A decade later, San Diego’s living wage law quiets critics, offers enforcement lessons

Two years ago, the paychecks Jose Partida brought home to support his family were barely enough to make ends meet. The landscape company he worked for at the time paid him about $11 per hour, without paid vacation or health benefits.

But life has since improved for the 28-year-old father of two. He now works for a different landscape company, one that does lots of business with the city of San Diego.

Partida is the beneficiary of a decade-old law that requires city contractors to pay their employees living wages for work they perform on the taxpayers’ dime. He is one of roughly 3,900 city contract workers currently earning nearly $15 an hour, including health benefits, and receiving paid vacation.

“I live better,” said Partida, who does irrigation work on city properties for Landscapes USA. “I don’t have any pressures. … Before it wasn’t like that.”

While the city’s living wage law initially faced strong opposition from business leaders, who argued that requiring pay well above the minimum wage would kill jobs and put employers out of business, the city’s experience over the past decade appears to have silenced those critics.

In fact, many employers report that the law has been good for workers and for business. Experts who study living wages say the overall success of such laws has helped pave the way for the movement to increase minimum wages in cities nationwide, including San Diego.

Workers rights advocates and city officials hope San Diego’s new minimum wage law, which went into effect in July, will have a similar positive effect on workers, businesses and the local economy. But the degree to which the law succeeds will largely depend on how aggressively the city enforces it.

If the budget is any indication, strong enforcement of the new law is unlikely. An inewsource review of the city’s experience policing the living wage suggests that its plans to rely on complaints to enforce the minimum wage law may not be enough to keep employers honest.

Businesses in San Diego have a track record of failing to follow wage laws, whether intentionally or not. And given that low-wage workers are often afraid to file complaints against their employers, workers rights advocates say it’s critical that the city make active policing of its latest wage law a top priority.

“If you look at the lessons learned from the living wage enforcement, the picture is very clear that you do have to do some proactive enforcement in order to ensure that employers feel the obligation to comply,” said Clare Crawford, executive director of the Center on Policy Initiatives, a local nonprofit organization that advocates for low-income families. “You really need the city to make sure those employees are protected beyond just waiting for complaints.”

A popular law

The living wage currently pays $12.21 per hour in cash wages, plus $2.45 per hour in health benefits, and offers workers up to 10 paid vacation days. It covers landscapers, janitors, security guards and a variety of other full-time, part-time and seasonal service employees who work for companies that do business with the city.

Many employees at Qualcomm Stadium, Petco Park, the Convention Center and other city facilities earn the living wage. Earlier this year, the city added paramedics and other medical workers to the list of city contractors covered by the law.

As its name suggests, the living wage is intended to help workers do more than just get by — it’s meant to help lift them out of poverty. At least that’s what the City Council intended when it passed the law in dramatic fashion on April 12, 2005.

For nearly six hours before the vote — the outcome of which was uncertain until the very end — opponents and supporters of the measure packed the auditorium of Golden Hall for heated testimony.

Advocates for low-wage workers hailed the ordinance as a way to achieve economic justice — “The living wage is a human right,” one woman said — while many business leaders assailed it as a government mandate that would kill jobs, cripple businesses and spell disaster for the city’s already dismal finances — “It will literally shut our doors down,” one business manager said.

In the end, the City Council voted 5-4 to approve the living wage. Cheers erupted when City Councilman Tony Young — widely believed to be the swing vote — announced his support for the measure. As the applause died down, however, Young stressed that he wanted to reserve the right to rescind the ordinance if the gloom and doom predicted by opponents of the living wage came true.

Tens years later, many say it hasn’t.

“It turned out to be really popular,” said Laurie Coskey, CEO of United Way of San Diego County and a faith leader who fought for passage of the living wage ordinance. “There weren’t any of the doomsday repercussions that were anticipated.”

The living wage got the city out of the business of paying its contractors low wages that advocates say kept workers and their families living in poverty. And raising the wage floor allowed contractors to bid on city contracts on the basis of service quality, rather than how little they paid their workers.

But the law applies to only a small fraction of workers in San Diego.

Some businesses with lots of city contracts employ dozens of workers who earn the living wage, but other businesses only pay living wage rates for the handful of hours a week one of their employees works on a city contract.

“I have nothing bad to say about” the living wage, said Mike Salceanu, operations manager at Landscapes USA, which employs about 35 workers who landscape city properties. “We have much better retention, and with retention comes increased quality of service.”

Additionally, he said, the living wage helps motivate his staff who work on private contracts.

“All of the employees want to be assigned to a city contract because it’s better benefits, better pay, better stability in their work,” Salceanu said. “We made it into a kind of a reward program.”

