/hr.
$392,190.73
51,969,.976.33
$2,362,167.06
'
$10.00/hr.
$423,098.07
$2,435,757.84
$25$,85' 5.91
$10.50/ltr.
S444,597.50
S2,935,463.75
$3,380,061.25
$10.39/hr.
$448,429.82
53,028,352.25
$3,476t782.07
$10.81/hr.
. $473,778.89 _,
, S3.256,316.17
83,7304195.06
W. Analysis and Conclusions
There are two likely sources of coat reductions from the above figures as well as two likely
sources of cost increases. The potential cost reductions come from (1) an "efficiency wage"
effect, whereby efficiency will increase at the high wage through reductions in employee
turnover, absenteeism, tardiness, and the like; and (2) contractors not passing through to the
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county the entire additional labor costs. Both of these will likely reduce the final cost, but we do
not pit a magnitude on these factors in this study.
The potential increased costs come from (l) monitoring costs for the city, which will use city
personnel to implement and monitor the ordinance. and (2) "ripple effect" costs, to the extent
that employers grant wage increases beyond those required by the ordinance itself. Again, we do
not attempt to quantify these additional costs in this study, but we emphasize that both of these
actors we wag the eity's control and aze not mandatory under an ordinance. If the city chooses
to handle both issues wisely, additional costs can be greatly minimized.
In the estimation of the authors, the additional potential savings and the additional potential costs
will largely cancel each other out, so we stick by the figures in the final table above es the most
likely costs of a living wage ordinance. These costs range from a little under 7/10 of one
percent (tithe eity's personnel budget to slightly over 1.1% of that budget. When the final
cost would fall depends on how many of the employees winning pay increases already have
health insurance coverage — the more that do, the lower the cost and the less that do, the higher
the cost. Our own eadumate Is that the final cost will be approiimaielp 33 mill on per year, a
little under 1% of the eity's present personnel budget.
Whether the bits of a living wage ordinance justify this small cost is a political decision for
the Miami sty Commissioners to make. In our won, the well known anti poverty benefits
and the small cost make adoption of a living wage ordinance a very attractive option.
Apr-20-06 11:10am From- T-110 P.06 F-060
IMPACT OF A LSO WAGE ORDINANCE ON THE CITY OF
MIAMI
by Bruce Nissen and Theodore Corrascv
Florida da International university
INTWDLICTION
A coalition of local organizations and individuals has urged the city of Miami to pass a living wage
ordinance to raise the wages of the lowest paid workers on the payroll of the city and its contractors.
Miami -Dade County, the city of Wand Beach, Broward County, and several other municipalities
across the state of Florida have already passed such ordinances. A living wage ordinance ordinarily
requires that wages be paid at or above the poverty line for a fhrnily of tour, and that health care
coverage (or its equivalent in monetary payment) be provided.
To date, despite expressed interest from the city's mayor and several city commissioners, no
action. has been taken on this request. One important piece of information that public officials have
asked for is what the likely cost of such an ordinance would be. One of the authors of this report
was approached with a request to undertake a study of the costs and benefits of passage of such an
ordinance. Thenks to a generous grant from the Dade Foundation (administering a local grant
program for the Knight Foundation) and a supplemental grant from the Community Coalition for a,
Living Wage (CCLW), we were able to undertake such a study,; The following is a brief study of
the likely impact of* 1i irtg wage ordinance on the city of Miami. Emphasis has been given to the
costs involved, although city officials should bear in mind the benefits such an ordinance is also
likely to bring the city and its inhabitants.
' We dank the Dade Foundation and the CAL W far their financial support However, neither hears any resperusibiiity
for the analysts or the results contained In this report. Likewbe, heather was given atty lahwelDe over, or lolOwledge of
the methodology employed in the report or in the conclusions reed..
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The study is based on the assumption that a city ordinance would closely parallel the
ordinance already in place since 1999 for Miami -Dade County. Thus, we memo that the ordinance
would cover (1) all employees of the city, and (2) employees of locally based service contractors
conducting city business through a contract with the city. We assume that required hourly pay
levels will be comparable to those of the county's ordinance, which are adjusted yearly to keep up
with increases in the coat of living. Currently the county's required pay levels are $9.25 per hour if
health care coverage is provided, and S10.59 per hour if it is not. We calculate these pay levels,
however, we use $9.44 and $10.81 per hour as "baseline" hourly wage figures while esrnating
cosies for a few intermediate levels of $9.50, $10.00, and $10.50 per hour.
THEORETICAL ARGUMENTS A$Qi T A LIVING WAgE
Arguments concerning living wage ordinatices are similar to those concerning minimmtnn wage
legislation. Proponents argue that workers at the lowest wages cannot cam an adequate income
unless the government sets a "wage #loon"; the wealth of the country hi being more unevenly and
inequitably divided; that "living wages" keep alias intact and are supportive of strong families;
wow gain greater self sufficiency; that the government gains because of lowered need for social[
services; communities gain through increased consumer spending in the community; and that even
employers gain through higher morale and efficiency with lower turnover of employees.
