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Raising Santa Monica

Photo by Slobodan Dimitrov

On a cool night in early June, before a standing-room crowd of more than 300 cheering supporters, a group of Santa Monica restaurant and hotel workers and their backers unveiled an unprecedented proposal.

In the name of fairness, the union workers said, Santa Monica should become the first municipality in the nation to impose a "living wage" requirement on businesses that received neither direct subsidies nor contracts from the city. The proposal, which would directly affect some 3,000 workers, would force an estimated 35 businesses along the coast with more than 50 employees to pay at least $10.69 an hour, a hike that would nearly double the minimum wage overnight.

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  • www.surfsantamonica.com
  • The affected employers would include national restaurants and retailers who reaped the benefits of a city-funded tourism boom, although the main target is luxury hotels, some of which pay their housekeepers the $5.75-an-hour minimum wage to clean $400-a-night rooms.

    Since the June 5 kickoff rally at the Church in Ocean Park, Santa Monica’s living-wage proposal has sparked a political and ideological war that recalls the early days of rent control, two decades ago. The setting, in both cases, was the stained-glass confines of the old brick church, a liberal bastion fit for what proponents view as a moral war. "The essential argument is a moral one — the right to lead a decent life," local union leader Kurt Peterson told the crowd. "It’s not just the wage, but the right to fight for that wage."

    It didn’t take long for business leaders to react. This, they argued, was a truly radical proposal that could force some businesses to shut down or move out of town.

    Since Baltimore imposed a $6.10 living wage on its contractors in 1994, more than two dozen other cities — including New York, Los Angeles, Boston, Minneapolis and Portland, Oregon, as well as L.A. County — have passed living-wage ordinances, but they only applied to businesses that received direct city subsidies or contracts. No city had ever told a company what they had to pay workers in the everyday course of their private business. That was unheard-of.

    Besides, the proposal would impose the living wage only on businesses within the Coastal Zone. While the zone — which runs from the ocean to Fourth Street north of Pico Boulevard and to Lincoln Boulevard south of Pico — includes most of the city’s highly profitable tourist-related businesses, opponents argue that it unfairly singles out businesses that happened to fall within its boundaries.

    "This thing is discriminat[ory] as hell," snapped Herb Katz, who chairs the board of the Bayside District Corp., which manages the downtown area, much of which falls within the Coastal Zone. "You can ruin a lot of businesses by doing it."

    "This is a very, very serious and very complex issue," Kathleen Rawson, the Bayside District Corp.’s executive director, said recently. "There is a potential for a domino effect that can be devastating for Santa Monica businesses."

    For the business community the ordinance is no veiled threat. The proposal was crafted by the hotel and restaurant workers union local and by Santa Monicans Allied for Responsible Tourism (SMART), two groups with close ties to members of the City Council. In fact, leaders of Santa Monicans for Renters’ Rights — which controls five of the seven council seats — had attended meetings to help hammer out the terms of the proposal. What’s more, some leaders of the powerful grassroots tenants group belonged to SMART, and the union was credited with helping the group win a super majority on the City Council, canvassing precincts and staffing phone banks during the last three council races.

    "If a vote were held today," predicted Tom Larmore, a politically savvy attorney picked by the Santa Monica Chamber of Commerce to head a special subcommittee on the living-wage proposal, "it would win six to one."

    The Santa Monica City Council first considered the issue at its meeting Tuesday — and drew hundreds of advocates pro and con — when it was expected to do nothing more than green-light a study of the proposal. But already the plan is drawing attention far from the city’s boundaries.

    "This is groundbreaking on many levels," said John Doyle, director of public affairs for the Employment Policies Institute in Washington, D.C. "Here you’ve got people competing in the open market not just with each other, but with those in the surrounding area. You’re going to see a tremendous fallout if this passes."

    Doyle has been critical of other living-wage ordinances, and he was skeptical of this one: "It will be an amazing experiment. It may be a costly experiment. I think they’ve overreached this time."