Other employers have reported similar benefits in annual reports filed with the city. In 2009, the first year the city asked employers for feedback on the living wage, 41 percent reported that paying the living wage improved their quality of service, while the same percentage said it reduced turnover and absenteeism.

The Downtown San Diego Partnership is one of the city’s newest — and biggest — living wage employers. The nonprofit’s Clean and Safe program, which employs workers to sweep sidewalks, trim trees and remove graffiti downtown, recently signed its first city contract covered by the law.

“We definitely noticed an increase in morale,” said Bahija Hamraz, executive director of Clean and Safe. “We are experiencing better retention. And we’re able to attract employees more effectively than we did in the past, so we’re more competitive.”

A worker from the Clean and Safe program scrubs downtown city sidewalks. August 18, 2016. Megan Wood, inewsource.

The downside, Hamraz added, is that the budget increase caused by the living wage has stalled hiring a bit. She said the nonprofit had hoped to hire more employees when it renewed the contract, but the added costs have prevented that so far.

Still, “I think it’s a net plus,” she said. “You have a more productive team, with better morale and also an ability to retain a team, which all translates into cost savings.”

Aztec Landscaping was among the first set of participants in the city’s program. Since the law went into effect in 2006, it’s held 210 living wage contracts, more than any other firm, according to an inewsource analysis.

Aztec’s vice president, Rafael Aguilar, agreed that the living wage law has benefited his workers, but “it did kill jobs,” too. Positions he had to cut after the law went into effect have never been restored, he said.

Despite such complaints, business leaders who were once strongly against the living wage law are no longer criticizing it publicly. A spokeswoman for the San Diego Regional Chamber of Commerce, which led the fight against the law in 2005, declined an interview request for this story: “We are going to pass,” she wrote in an email.

To date, more than 130 cities have adopted living wage laws nationwide. Economics experts have been studying their impacts on workers and businesses ever since Baltimore passed the first one back in 1994.

For the most part, researchers say, the experiences of many workers and businesses in San Diego appear to reflect broader research about living wage laws in cities across the country. While studies have found the laws result in modest job losses and increased costs, researchers have generally concluded that they help stabilize the lives of low-income families — allowing them to pay down debt, see a dentist or quit a second job — and improve the performance of businesses.

Experts say the overall success of living wage laws helped give birth to the minimum wage movement sweeping the nation. As David Fairris, professor emeritus at the University of California Riverside, put it: “The living wage movement showed that … it didn’t all go to hell in a handbasket.”

Enforcement lessons

In June, San Diego voters overwhelmingly approved a ballot measure to raise the minimum wage and provide workers in the city with paid sick days. The law, which went into effect in July, added 50 cents to the minimum wage, raising it to $10.50 an hour.

The city’s minimum wage will jump to $11.50 next year, but its gradual increases will eventually be eclipsed by the state’s minimum wage, which will reach $15 per hour by the year 2022.

The question now facing San Diego is how it will enforce the new wage mandate. City officials acknowledge it won’t be easy, but workers rights advocates say the city could learn important lessons from its decade of experience policing the living wage.

Since the living wage law went into effect, the city has recovered on workers’ behalf about $594,000 in unpaid wages from city contractors through complaint investigations and compliance reviews.

To date, workers have filed more than 60 formal complaints against their employers, alleging a wide variety of living wage violations, including unpaid wages and unpaid leave. An inewsource analysis showed the city confirmed violations in 52 percent of the complaints and required employers to pay a total of $408,000 in back pay.

The city has recouped an additional $186,000 for workers through proactive enforcement. A separate inewsource analysis showed the city has conducted more than 70 compliance reviews since the law went into effect in 2006, roughly 43 percent of which resulted in violations. Last fiscal year, more than half of the compliance reviews found violations.

Employers subjected to audits have been cited for failing to pay living wages and failing to compensate workers for vacation, among other violations. Some violations have been minor, but others have been substantial.

Last year, for example, a city audit of three contracts held by Ace Parking found multiple living wage violations, requiring back pay totaling more than $72,000, the highest amount paid as a result of a compliance review.

The parking services company, which declined an interview request, failed to pay required wages, offer paid leave and maintain proper records, among other violations. The city has paid Ace Parking more than $45 million in living wage contracts, more than any other contractor.

In 2010, the city permanently banned J.L. Krueger Landscape Services from bidding on city contracts after an audit found some of the same violations.

In both cases, the companies were found to have violated a fundamental requirement of the law, which records show many employers have ignored: They failed to inform employees of their rights under the living wage law.

Enforcement “needed to be proactive,” said former state Assembly Speaker Toni Atkins, who led the effort to pass the living wage in 2005 when she was on the San Diego City Council. “You need to shine the light.”

