Oakland’s Highly Paid Nonprofit Executives Lead the Fight Opposing a Minimum Wage Increase

Goodwill Industries of the East Bay’s executive director John Latchford opposes raising the minimum wage to $12.25 in Oakland by next March. Latchford’s total compensation in 2012 was $311,566.

Nonprofit corporation executives are among of the most adamant opponents of raising the minimum wage in Oakland, California.

A ballot initiative spearheaded by labor unions and community organizations to raise Oakland’s minimum wage from $9 an hour to $12.25 next year was criticized in the San Francisco Chronicle by several nonprofit leaders who fear that the law will cut back the reach of their job training programs. Michelle Clark of the Youth Employment Partnership said the minimum wage increase will force her organization to scale back their job training program by 30 spaces. “That’s going in the wrong direction,” Clark told Will Kane of the Chronicle. Olis Simmons and John Latchford, the leaders of Youth Uprising and Goodwill Industries of the East Bay, respectively, voiced similar concerns.

These nonprofit executives are essentially objecting to raising the pay of their employees from $18,720 in yearly pre-tax earnings to about $25,480, an increase of roughly $6,700 per employee.

But what do Clark, Simmons and Latchford make in a given year? How much does their employment cost their organizations?

In 2012 the Youth Employment Partnership paid Michelle Clark $159,330 in total compensation. That’s equivalent to the pay of 8 minimum wage workers.

Olis Simmons of Youth Uprising had a paycheck and benefits equal to $249,761, or 13 minimum wage workers.

And John Latchford of Goodwill Industries is among the highest paid nonprofit executives, taking home $311,566 in salary and benefits in 2012.

Another way of looking at the math of a minimum wage increase, one that focuses not just on the pay of those at the bottom of the economic hierarchy, but also those at the top, is as follows: Under the current minimum wage of $9 an hour, or $18,720 per year, these three nonprofit executives combined are paid as much as 38 of their lowest wage employees. If Clark, Simmons and Latchford have to raise wages to $12.25 an hour, their compensation would drop to an amount equal to the total pay of about 28 of their minimum wage workers.

I break the math down this way because the debate about the minimum wage is centrally about inequality. Few things are certain about the impact of raising the minimum wage. But one certain impact is that income inequality in Oakland would be significantly reduced.

Under the current minimum wage, the ratio of John Latchford’s compensation to that of a minimum wage worker is 16:1, that is, Latchford makes sixteen times more than a minimum wage worker does. Under a $12.25 minimum wage Latchford’s ratio over the lowest paid workers drops to 12:1. That’s a far from the commanding heights of the U.S. economy where the CEOs of global corporations pay themselves hundreds of times more than their average employee, but it’s still a very unequal economic structure that could be addressed if Oakland passes a significant minimum wage increase.

Source: IRS Form 990s for 2010, 2011, 2012.

Comparing Bay Area Minimum Wage Increases

Berkeley and Richmond recently upped their minimum wages, and Oakland and San Francisco are also considering significant lifts for their lowest-wage workers. But each city’s minimum wage plan differs in significant ways. These differences reflect the balances of power between workers and employers, unions and business leagues, in each city.

In Oakland, labor and community organizations banded together as a coalition last year and decided to place an initiative directly on the ballot in time for the elections this November. That decision to circumvent the city council prevented what happened in Richmond and Berkeley. In Oakland’s neighbors to the north initial calls by grassroots activists for a $15 minimum wage were translated into a much smaller increase. Final legislation in these two cities was further watered down. Business lobbyists successfully argued that an immediate and significant hike in the minimum wage for all workers would cause unemployment, business closures, and a drain economic activity from these cities.

Berkeley’s minimum wage therefore isn’t very large, and it isn’t indexed to inflation, so it loses value quickly.

Richmond’s minimum wage, while larger on paper, may not impact very many workers in the city because of complicated exemptions that allow lots of employers to simply not pay the new municipal minimum wage, or to pay a lower “intermediate” amount.

In San Francisco the process has been legislative, like Richmond and Berkeley. But instead of starting from $15 and cutting downward, San Francisco’s board of supervisors appear headed toward $15 by 2018. If they pass the minimum wage legislation that was considered at today’s rules committee, San Francisco’s minimum wage will rise from it’s current $10.75 to $12.25 next year.

