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Professors, businesses divided on effect of potential minimum wage hike

By Sylvia Lutze

May 20, 2015 1:17 a.m.

The Los Angeles City Council voted Tuesday to increase the city’s minimum wage to $15 an hour by July 2020, but UCLA professors said they don’t think the Westwood community will experience severe problems with the increase.

Chris Tilly, a professor in urban planning at UCLA and director of the UCLA Institute of for Research on Labor and Employment, said Westwood and UCLA jobs are less likely to be affected by the changes in minimum wages than other areas because they have a consistent client base of college students.

The city council’s proposal states the city’s minimum wage will increase each year for four years starting July 2016, when city wages are expected to increase to $10.50 an hour.

According to the proposal, small businesses will be given an extra year to adapt to the new wages. Some small business owners in Westwood said they are still concerned about the effects the increase will have on their businesses.

Clinton Schudy, owner of Oakley’s Barber Shop in Westwood, said he thinks a lot of businesses will be forced to cut hours.

“When there’s an increase in wages, it usually gets passed on in pricing,” he said. “The cost to buy things or do things goes up and the actual level of living doesn’t change.”

Diddy Riese owner Mark Perry said he implemented the ice cream shop’s first major price increase in 13 years Monday, partly because he is concerned about the wage increase.

“Labor costs always go up over time,” he said. “Commodity prices, specifically in dairy, have been steadily increasing.”

He added this is quite a dramatic increase in minimum wage that will affect the restaurant industry, especially in restaurant expansion projects.

Perry also said he thinks that wage hikes will make it more difficult to create new restaurants because of the increase in costs.

“There is no way consumer prices can stay the same,” Perry said. “Certain prices will have to increase across the board.”

Despite concerns from small businesses, Tilly said he thinks there is potential for economic growth with little to no loss in jobs.

“Some businesses may be hurt and some may have to scale back,” he said. “However, putting more money in the hands of low-income individuals means more money will be spent.”

City officials performed three studies in Los Angeles to predict the possible effects of raising the minimum wage. Two studies showed little to no negative effects on employment while the other showed a largely negative outcome, Tilly said.

He added the negative outcomes from the study seem implausible, and the benefits to the low-income population are worth small negative effects.

Christopher Erickson, a professor at UCLA Anderson School of Management, said he feels less confident about the potential increases because the studies’ conclusions differ.

“There are a number of factors that go into the overall effect on the economy,” Erickson said. “(Whether) it will reduce employment significantly is still an open question.”

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Sylvia Lutze
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