Workers advocates have largely praised the city’s efforts to enforce the living wage law, but they say a lack of funding has limited the scope of its work. The enforcement office is run by just three full-time employees who are tasked with sifting through payroll records and interviewing employees in order to detect violations.

In fiscal year 2015, the city proactively reviewed 22 percent of its active living wage contracts. That’s a lower audit rate than the city of Los Angeles, which reviewed 28 percent of its living wage contracts.

Three years earlier, San Diego didn’t conduct any compliance reviews because its skeleton staff was busy investigating an unusually high number of complaints.

Some business owners say the limited proactive enforcement is a problem. In 2010, security contractor Elite Show Services filed a complaint with the city, alleging that some of its competitors working for the Convention Center had “snubbed their noses” at the living wage law. The company requested that the City Council “take immediate action to follow through on [living wage] enforcement … so that the playing field for all companies is leveled.”

Records indicate that the city found no violations.

“It’s good for them to do” compliance reviews, said Aguilar of Aztec Landscaping, which has been subjected to three audits. “It weeds out people that are trying to do shady business.”

Workers advocates agree. They stress that the high violation rates found through complaints and compliance reviews suggest the need for more proactive enforcement — something they hope will be prioritized as the city starts to monitor its newest wage law.

“People will make mistakes, people will try to cheat, people will just not know,” said Donald Cohen, the former executive director of the Center on Policy Initiatives, who helped craft the city’s living wage law. “If you’re not out there being proactive, then our worst selves can come out.”

Minimum wage connection

If a lack of funding has hampered enforcement of the living wage law, it’s likely to pose a much greater obstacle for minimum wage enforcement.

The city has budgeted $400,000 to administer and enforce the new minimum wage law in fiscal year 2017. That’s only about $3,000 more than it has allocated for enforcing the living wage law. In other words, the city plans to spend almost as much money to police a law that covers 172,000 low-wage workers citywide as it does to enforce a law that applies to fewer than 4,000 city contract workers.

The city is still in the early stages of creating a program to enforce the minimum wage law. In August, the City Council passed an enforcement ordinance that subjects employers to civil penalties of up to $1,000 per violation and creates an office with the power to review payroll records and interview workers.

The city plans to rely on complaints to monitor compliance.

“They did not build into the ordinance a requirement to do proactive enforcement,” said Crawford of the Center on Policy Initiatives. “We see that as one of the weaknesses.”

Mayor Kevin Faulconer opposed the minimum wage increase. A spokesman for his office declined an interview request for this story.

City Councilman Todd Gloria, who led the effort to raise the minimum wage, said he understands the importance of compliance reviews. While the new law doesn’t explicitly mandate proactive policing, he said it allows for audits to be a part of the city’s enforcement repertoire.

“It’s my intention that that tool is at the disposal of the enforcement office,” said Gloria, who plans to further discuss minimum wage enforcement during a Sept. 14 Budget Committee hearing. “It cannot simply be just a complaint-driven process because too often too many people are not going to feel empowered to come forward.”

Gloria said the city plans to follow the lead of other cities that have enforced minimum wage ordinances, prioritizing education outreach and cooperation between the city, the state Labor Commissioner’s Office and local community groups.

“We should be in an educational role right now,” Gloria said, noting that his office has already received calls from workers claiming they weren’t being paid the new minimum wage. “Are we getting notices to employers? Are we working with nonprofit partners in neighborhoods that can help us spread the word?”

But eventually, Gloria said the city will have to take stock of its enforcement efforts.

“We’re going to really have to start looking at the metrics,” he said. “If the council saw that there were no proactive [compliance reviews], they’d have to ask why we’re spending the money we’re spending on the enforcement office and whether or not we’re getting our money’s worth.”

How we analyzed San Diego’s living wage data

To evaluate the effects of San Diego’s living wage ordinance, inewsource analyzed several sets of data dating back to the start of the law in 2006. We filed Public Records Act requests with the city of San Diego’s Contracts and Purchasing Department for lists of issued contracts, employee complaints, compliance reviews initiated by city staff and annual compliance reports filed by contractors. We also requested living wage contracts held by Petco Park, the San Diego Civic Theatre, the San Diego Sports Arena and the San Diego Convention Center, all of which are considered city facilities. The city said these agencies maintain separate sets of records from the Contracts and Purchasing Department. The Convention Center turned over its contracts. The Civic Theatre said it had no responsive documents. Petco Park declined to release records, claiming it was exempt from the Public Records Act. The Sports Arena also declined to provide its living wage contracts. After standardizing contractor names in the various sets of data, inewsource was able to conduct the analysis.

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