Opponents tend to rely on the ideological belief that the market should be the ultimate
determinant of economic distribution; they see any deviation from a strictly "free market" approach
as cresting distortions and inefficiencies. Beyond purely ideological arguments, they argue that a
Living wage ordinance will cost the movarnment too much; than it will likely lead to unemployment;
administrative costs will be huge; competition for city contracts will decrease; and that the "wrong
signal" will be sent to the business community, thus discouraging investment in the area.
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This report will not enter into the ideological debate, but will confine itself to the likely
empirical effects of passage of a living wage ordinance. Much of the previous research on living
wage ordinances gives some indication of the likely impacts.
FREV101,1$A,E$E.ENRCII ON LW1N W
To date over 110 municipalities and counties and other public entities in the United States have
passed living wage ordinances, and a fair amount of research has been done on living wage impacts.
They brick down into two types: p ospeative studies, such as the present one, that predict the likely
impact if a living wage ordinance is passed, and retrosvp studies, which look back at the actual,
impact ear passage.
Both types of studies are valuable, but of course the retrospective ones are probably the most
valuable because they tell you what actually happened, as opposed to future projections of what will
happen. Predictions of'the fixture inevitably rely on assumptions, and are therefore less likely to be
entirely reliable.
This study cannot review all the studies conducted on living wage ordinances. The
interested reader is referred to several web sites that contain a largo cumber of them.' Here we will
confine our attention to the resin "after -the -fact" retrospective studies, because they are the most
reliable and most important,
Two studies looked at the impact of the Baltimore living wage ordinance, passed in 1994.
The fist study, conducted in 195, examined the impact after one year in operation (Weisbrot and
SforzaRoderick, 1990. The study found evidence supporting nearly all of the claims of
' Three soma's giving listings oriuttlt <two with a favorable view toward living wag+ ordinance: and ono with
art sxirextely nagativ[a vi$W) are this %Ro ing; www.utotuttazduipotitresourcuttilivinigwagekhtni,
www.6 gi a /gont t efrn iaseuguidakiivingwaskliyingwage, And w► w egionlipm,presy_publ .cfrn.
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proponents, and was unable to foul any of the negadvc consequences predicted by opponents. Mal
firdings were:
* The real cost of city contracts actually decreased after the ordinance went into effect. For the
average contract (weighted by its share in the sample), this decline was statistically significant.
* Of companies interviewed that held contracts before and after went of the law. none
reported reducing staffing levels in response to the higher wage requirements.
* The cost to taxpayers of compliance has been minimal. with the city allocating about 17 cent
per person annually for this purpose.
* The average number of bids per contract declined from 1994 to 1995, but this decline was not
statistically significant, nor did it affect the competitiveness of the bidding process as
manifested in actual contract costs.
* There is no evidence that businesses have responded negatively to the passage ofthe
ordinance. In fact, the value &business investreent in the City of Baltimore actually increased
substantially in the year after page ofthe law.
The second study examined the impact after two years of operation (Miedt, Ruiters, Wise,
and Schoenberger, r,1999). The overall conclusions were smaller to those ofthe previous study;
* The living wage ordinance has had positive effects on a relatively Mall number of workers in
Baltimore without significant financial cost to the City.
* Due to the prevalence of part-time and seasonal work, however, living wages do not always
amount to lives lnoomes. Greater consideration must be given to increasing and stabilizing
hours worked.
* The small financial impact on the city suggests that living wages could be paid mom generally
in the private and non-profit sectors with a relatively low impact on costs and competitiveness.
* Evidence suggests that higher wages and hours improve the stability and reliability of the
workforce.
* Non-compliance in terms of paying the living wage and/or providing adequate payroll
documentation remains a significant problem, affecting the impact ofthe liming wage office
and our ability to analyze that impact.
* The benefits ofthe living wage may be threatened by the effects of welfare reform.
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These two studies indicate that& more ideological arguments against a living wage
ordinance are not well founded. Another study examining the ixopact of liviog wage ordinances an
Boston, New Haven, and Hartford found that the cost to the city of covered contracts actually ,, ixn
the vast majority of cases (Pollin, 2003). This does not, of course, mean that the living wage
requirement °await the decrease in costs (although that is theoretically possible, through*efficiency
wage„ effects malting the higher paid workforce more efficient), but it does indicate that any
Increased costs were so small that they were outweighed by other hectors causing overall costs to
decrease.
A retrospective study of a number of California cities with living wage ordinances found
that they were effective in substantially raising the wages of covered workers, and had an impact on
reducing urban poverty (Neumark, 2002). The author, David Neunak, is a well known opponent
of rninimum wage legislation, so his findings surprised him. Neumark found a small insignificant
"disempioyntent"• effect, meaning that a slight decline in jobs occurred. He had expected this
disemployment impact to be much smaller than the insignificant amount he discovered.
Thus far the retrospective studies have been overwhelmingly positive. Despite this positive
evidence, a prudent public official will still want to know the likely cost if a local living wage
ordinance is passed. In this study, we will use very conservative assumptions so that any errors in
prediction will be on the side of overstating costs, not understating them. The actual cost to the city
is likely to be less than our final projection, but we feel it is safer to err oxt the side of caution.