    But some experts took a more positive view of the plan. Economists who have studied the history of the minimum or living wage in this country note that such dire predictions have seldom panned out. "There is no reason why a municipal living-wage ordinance should be seen as seriously burdensome for cities," said Robert Pollin, professor of economics at the University of Massachusetts, Amherst, and co-chair of the Political Economy Research Institute there. Pollin co-authored the landmark study "The Living Wage: Building a Fair Economy," which found little evidence to support the notion that increasing bottom-end wages forces employers to cut back on staffing. Pollin concedes, however, that Santa Monica’s proposal is "probably a new idea."

    To Madeline Janis-Aparicio, the leader of the Los Angeles Living Wage Coalition, that’s just the point: "This is a growing issue across the country — the divide between the top and the bottom. There is a huge growth in the working poor."

    Janis-Aparicio said she was confident that the measure would survive any legal challenge: "We looked extensively at the legal issues. There is nothing in state or federal law that prohibits a city from setting a standard. Charter cities like Santa Monica have great autonomy. The city has the complete authority to do this.

    "There is no other place in the country that has tried this zone approach. It is a very unique approach. It is an ambitious thing, and different legally."

    Still, the political battle over creation of a localized minimum wage has only just begun. Both camps have outlined their strategies behind closed doors, and started pondering the legal and economic implications — poring over studies and seeking the advice of experts in the field. The union has carefully organized a public-relations blitz, making workers available to the press for interviews, while opponents have mounted a fund-raising drive that incumbent council members fear marks an early start of the November 2000 elections.

    "I’m very aware of the political minefield into which we’re headed," said Councilman Kevin McKeown, one of the key proponents of the proposal. "If we go forward with this, it shows an incredible commitment to doing the right thing. In a way, it’s like they’ve already started the campaign. The war drums are pounding loud over at the chamber office."

    The life of Jose Natividad Casillas, union leaders say, illustrates the moral inequities of the current wage structure. For four years, Casillas, 36, has washed dishes at the Miramar Sheraton, the city’s only unionized hotel. A hard and loyal worker, Casillas’ salary has gone from $6.47 to $7.85 an hour, which helps to support his wife and six children. In his four years on the job, Casillas has only missed one day of work, after cutting his finger on a broken glass. He took an unpaid day off to get six stitches, and, after a timely paid federal holiday, was back at work. "My work is very hard," said Casillas. "I feel it in my back, my lungs."

    Despite the low wages, Casillas is proud of his job, which helps to feed the hotel’s $200- to $1,000-per-night guests, including President Clinton. "Sometimes I think that perhaps I’m washing the dishes that a president eats from," Casillas said. "It fills me with pride. We need each other, those at the top and those at the bottom. But we need to make a dignified wage. It’s a moral question. The workers need it."

    Thanks to the union and support from the community, Casillas has become a success of sorts. He has been able to trade the rat- and roach-infested $475-a-month one-room apartment in Echo Park for a clean, federally subsidized $448-a-month four-bedroom apartment in downtown Santa Monica. Instead of taking a bus to work at 5:45 a.m., Casillas now walks three blocks to his 7 a.m. job. "I’m very lucky now," he said. "I live like a rich man." Still, Casillas sometimes must visit a food bank to keep within his budget, and he is worried he could be stuck in a dead-end rut that won’t allow him to give his children the education he never had. Earning the living wage would help change things, maybe even buy his children a computer for their homework.

    "My daughter won a bronze medal [for her grades] and graduated from junior high school," said Casillas, who only finished the third grade in Mexico. "All she had was a paper and pencil. I don’t make enough to raise a family and prepare for the future."

    Casillas said he is fighting the battle for a living wage not only for himself, but for his fellow workers: "I’ve seen the need. I’ve suffered and lived, and many of my co-workers are still suffering like I did. You go home, sleep, get up and go to work. You don’t have time for the family."