That would match the proposed increase that Oakland voters will consider in November. But then San Francisco’s minimum wage would jump another 75 cents in 2016, and then a dollar in 2017 and another dollar in 2018. Those increases significantly outpace the rate of inflation.

Here’s what the different enacted and proposed minimum wage increases in the Bay Area look like compared to one another.

In Oakland the “Lift Up Oakland” ballot initiative would raise the minimum wage for all employees in March 2015 to $12.25 and then increase this wage each year to prevent it from losing value from inflation. The Oakland Chamber of Commerce is attempting to place a competing measure on the ballot that would phase in a minimum wage increase, but the increases charted below for this proposal would not benefit all workers as the Chamber’s proposal carves out certain categories of employers and employees.

 

San Francisco’s proposed minimum wage would rise to $15 in 2018, possibly bringing pay just above the bare minimum considered a living wage.

 

Differences between Berkeley and Richmond’s recently passed minimum wage laws, and San Francisco and Oakland’s proposed minimum wages are larger than this graph would imply. In Richmond the number of workers excluded from the new minimum wage of $13 by 2018 is probably very large due to exemption of “small businesses” from having to comply, and a complicated provision that establishes an “intermediate” minimum wage halfway between the city and state minimum wages, allowing employers who obtain half their income from sales or services provided outside the city to pay this lesser wage.

 

 

What’s the Difference Between a $12.25 and $10.20 Minimum Wage?

The Oakland City Council has the power to raise the minimum wage paid by employers in the city. However, after years of not using this power to raise wages, a coalition of community organizations and labor unions is proposing to “lift up” Oakland’s minimum wage to $12.25 per hour through a popular vote.

In response to this coalition’s campaign, vice mayor Larry Reid is now also sponsoring a minimum wage ordinance to boost the bottom of Oakland’s wage scale to $10.20 an hour starting in 2015.

There are several key differences between Reid’s wage proposal and what the coalition is seeking at the ballot box.

Not surprisingly it’s the $2.05 difference between the two minimum wage proposals that creates the most contrast.

Consider the fact that there are currently very few occupations in Oakland that pay less than $10.20 an hour, but there are numerous jobs in the city that pay less than $12.25. The impact that Reid’s minimum wage would have on Oakland’s lowest paid workers would be incredibly small because few employees fall below his minimum mandated amount. Add just $2.05 more and the number of workers who will benefit leaps upward by perhaps an order of magnitude.

According to the Bureau of Labor Statistics’ most recent data for the Oakland-Fremont-Hayward metropolitan region only 0.6% of the workforce currently earns on average less than $10.20 an hour. But 6% of workers in the region earn less than $12.25 an hour.

That’s a major jump upward from a virtually insignificant number of workers to a small chunk of the total labor force. (I should note that the BLS statistics are for all of Alameda and Contra Costa counties, and here I’m assuming that Oakland roughly reflects the broader jobs picture in both counties.)

For the East Bay region, the BLS lists only 8 occupational categories in which the average worker earns below Reid’s wage proposal, but there are 39 occupational categories where average pay is below $12.25.

In other words, Reid’s minimum wage, if adopted, wouldn’t benefit most short order cooks, sewing machine operators, laundry and dry cleaning workers, child care workers, desk clerks, food preparation workers, personal care aides, waiters, and dishwashers.

What’s the Real Impact of a Minimum Wage?

In a recent profile story for the East Bay Express my colleagues Ali Winston, Elly Schmidt-Hopper, and I noted that Oakland mayoral candidate Bryan Parker doesn’t support a minimum wage measure that’s picking up lots of signatures, and which will likely be on the city’s ballot this fall. The measure would require all employers in the city of Oakland to pay their workers at least $12.25 per hour.

When we asked Parker about the minimum wage measure in an interview we weren’t surprised by his non-supportive answer. Parker is a business executive who ran a division of DaVita, a Fortune 500 healthcare company that pays many of its workers very low wages. Previously Parker worked at several investment banks, the sorts of places where conservative, anti-labor economic opinions are dominant.

But a few days ago on Twitter Parker claimed we misunderstood and mischaracterized his position on wages. He tweeted that he supports a “living wage.”

To clear up the record, here’s what Parker actually told us. We asked him, “do you support a $12.25 an hour minimum wage such as the ballot measure that will likely be put to voters?”

Parker didn’t respond with a “yes.” Parker told us that he supports the idea of a “living wage,” but that he isn’t sure “what the right number is.”