L.UELY COSTS QP A1,,IVINGWAGG O 1NA i E
In assessing the effects of implementing a living wage ordinance, one must ask the following
questions:
* Who benefits from the new wage standare1 and how much?
* How much will a living wage cost city of Miami?
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The fist step is to identify the benefactors. The primary benefeetors would of course be
individuals earning less than the desisted "living wage" either as municipal employees or as
workers fbr contractors used by the city in service industries (janitorial, landscaping. security guard,
etc). The families of these individuals would also benefit The city and its citizens may benefit
through a decrease in the level of poverty and all the attendant ills that come with poverty (crime,
welfare dependence, etc.) Taxpayers may also benefit from sevingu *tough not hawing to provide
health care and public assistance to those now able to support themselves. And even the contractors
employing these individuals may benefit through a more reliable and motivated workforce:
absenteeism, tardiness, labor turnover, and the like decrease when rates "above the going rate" are
paid.
Assuming the ordinance was implemented, to whom would the burden fall? For the
increased costs of higher wages and benefits for direct city employees, the burden obviously falls on
the city's budget For the private contractors, the limited evident.* we have to date indicates that
they are likely to pegs some of any increased costs our to the city, but not all. Those not passed on
are handled through interim adjustments within the firm. However, for the purposes of this study
we will make a "worst case" assumption for the city: that all additional costs to the contractors win
be passed through to the city. We will also, until the end of the analysis, More any "efficiency
wage" savings, although available evidence indicates that they do exist. In other words. we rely on
pessimistic assumptions, to make certain we are not underestimating costs to the city.
The remainder of this study will calculate corers to the city. should it pass and implement a
living wage ordinance with the "living wage" set at levels between $9.44 per hour and $10.81 per
hour. Fit we will consider the increased cost of paying employees of service contractors with the
Apr-29-06 11:16am From- T-118 P.12/21" F-066
city a living wage. Then we will consider increased direct costs to the city's payroll from paying all.
of its employees a living wage.
City Coact Workers
To determine increased cost of city contracts, we filtered all services contracts from a list
detailing every open oity contract in the calendar year 2004, which was provided by the City of
Miami Purchasing Department. Of the 306 open contracts, the authors sorted each for service -only
aontraaets with connectors located in Miami Dade County or neighboring counties. This ultimately
left 43 contra.
Many contracts were for time periods other than one year in length. In these cases, the costs
were rumuallzed the following two ways:
* In the case where contracts were awarded in years, the total amount awarded was divided by
the number of years the contract was to be active.
o contract amount / contract years annualized cost
w Where connects were awarded for specific months, the total amount awarded was divided by
the number of months and multiplied by 12.
o (contract amount /contract months) (12) — annualized curt
Overall, the city's tee cost for the 43 service contracb is $6,0201.014.34.
From these 43 connects, Standard Industrial Classification (SIC) and North American
Industry Clarification Systems (NAICS) codes were assigned based on the contract descriptions to
specify which industry the contract serves as listed by the U.S. Cus.
(latto://www.census.govieocd/www/econ97.hunl) Both SIC and NAICS codes needed to be used
since the Census began using NAICS codes in 1997 to classify industries. The Census, however,
provides abridge to link the SIC codes to NAICS.
(biangbame1 aige vie www/naieatab am) To ensure the assigned codes were correct for
every contract, each was verified with the vendors' registered codes as listed in the Flondu Business
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Directory (2004) and the Dun and Bradstreet Regional Bw seas Directory for South Florida (2004
As a result, the following S1C/NAICS codes were used:
* 1711/235110 — plumbing, Heating, and Air -Conditioning Contractors
* 1743/235430 — Tile, Marble, Terrazzo, and Mosaic Contractors
* 1795/235940 — Wrecking and Demolition Contractors
* 1796/235950 — Building Equipment and Other Machinery Installation Contractors
* 1799/235990 — All Other Special Trade Contractors
* 2951/324121 — Asphalt Paving Mbctare and Block Manufacturing
* 7534/326212 — Tire Retreading
* 4151/485410 -- School and Employee Bus Transportation
* 4499/488330 — Navigational Services to Shipping
* 7549/48841 a — Motor Vehicle Towing
* 4215/492100 — Couriers
* 8734/541380 — Testing Laboratories
* 7363/561320 — Temporary T e1p Services
* 73 81 /561 6 13 — Armored Car Services
* 7342/561710 — EMerminating and Past Control Services
* 7349/561720 — Janitorial Services
* 0782/561730 — Landscaping Services
* 7217/561 740 — Carpet and Upholstery Cleaning Services
* 4212/562111— Solid Waste Collection
* 4953/562211-1 Hazardous Waste Treatment and Disposal
* 1799/562910 — Rcmcdiation Services
* 7999/71131 0 — Promoters of Performing Arts. Sports, and Similar Events with Facilities
* 75.37/811113 —Automotive Transmission Repair
* 7539/811118 — Other Automotive Mechanical and Electrical Repair and Maintenance
* 7532/811121 — Automotive Body, Paint, and interwar Repair' and Maintenance
* 7536/811122 — Automotive Glass Replacement Shops
* 7534/811198 —All Other Automotive Repair and Maintenance
* 7629/811212 — Computer and Office Machine Repair and Maintenance
Aside from using the Census to classify industries, data reporting industry total receipts,
salaries, number of establishments, and employees (part -lime turd full-time) was collected from the;
U.S. Economic Census websitc. agted/www.censteproyinceliec97/us/US000.1-1Thl) For most
industries, the data was extracted at the Miami PMSA level given that it provides the most accurate
description of employment and industry activity as possible. In some cases, data was not reported
at this level so state or national figures were used instead2.