    According to a sample poll conducted by SMART, the tourism activist group, many of the 3,000 workers affected by the proposal — the department store clerks and floor workers, the restaurant dishwashers and cooks, the hotel housekeepers and parking attendants — earn the minimum wage. On the other hand, the corporations that run many of the businesses are multi-million-dollar-per-year — if not multibillion-dollar-per-year — enterprises such as Fujita, Sunstone and the Gap, which pay their top executives in one week what the low-end workers make in a lifetime.

    Union leaders scoff at the notion that the Santa Monica hotels can’t afford to absorb the living wage. They note that the Radisson Huntley in Santa Monica pays housekeepers the $5.75-an-hour minimum wage without health benefits, while the Radisson Miyako in San Francisco pays $12.09 an hour plus full family medical benefits. Yet, both hotels charge about $225 per night for a king-size room. "I don’t understand why it’s so hard for them to pay $21,000 a year," union leader Peterson said. "They talk about letting the market ride, but they haven’t been living by market rules for 15 years."

    Proponents of the living wage argue that although the 35 businesses affected receive no direct subsidies or contracts from the city, they have reaped the benefits of the city’s investment in the Coastal Zone, a state-designated area, and was carved out by the 1976 California Coastal Act to help develop the coast while protecting its natural beauty. During the past decade, city funds have turned the sagging Santa Monica Pier and deserted Third Street into booming regional attractions that have made tourism a $700-million-a-year industry, generating some $17 million in annual tax revenues.

    In addition, a 1990 voter initiative banning new hotels along the coast has frozen out competition for existing establishments, which boast among the highest occupancy and room rates in the county. Yet despite the windfalls from public investment — the city continues to pump nearly a million dollars per year into its Convention and Visitors Bureau — taxpayers continue to subsidize many of the workers, who are among the lowest paid in the county and who often rely on food stamps or other forms of public aid.

    "Why is it that now these businesses are profitable?" said former Mayor Dennis Zane, who helped oversee the transformation of Santa Monica into a tourist haven. "It’s the city’s commitment. What changed was the city’s investment, which was concentrated in the Coastal Zone. And the major beneficiaries are the hotels. It is morally questionable to operate a business at that level of profitability and have a work force that can’t make ends meet without a public subsidy."

    The $10.69 living wage was arrived at by calculating what a family of four needs to no longer qualify for food stamps. (Opponents, however, argue that most workers don’t have families of four, and that many are single.) The proposal also would add full health coverage for a worker’s family and provide seven federal holidays per year, and one sick day and vacation day per month.

    "We don’t want to hurt the business climate in Santa Monica, we just want to make it fair," said longtime community activist Vivian Rothstein, a member of SMART. "The profit margins have gone up and up and up. This is close to what happened with rent control. If the landlords hadn’t been so greedy, there wouldn’t be rent control. If the wages were more equitable, there wouldn’t be [the present] emergency . . . It’s the greediness and the disparity that creates this emergency."

    Restaurant owner Tony Palermo feels that he’s caught in the middle of a war against the big hotels, a war he has no part in. Teasers, which he opened on the Third Street Promenade when the strip was a row of struggling or boarded-up storefronts, is now a bustling business with 82 employees. The proposed living-wage ordinance, he said, would drive him out of business.

    "I just want to know where I send my keys," Palermo said. "There’s no way to take that hit. It’s like taking water out of a rock. They’re trying to go after the hotels, and we’re caught in the middle."

    Palermo argues that the living wage doesn’t just apply to the dishwashers and busboys at the bottom of the food-service chain, but triggers raises all the way up to the chefs and restaurant managers at the top. Pay your $6-an-hour dishwasher $10.69 an hour, and you have to pay your $7-an-hour prep cook $11.25. You also have to hike up the wages of the worker in charge of the salad station, the fryer and sandwich maker, the sauté and broiler cook, the assistant kitchen manager and, finally, the chef. And what about the hostess, or the waiters and waitresses who make minimum wage but cash in on tips? They too would have to be paid at least $10.69.

    "We don’t make enough profit," said Palermo. "We’d have to shut down. It’s the biggest bullshit Catch-22 you’ve ever heard in your life."