He then said something rather dismissive of the entire idea of using government to raise wages for the working poor. “What I want to think about instead [of a minimum wage] is more full employment,” concluded Parker.

The real value of the federal minimum wage has been made to decline since about 1968. This is one of the major causes of rising household income inequality in America. Ronald Reagan’s term in office coincided with the most consistent and effective attack on the minimum wage.

That’s supply-side economics at its most pure, and it’s also a talking point that has been used by opponents of minimum wages for decades. So to be really clear, when we asked about a minimum wage, we got an answer that wasn’t supportive, and that instead pointed towards a “rising tide lifts all boats” sort of plan.

Here’s the reason we likened Parker’s economic thinking to Ronald Reagan (see 1:33 mins in).

To be fair to Parker there’s some theoretical logic behind the full employment goal. In labor markets with lower unemployment rates companies have a harder time recruiting workers, even for the most unskilled of jobs. Tighter labor markets lead to rising wages as employers scramble to hire employees and retain them. Workers don’t fear quitting or losing jobs as they can just take another one. Wages tend to rise slightly during periods of low unemployment as workers have a smidgen of bargaining power.

Parker also told us he’s cautious about minimum wages because he believes they actually cause unemployment. “Employment would decrease,” said Parker. “Employers wont be able to afford as many employees. There’s extensive studies by economist showing that every time a minimum wage has been raised there’s been a deflationary impact on the overall jobs market.”

Again, that’s a very Reaganesque sort of statement. (See the above video link.)

Switching back into his business executive mode, Parker then told us that he’s a “data driven person.” This is why he doesn’t support a minimum wage and instead offers up the goal of growing jobs.

Problem is, a lot of the economic studies that claim to show a causal link between rising minimum wages and job losses are conducted by researchers working directly for pro-business, corporate-funded think tanks. When your paycheck comes from business interests who will profit from driving down wages, is it any surprise your findings are that higher wages for the lowest-paid workers are bad for the economy, even bad for those very workers?

For a recent example of this logic see Mark Wilson’s “The Negative Effects of Minimum Wage Laws.” Wilson’s consulting firm Applied Economic Strategies, LLC writes economic propaganda for the wealthy elite, attacking higher wages for workers, arguing that unions are obsolete, promoting tax cuts for the wealthy, among other policies that redistribute income and wealthy upward. Wilson was once employed by the Heritage Foundation, a think tank funded by ultra-conservatives like the Koch brothers and he served in George W. Bush’s administration. Oaklanders can probably expect some studies along these lines to be offered up this election season by local opponents of the minimum wage campaign.

The actual academic, peer-reviewed studies on the minimum wage don’t support Parker’s “data driven” opinions. Whether a higher minimum wage causes unemployment to rise at the bottom of the labor market is a controversial question that has been debated since Congress passed the first minimum wage law in the aftermath of the Great Depression, 1938. (It’s been debated alongside child labor laws — those opposing restrictions on using kids as workers in mines and factories were the same people opposed to mandated minimum wages.)

In fact, some studies show minimum wage increases actually bumped up employment rates.

Other state-level studies have shown that minimum wage hikes have led to job losses for low wage workers, but that the overall impact was still to redistribute hundreds of millions of dollars in income downward, even after accounting for lost income from fewer jobs, thereby improving the economic conditions of low-wage households.

A reason for the contradictory results, however, is that the minimum wage is an obviously political issue. It’s at the center of a power struggle between workers and businesses over the distribution of income from economic activity. Enacting minimum wage laws, or raising them on a statewide levels, or even in large metropolitan areas, causes the direct redistribution of millions in income from the top earners to the lowest paid workers. The net effect is probably to redistribute income from wealthy and middle class households to the poor, thereby lifting up the workers with the greatest needs. Many researchers who attempt to gauge the impact of the minimum wage on employment levels are already out to prove either the good or the bad in the policy. When researchers pick their methodological tools, data sets, and statistical formulas, it’s often the case that they’ve already subtly biased the outcome. The kinds of studies you trot out in support of your argument are just that; ammunition to support whether or not you’re for redistributing aggregate income downward via the minimum wage.

But overall the research —not just economic studies, also sociology, history, and not least the actual experiences of working poor families— is pretty clear. Minimum wages increase the overall share of income claimed by the bottom quartile or so of the workforce.