a The following ithlasaies ware not available et the Miami PMSA level:
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To determine an approximate total of employment per $100,000 in receipts, the following
equation was used:
#employees x
receipts 100000
The number of employees was multiplied by 100,000 and divided by the total receipts. Aside from
generating the industry's receipts per 100,000 employee totals„ we converted the total employees
earning less than the proposed living wage into full-time equivalent (FTE) totals using the equation
below:
(mean hours worked ! 40) (# of employees) FTE
F'l'E is equal to one person working full-time for an entire year. The mean hours were determined
by taidng the average number of hours reported by the Integrated Public Use Microdata Series
(IPUMS) data for each industry and then divided by 40. This amount, multiplied by the total
employees earning below the living wage levels, provides the FTE figures for each industry. The
purpose of converting employee totals to FTE is simply for comparison purposes when dealing with
part-time and full-time employee figures.
As noted, the FTE equation relies on data from 1PUMS. IPUMS data consists of samples
from U.S. Census data that focuses primarily on individual and household informedon. The 2000
5% Census PUMS sample was used to determine the hourly wage for employees of each indusuy3.
The purpose of using the industry variable is to match those respondents that worked in industries
similar to the open contacts being =mined in Miami. 1PUMS does not provide an hourly wage
- Flor d,. - 235110, 235434 235950. 235990. 324121
ix.. -- 235940, 326212
- 1PUMS - 561T20
- Duna, &'adsareot - 561730
3 The following variabks were selected; (1) Mina i/Hialleeh Metropolitan Area, (2) if the respondent was in the labor
fame the previous year, (3) numbcar of weeks worked, (4) number of hours worked, and (5) wage and salary incomes.
SUMO data from JAMS was needed for indastries 3241M and 32621 because there were Hoot
enough responders available at the mtmlclpal Level to develop an ammo estimate ado industry in the region.
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for the workers. To calculate an hourly raze variable, the authors divided the worker's income by
the lumber of weeks worked and then by the average weekly hours worked as illustrated by the
equation below.
Income
weekgworked
howsworAwd
While the sample does not list NAICS codes to six digits as the Census does, it offers
NAICS codes between two and five digita4. The aim of fusing IPUMS data is to determine an
average hourly wage and the proportion of workers earning leas than the specific amounts. In this
case, the specified living wage standards examined are S9.44 and $10.81 par hour to represent the
upper and lower ends of the pay range with 50-cent intervals between $9.50 and $10.50 in between.,
Based on the average wages, one is able then to determine the average increase cost. For
comparison proposes, Table 1 shows the average hourly pay increase those below the living wage
would gain, should an ordinance be passed at that level.
4 The industry codes used as fisted by 'FMCS are listed by code and industry deseeiptfaa:
O 23 - Cation
o 3241M - Misc. Petioleum and Coal Products
o 32621--Tires
o 485M Bus Service and Urban Minsk
a 488 - Service& Incidental to Tnineportation
o 492 - Couriers and Messengers
a $413 - Architectural. Engineering and Mated Servioc
O 5613 - Employment Services
o 5616 - Investigation and Security Services
O 56173 - Landscaping Services
o 56 t 7Z - Services to Buildings and Dwellircga
o 561M - Other Adminiatradve and Other Support Services
O 562 - Wate Mgmt snd R+ntioa Scrvic
o 711- Performing Arts attd Related Services
o * 111Z - Automotive Repair and Maintenance
o 8112 - Electronic Equip. Repair and Maintenance
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Table 1
Aw rap hourly pay increases for each lndustry at differing living wage" rate
Industry
$9.25 hr,
$944/hr.
$9,50lhr.
10/ht.
$10.50/hr. A.$10.59/hr
$10.81/hr.
23 - Construction
$2.94
$3.09
$3.12
$3.33
$3.55
$3.57
$3.72
$2.03
3241M - Misc. Petroleum
'and Coal Product
$2.25
$2.44
$2.50
$3.00
$2.07
$2.16
32621-Tires
$2.87
$3.06
$3,12
$3,33
$3.40
$3.49�'
$3.5$
485M . Bus Service and
Urban Transit
$2,64
$2.73
$2.69
$2.92
$3.28
_
$3.31
$3.53
488 - Services Incidental to
Transportation
$2.81
$2.91
$2.96
$3.10
$3.33
$3.36
_
$3.51
492 - Couriers and
Messengers ...