    Ruth Elwell, who owns Ye Olde King’s Head near the Third Street Promenade, said the proposal will discourage her from hiring more than her current 48 employees. Once you go above the 50-employee threshold, she said, the proposal will trigger a domino effect. "After the last minimum-wage increase of 50 cents, everybody wanted an increase of 50 cents. This would put restaurants out of business, we are so labor- intensive. I don’t think people will pay $18.95 for fish and chips."

    The wage hikes will send businesses scrambling for ways to either cut costs or jack up prices, agrees Larmore, the attorney studying the matter for the Chamber of Commerce. The era of the $14 hamburger by the beach is about to dawn. "You’ll have businesses figuring out ‘How do you adapt?’" Larmore said. "‘Can we scale back to fewer employees? Increase automation? Raise prices?’"

    The proposal would also have a devastating, and unintended, fallout on businesses that employ fewer than 50 workers, opponents contend. "They compete in the same labor pool," Larmore said. "They will have a hard time filling their jobs and may need to increase wages to be competitive. Something has to give here." In fact, the very workers the proposal is designed to help could end up being the hardest hit, since a $10.69-an-hour job with benefits will lure better-prepared employees. "The work force is going to start to look like Orange County," Larmore said.

    Ironically, the large hotels targeted by the proposal will likely be the least affected, since their upscale clientele won’t likely blink at the higher prices, opponents predict. They note that the current proposal stems from an effort by the Miramar Sheraton to decertify the union. If the union wants higher wages, they argue, maybe they should focus on organizing the workers better. "If the union is strong enough and organizes well, that’s where the battle’s to be fought," said John Warfel, who sits on the Bayside District board. "To use the back door to have a union wage is blatantly hypocritical and unfair."

    Opponents of the proposal also argue that imposing the wage in only one section of the city is discriminatory. Businesses in the Coastal Zone may have reaped benefits from the infusion of city funds, but they also have more than repaid their debt in assessments and taxes.

    "This money came from sales taxes, bed taxes, utility-user taxes," Larmore said. "Businesses pay for assessments to be there. There’s no giveaway. [The city] got more than they ever put into it.

    "Business owners take big risks," Larmore added. "They borrow money, they work hard, and then, if they’re successful, they’re the bad guys. This is like the Inquisition."

    With the council poised to pass some form of living-wage ordinance — Santa Monicans for Renters’ Rights (SMRR) officially endorsed the concept at its annual summer convention last month — what remains to be determined is just how far the proposal will go. For now, any proposal that increases the minimum wage on businesses with no direct ties to the city would be unprecedented.

    And none of the current living-wage laws have literally doubled wages overnight. In fact, the study the council commissions may raise more questions than it answers. Already the chamber has launched a campaign to raise $75,000 to commission a study of its own, and SMART has spent months analyzing the legal ramifications of the proposal.

    Still, it may not be until at least next April that the council receives the results of the consultant’s study and crafts an actual ordinance. Some members of the renters’ rights group have argued for raising the employee threshold to 100 instead of 50, while others have argued for lowering it. Likewise, the $10.69 living wage is still open to debate. In addition, the current proposal calls for establishing a local hiring hall and a board to protect workers against harassment for speaking out, measures businesses view as empowering the union. And a hardship clause that exempts vulnerable businesses is viewed as an invasion of privacy.

    What’s certain for now is that the biggest ideological and economic war since rent control is looming on the shores of what critics have long dubbed the People’s Republic of Santa Monica.

    "Santa Monica is the right place," said Councilman Michael Feinstein, a key proponent of the proposal. "There is a political will to look at it, and the financial success of its tourist industry makes the low wages so glaring."

    "It’s going to be the hottest issue in recent memory," said Councilman Paul Rosenstein, a union electrical worker who has served on city commissions for more than a decade. "Not only will we have the local employers we’ve heard from so far, but the chains, the state, national, regional . . . Local businesses are on the warpath, and the biggies haven’t even jumped in yet."