Official Neglect Fosters Wage Theft In San Diego

Study: Nearly 40,000 workers shorted on paychecks.

By Doug Porter / San Diego Free Press

What happens if voters approve an increased minimum wage ordinance and government can’t be bothered? Short answer–people get ripped off.

The Mayor’s office in San Diego fought an increase in the local minimum wage at every turn over a two year period. The City Council passed an ordinance raising the wage in steps along with a system for earned sick leave in July 2014. The Mayor vetoed it. The Council passed it over his veto.

Kevin Faulconer’s allies, led by his primary political consultant, organized a petition drive–gathering signatures under false pretenses–and the ordinance was placed on the June 2016 ballot, when 63.84% of the voters approved it.

Having failed to defeat the political will of the people, the City of San Diego adopted a policy of benign neglect when it came to enforcement.

Credit: CPI

And now we know the impact of that policy.

A study by the San Diego State University Department of Sociology, the Center on Policy Initiatives, and the Employee Rights Center of San Diego estimates employers in San Diego and Imperial counties have failed to pay the legal minimum wage to 39,900 local workers.

One year ago today the San Diego Earned Sick Leave and Minimum Wage Ordinance became law and established a local minimum wage (currently $11.50 an hour) applying to all work done within City limits.

The law required the City of San Diego to create an enforcement system. Apparently, Mayor Faulconer was preoccupied with stadium deals until very recently. San Diego has not enforced the wage and retaliation complaints, referring them to the State Labor Commissioner, which lacked staffing to conduct investigations.

From the report:

Until June 30, 2017, the city lacked even a form for those complaints. At that point it quietly added two checkboxes to an online form and changed instructions on the website

to say workers have the option to file a complaint with the City or the Labor commissioner. In its first year, the San Diego enforcement office has been focused instead on informing business owners about the sick leave and posting requirements, and has taken 12 complaints of denied sick leave.

By contrast, the City of Los Angeles, which passed its first local minimum wage law at the same time as San Diego, in July 2016, has established an active enforcement office and has already recovered $250,000 for workers who were paid less than the legal wage.

Working in collaboration with local advocacy organizations, San Francisco recovered almost $6.6 million in the first decade of its minimum wage ordinance (2004-2013).

Only after a letter urging cooperation was sent to the City Council and Mayor in May 2017 from State Commissioner of Labor Julie A. Su, did the government grudgingly take steps to rectify the ssituation

The Labor Commissioner, with one office serving all of San Diego County and a two-person satellite office for Imperial County was able to investigate fewer than half the 2,852 individual claims it received in 2016.

Wage complaints were concentrated in restaurants and construction, substantially exceeding their proportion of the local workforce.

Again, from the report:

Fear of retaliation and lack of knowledge about wage law violations and about the complaint process emerged as the major barriers to filing complaints. In addition, workers believed others thought it would do no good to complain.

Our survey asked, in three ways, why many people who are owed money by their employer don’t file claims to collect it. These questions were open-ended:

• Claimants who said they did not file immediately, for reasons other than awaiting resolution by their employers, were asked why they waited.
• Claimants who said their coworkers suffered the same violation without complaining were asked why the coworkers did not file.
• All respondents were asked why other people they know do not file complaints.

Credit: CPI

***

Much noise was made about a study released last month by the University of Washington on Seattle’s steps in raising the minimum wage to $15 an hour. (Like many other minimum wage increases, Seattle’s is incremental)

The study’s conclusions fit neatly into the so-called free market narrative pushed by people like SDSU econ prof Joseph J. Sabia, who would like us to believe raising the minimum wage is likely to result in making many low skilled workers worse off.

The San Diego Union-Tribune’s editorial board was all over this study, cranking out a June 27th editorial suggesting the study’s conclusions “may have grim implications for San Diego and California.”

The UT’s editorial was just the latest in a steady stream of commentary aimed at convincing San Diego’s electorate they made a poor choice in voting for a minimum wage increase in 2016.

Columnist Dan McSwain has cranked out two columns (that I remember) this spring along these lines, one predicting San Diegans will soon come to know the “victims” of the minimum wage increase and the other asking (and answering) the question “Is San Diego’s new minimum wage already hurting its poor?”

The problem with studies on (both affirming and denying) the effects of minimum wage is context. Wages are but one factor in the economy. Can we blame minimum wage increases for the stunning collapse of retail stores nationally? Nope. They’re closing in states regardless of wage laws.

In San Diego, we’re expected to ignore a 3.6% unemployment rate, evidence the restaurant industry has reached market saturation, and changes in consumer behavior (a larger increase in off-premise beverage sales) and instead told increased wages and earned sick leave are to blame for a relative decrease in hospitality job openings.

The free marketeers pushing these kinds of narratives often express ‘concern’ for the plight of lower paid workers–How exactly does one pay rent on San Diego’s minimum wage?–but offer up solutions based on a political economy only existing in textbooks approved by the Texas Board of Education and former Gov. Rick Perry.

Coming back to the University of Washington study, even those who want to support its conclusions admit there are problematic issues.

A report issued just days before the UofW study by on Seattle’s labor market released by Institute for Research on Labor and Employment at the University of California-Berkeley can to an opposite conclusion.

In fact, the UofW report is an outlier. It’s at odds with most of the research on minimum wages.

As Barry Ritholtz observed at Bloomberg View:

Anytime we encounter an outlier, we should pay close attention to what might be causing the unique findings. As Michael Hiltzik observed in the Los Angeles Times, the study’s findings “are out of line with almost all other studies of the minimum wage employment effect.” That doesn’t make them suspect, exactly, but it does warrant a close examination of the methodology to see whether the researchers missed or misinterpreted something.” As Carl Sagan observed with the acronym ECREE, “extraordinary claims require extraordinary evidence.”

So far, the evidence is going the other way. Not only is the data not public, so it hasn’t yet been peer reviewed, but what we do know about the study’s methodology has been criticized for its failings. The biggest is that it excludes businesses with more than one location. In other words, no McDonald’s or other fast-food restaurant chains were included. Nor was Wal-Mart, or any of the countless other well-known retail and restaurant chains.

That is quite a significant oversight: Michael Reich of the Center on Wage and Employment Dynamics at the University of California at Berkeley analyzed the impact of the methodology used. He notes that the UofW report excludes “48 percent of Seattle’s low-paid workforce out of their study.”

This debate about the minimum wage ignores the underlying problem. Our national morality, economy, and political outlook (and politics) rely on the deification of the dollar and the supremacy of self.

It’s time we got back to idea that a rising tide lifting all boats.

**How the CPI/SDDU/ERC study was made**

A research team of 22 SDSU graduate and undergraduate students conducted surveys in the lobby of the Labor Commissioner’s Office in San Diego over a nine-week period from February through April of 2017.

Collectively, these students were present in the Labor Commissioner’s Office for more than 400 hours. Researchers approached people in the lobby and asked them to participate in the survey if they were workers there about a claim and were over 18 years old. We conducted surveys with 305 workers. Most surveys, which included many open-ended questions, took from 15 to 45 minutes.

A few surveys were interrupted by the respondent being called into a meeting about their claim, and we then attempted to complete the survey over the phone. We asked respondents to participate in in-depth interviews at a later date, and conducted 30 of these interviews. We also interviewed staff of six non-profit organizations that assist workers with reporting violations and/or recovering wages. In addition, we conducted brief phone surveys of 96 workers who contacted the Employee Rights Center about violations but had not yet filed claims.

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