$2.72
_
$2.91
$2.97
F 32.92
r $3.08
$3.10
$3.24
$413 - Architectural,
•Engineering & Services
$2.50
? $2.63
' $2.69
' $2.79
' $2.97 '
$3.0 i -"
$3.23
5613 - Emplo ment Services
$3.17
$3.27'-
$3.33:
$3.68
$3.80
' $3.77 '
$3.99
5616 - Investigation and '
Security Sor viers
$3.03
$3.19
53.23
$3.5
53.81
$3.86
$4.06
SS61 �+- Landscaping
$3.39
,
$3.51
$3.55
$3.88 .-
$4.17
$4.21
$4.40
$4.39
5617Z - Services to
Building and Dwellings
$3.33
$3.52
$3.51
$3,85 ^
$4.24
$4.31
561M - Other Administrative
and Other Support Services
$3.17
$3,36
$3.29
$3,43
$3.70
$3.67
$3.89
562 - Waste Mont and
Romodiation Services
$3.24
$3.43
$3.49
$3.49
$3.56
$3.44
$3.56
711 - Perron/ling Arts and
Related Services
$3.37
$3.31
$3.33
$3.60 v
$3.90
$3.87
$4.05
8111Z - Automotive Repair
wind Maintenance
$►2.92
$3.03 ..
$3.06
$3,26
$3.47
$3,53
$3.69
8112 - Electronic Equip.
Repair and Maintenance
$2.97
$3.16
$3.22
$3.13 -
$2.98
- $3.07 r
$3.29
From the information provided by the tables above, assimiing that the labor demand remains
constant, one could estimate the cost of implementing a living wage an the city's service contracts.
The first task war to determine how many FTEs were required to fulfiu the services the contracts
demanded. This was estimated by taking the PTE totals from the Census data and applying it to then
following equation:
#ndustryr"TErate x = confraciFTE
100000 contract cos
lk
Apr-29-06 11:20am From- T-116 P.17/2T F-066
The contract FTFs were then multiplied by the average hourly wage differences determined using
the MUMS data to show the hourly cost of raising employees in each industry to the living wage
niinimu=ax.
Table 2 shows the increased costs by industry, and total increased costs, at each possible
level of the "living wage". Table 1 was used to determine the costs by multiplying the contract FTE
by the average increaSc. We assumed 2,080 hours per year worked (40 hours per week X 52 weeks
per year). A 7.65% FICA (social security and :Medicare teat} was aggregated to determine the final
total cost for vendors to meet the living wage standard for all employees.
Table 2
Living wage costs by industry at differing "living wage" rates _
NAICS
$925/hr.
$9.44hor..
$9. 0lhr.
101hsr.
$10.50/hr.
$10.591hr.
$10.31/hr
2 10
$2 705.V
$2 843.66
2 944. 9
64.5
$ .99
$3 285A0
$3 423.4
235430
$882.12
$927.13
$960.13.
999.14
$►1.065.15
$1,071.15
$10t239.8$
$1,110.1
$70 ti7 . 3
235940
$8)432.114
$86"� ,.08
$917$. i0
$9,551.48
$101182.51
215950
$1,849.33
$1.944.20
0)3.41
$2,095.21
$2,233.64
$2,246.22
r $2,340.._ ,__
235990
$329.15
3345.94
51.26
072.111
1;397.44
$399 6$
$416,48
$77.27`_-
$5,018.05
324121
$89A5
0218
95.16
S114.20
$711
A $82,22
326212
, $4,022.85
$4,289.16 ,
L373,27
'S4.e 7.62
$4,76 .74
_
$4,891.90
485410
$5,934.92
,137 5�
$047.33
86,564.38
37,373.69
$7�441,13
37.935.71
$5,328..6'1
4
.45
765.93
48 410
$$4
$4,417.74
$4: 933 65
S4 706.18
$,5,05535
85, 00.89 •
492100
'i $6,64
$14)55' .56
$1,077.33
$1,059.20
$1,117.23
$1,124a�
$1 17 .24j,, _,�
S 11 83 0
143,113.33
8130,553.25
$153„9119.97
$168,873.76
$170,018.67
817,2008.48
$1 3
$61320
$4,52833
$4,671.39
$4t757.10
1,5 57.10
$5,428.52
$4,29996
$5 .95
$81.81
561613
$61.06
$64.29
165.09
$70.33
S76.78
$77.79
561730
$119.30
$126.11
r 8125.75
S13/.93
. 115.90
815461
$157.
561720 '
$60,537.46
$63t991.54
$31,020.70
$63e$09.74
,053.51
' 5O,9_99 .74
12 ,237A4
7720N 72 ..
$32,558
$7, 353,2$_
S35,092.38
$79,807,
$31r866. 5
561730
$28,444.19
56t740
012.75
824,097.59
.25t46o.25
$27+826.+98
$29,906.83
830193.70
,
$27 891.1
562111
S97042.117
89,784.56
$91385.111
$9,784.55
S10,354.76
$10,469.18
$10,155.40 _
$.534.07
$62211
$486.07
$314,37
$523.57
$523.57
$534.07
$516.07
562910
$1,842.71
$1,950.77
$1,984.89
81,984.89
$2,024.70
$1,956.45
$2,024.70
711310
$15„81$.46
$161090.34
$1 8$1.15
fly 3,
$ 7.4314.52
416t948.4
$119, 87, 7
811113
$ J2 7.18
$4.7 .7,1
�7 .30
` SO .70
6r
�
-
08311
..1_
1111
1 4 1.49
r
$1 .16
P >�
$
LS. 1.
D i
.P
$1,30
�176.76
AS
1 is
075.01
Tf
1 r
811121
$39 569.37
&!1 l?59.99
$4166.53
$47� .51
F
847 835.58
850 003.76
811132
4997
88199
90.7
948.94
83,
41.07
1,027,53
074 11.
811Pi$
624.32
.92
9.
r4'0
, 56.53
3,4�4.57
3,50•
1f
11212
761.83
$1 .19
. .76
$1697.4/
-
$1. 16.33
$1962.07
..
1 81966. _
12
Apr-26-08 11:20am From-
T-116 P.18/2T F-050
Table 3 summarizes the total increased costs to contractors at each of the living wage levels
discussed previously. The wage increase column represents the cost for contractors to increase their
workers' wages in order to meet the live wage. Given that the full amount awarded by the city i% r
service contracts is $6,020,004.34, the payroll increase to meet living wage requirements would be
a 6.46% at $9.44 per hour or 7.87% at $10.81 per hour addition to the city's current contract
expenses. As for the impacts at $9. , $9.50, $10, $10.50, and $10.39 an hour, the increases are
6.17%, 6.51%, 7.03%, 7.39%, and 7.45% respectively.
Table 3
Total comma to coutraetors at various riving wage amounts
LivingWage
Wage
,, FICA Increase
Total
$9.25/h .
[n ►�
$344,932.56
w
$26,387.34 i
m.} 71,319.90
— $ 44/laar.
1361,014.99
$27,617.65
$31g1t 64
$9.50/hr.
$365,022.94
$27,924.26
$29,566.17
S3921947.29
$416,052.03
$10.00/br.
$386 485.88
$1 .50/kflr.
$414,106.47
$418,304.02
$31679.15
$31,867.06
,
$445i'788.62
1400,171.08 .
$473,778.89
$10.59/hr.
$10.81/hr. ,__
$440,110.44
$33,668.45
Cfcy of Mini l Employees
A list of every city employee earning less than $12 per hour was collected from the
Department of Employee Relations for the City of Miami. This list was used to assess the cost of
increasing payroll to meet the same living wage levels examined for the city's contractors. The cast
of implementing a living wage for the City's employees equals the sway of the differences between
the living wage standard and each employee's hourly rates. This would determine the city's total
cost on an hourly basis.
To attain a biweekly cost, each employee's living wage difference was multiplied by his/her ,
scheduled hours. The biweekly total was then multiplied by 26 to determine an annual cost. For
the sake of accuracy, part -lime and full-time employees were assessed separately,
13
Apra-20-06 11:21am From-
T-11e$ P.I0/2T F-000
Overall, there are 317 part-time end 327 full-time employees in the city as of January 2004
who are earning leas that $12 per hour, Table 4 shows the total number of employees earning
below the living wage lever being elonnined. In total, the city had 449 employees earning under
$9.25 per hour; 458 km than $9.44; 459 below $9.50 per hour; 470 under $10 per hoar; 508
less than $10.50 per hour; 512 below $10.59 per hour; and 531 under $10.81.
Table 4 -
Number of city emplo ccs earning less them various )living wage levels
Living Wage
Fart time
_ Full-time
$9.25/hr.
265
184
$9.44/hr.
_ n 265
193
59.50/hr.
265
194
$10.001hr.
265
205
$10.50/hr.
281
227
$10.$9/hr,
285
227
$10.81/hr. ,
286
245 .
The part -thee employees referred to in Table 4 have the following characteristics: the 265
reinstall less than $10/hr. earn an average of about $6.85 per hour. The 281 and 285 taming
less than $10.50/hr. and $10.59/hr. average $7.03 and $7.09 per hour respectively. Moreover,
the 286 earning Imo that $10.81/hr. average $7.10/hr. All of the part tl sue employees work en
average of about 32.9 hours per week. The full...tint* employees referred to in Table 4 have the
following characteristics: all of them average 40 hours per week, and they earn on average
$7.83/hr., 57.90/her., 57,91/hr., 58.02/hr., $8.23/hr., $8.23/hr., and 58.52/hr. at each of the
respective "living wage" lever.
Table 5 shows the costs of increasing part-time worker wages to meet the living who.
Included is an annual cost with the 7.65% 171CA increase. At $9,44 per hour, the FICA expense
amounts to $88,829.18, while at $10.81 per hour, it sums to $138,060.31.
14
Apr-29-06 11:22am From-
T-1l6 P.20/2i F-056
Table 5
Living wage costs f rr City of Miami
part-ttme employees
Annually
Annual Code w/FICA
Living Wage
Hourly
Biwee rly
$9.25/hr.
$635.01 .
$41,352.32
$1,075,160,32
51,1574•410.08
$1 49 994.90
$9.44/hr.
$685,36
$44,660.22
$1 161 165.72
$9.50/hr.
$701.26
$45,704.82__
$1,188,325.32
$1,279,232.21 _
$10,00/hr.
$833.76
$54,409.82
$12414,655.32
51,653,521.22
51,522,876.45
I 51,780,015.59
$10.50)hr.
$973.72
$63,596.97
$10.59/hr.
099.37
$65,281.32 —..►
$1,697,314.32
$1,827458.87
51,942,770.23
$10.81l1”*.
$1,062.26 ,
$69,411.92
$I,804,709,92
Table 6 demonsuntes the costs of increasing fill --time employee payroll to equal living wage
standards in addition to the 7.65% FICA expense. At $9.44 per hour, the FICA expense amounts to
$47,236.22, while at $10.81 per hour, it sums to $93,345,35.
Table
Living wage rots for City of Miami lull tlme am
--.-- -
Liv' W e
Hourl
Biweekl
Annual
Annual Cost wfFICA.
$9.25/hr.
$261.13
$20,890.40
$543„130A0
5584,701.41 ,,
$9.44/hr.
$296.86
$23z748.73
$?4k679.13
,,
$6171466.93
$641,657,33
$664,703.15
$690,744.12
59.50/hr.
$308.49.
$10.00/hr.
5407.70
_
$32,615.72
$41j282.22
$848,008,72
$11073,337.82
,
$912,881.39
51,155,448.16 a
$10.50/hr.
$516.03
$10,59/1v. _
$536.46
$42,916.62
51,115,832.22
$1, 01,193.38 _
$10.81/hr, _
_, $586.63
$46,930.79
r„
$1r220,20Q.59
$1,313,545.94 .,
By adding the costs for both part-time and full-time employee, the city can obtain its total labor
costs as presented in Table 7, The increased costs represent 0.62% of the ctty's personnel expenses;
in FY 2004 at $9,44 per hour and 1.05% at $10.81 per hour. (City of Miami, 2003)
Table 7
Total city employee costs
Living Wage
Part-time
Full-time
Total
$9.25/br.
51 157 410.08
$584 701.41
$17 111.49
$9.44/hr.
$1,249,994,90
$664,703.15
51,914,698.05
$9.5011r,
51,279,232.21
_ $690,744.12
$1,969,976.33
$1 O.00/br.
$1,522,876.45 ...
$1,780,015.59
$912,881.39
$1,155,448.16
_ . $2,435,757.84 .
,935,463.75
$10.50/hr. _
$10.59/1r.
$1,827, 158.87
$1,2014 3.3 8
$34/28 52.25
15
Apr-26-06 11:23am From-
T-116 P.21/27 F-066
$10,111,1hr, f $1�942,770.23 $1,313,545,94 1 il3A256,316.17
in conclusion, Table 8 provides the total additional payroll costs incurred if the city were to
adopt the living wage. The total cost includes both municipal payroll costa and increased payrolls
costs for service contractors.
Table B
Total additional payroll costs at differing living wage rates .�
Li ' w
Contracts
10 e es
Total
$925/iur,
$3711319.90
$1,742,111.49
$2,1135427.38
$9.44/hr.
$388,632.64
$1,914,698.05
S2,383,330.69
$9.50/hr.
$3921947.20
$1,969,976.33
$2,362,167.
i
$10.0042r.
$416,052.05
$2,435,757.84
$2,858,855.91
0
$10,50/br
..
$44S{785.62
$2z935,463.75
$3„300,061.25
$10.59/hr.
$450j171.08
$3,028 35225
$3,476 782.07
.
$10.81/hr.
_„
_. $473,778.89
$356,316.17
$3,730,095.06
These figures illustrate the total increased payroll costs to all employers. The authors believe this is
an "upper end" estimate: of what the total costs to the city could be, because it incorporates
assumptions that modmize costs to the city beyond what is likely. For example, we assume that all
additional contractor payroll costs will be passed on the city in the form of higher contract costs. As
research elsewhere has demon, often living wage ordinances do not result in gay increased
contract costa to the city adopting a living wage. Also, we made no allowance fbr an "efficiency
wage" effect, Fect, although evidence indicate that there will likely be one. Workers who are paid
"above the norm" tend to be absent less, tardy less often, less prone to quit, to have higher morale
and to put in greater effort, etc. The savings from lower employee turnover alone will likely be
substantial. None of these savings are incorporated into the calculations used to arrive at the above
figures.
Of course there would be other benefits and savings to the city from adoption of a living
wage policy. These "indirect benefits" would be very hard to quantify however, and we make no
attempt to do so here. However, it is important to realize that workers who we able to pull
16
Apr-20-05 11:23am From— T-116 P.22/27 f-05a3
themselves out of poverty, perhaps afford the down payment on a modest home, provide for their
own health cage rather than relying on the emergency room of Jackson Memorial Hospital, send
their children on to college rather than making them work to support the family, etc. become an
asset to the city and the surrounding county, rather than a "drag" on it, both economically and in
civic contributions to the community.
There could be additional indirect costs too, however. The two most significant are
potential monitoring oasts, and a 'ripple" effect cost. Monitoring costs refer to the personnel
expenses the city may incur in implementing and overseeing the living wage ordinance. Predicting
the cost of this on Miami is difficult, it may cost next to nothing, if the city is able to assign living
wage monitoring costs to existing city pommel aiready overseeing similar work. rf alp city would
need to add additional personnel, costs may rise. We make no prediction of what the+ city would do
in this regard — we only note that the cost could range anywhere from SO to $200,0O0, depending on
how elaborate the city chooses to be in its monitoring and oversight. Monitoring costs me not
mandatory and it is up to the city's discretion as ro how the living wage initiative would be
implemented and monitored.
The same is true for potential "ripple" effects. The ripple effect refers to pay increases that
rhe0.y be gated beyond what is required by the living wage ordinance. The city aand)or city
contractors may choose to do this to maintain some degree of pay differentials at the bottom of the
wage structure between employees with different skills and/or length ol!employment, For example,
if the new living wage floor if $ 1 0 per hour, will a a an employer raise the pay of employees previously
making S6.50 per hour and $9.75 per hour to $10 per hour? Or will the employee previously
making $9.75 per hour get a larger increase, beyond that required by the law?
17
Apr-26-O5 11:20am From- T-116 P.23/27 F-066
This is an issue that is up to employers to decide. but many of than (almost certainly the
city) will decide to grant additional raises, to maintain a degree ofpay differential, It is important to
note here that a `ripple effect" pay increase is not p nc ory. As long as the city pays contract and
municipal employees at the legally mandated level, the extent of a ripple cost would depend solely
on the city's judgments
Determining the size of the ripple effect is perhaps the most challenging issue to address.
Bemuse this Is entirely a discretionary matter for the city to decide, we can only recommend that
the city keep ripple effects to a minimum, using a method similar to that advocated in footnote 5.
Deoause there is no way to predict what the city will decide to do regarding "cripple effect" wage
increases, we leave out any estimate hare. (We 4o know that private contractors will make the
ripple effect rases minimal, because market pressures will induce them to highly compress the
wage differentials at the very bottom of the wage scale. So we are very confident that ripple costs
will be very minimal for the oity's service contracts.)
If the city rationally addresses the monitoring and ripple costs, we are very confident that all
increased costs will be completely offset by the efficiency wage and partial.-pasa-through cost
savings. Therefore, we stand by the numbers in Table 8 as prudent estimates of total costs to the
city. should it pass a living wage ordinance, With intelligent implementation, the costs could be
lower — much lower, as experience elsewhere has shown.
While the final declsloa belongs to du city, the authors would recommend that the clty' consider implementing pay
to tip below the new living wage level in a manner that awe, but snalntabts, the pay differentials.
For exempla, starting with the lowest paid worker, if the new pay structure maintains e 2 coat pay differential for each
10 ow pear cal under the old PRY the pay Increases would get progressively smaller as you move up
the pay soaks, fly decreasing to $0 at scone point between, $1 and $1,50 above the new "living wager" foot.
Differential pay levels are maintained, additional costs are mpiaimtz td, and the airy avoids inadvertently paying wage
increases to employes who are in a higher segment of the labor meet then that of the living wage beneficiaries.
18
Apr-20-06 11:26am From- T-116 P.24/2T F-066
Stupidly AND CONCLUSIONS
Ae illustrated, implementing a living wage in Monti at $9.44 per hour could cost the city
roughly $2.3 million The corresponding figure would be $3.7 million at a $10.81 per hour
living wage rate. These figures represent 0.74% and 1.,21% of the dty's current personnel
budget of $309.38 million.
This report has focused only on costs, not the benefits of a living wage ordinance. We fund
the costs to be rather small, in the vicinity of d °/a of the city's personnel budget. If the city were to
follow the pattcm set by the Miami -lam Living Wage Ordinance by requiring a wage of $9.44/hr.
if health insurance benefits are provided or $10.81/hr., if they are not indexed for inflation in later
years. The final cost would end up somewhere between the $2.3 million and $3.7 million coat
calculated at those two wage levels, depending on the number of covered employees who already
are provided health insurance. Since some presently have health coverage and many do not, the
final cost le likely to be approximately $3 million, It could very well end up costing less than
this, but budgeting for this amount xt would be prudent if the city wishes to be certain it can afford the
cost.
Whether this cost is worth the many benefits of a living wage Is a political decision for the
Miami City Commission to make. This report has detailed the likely costs, which end up being
rather small. In the estimation of the authors, the well-known anti -poverty benefits and the mall
cost make adoption ofa living wage ice a very attractive option,
19
Apr-20-06 11:26am from- T-116 P.2E127 F-066
CITiA'1"IONS xi
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-
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