Since last November’s election, the new North Miami Beach City Commission seems hellbent on destroying all the successes and accomplishments achieved by the previous administration.

Their latest act of collective lunacy is the proposal of a “living wage” ordinance, which guarantees a minimum of $14.50 an hour for all full-time and part-time city employees beginning October 1, 2020, and for seasonal employees beginning October 1, 2021.  Seasonal employees are typically local high school students hired as summer camp counselors for two months a year.

The first reading of the proposed ordinance passed 6-1 at the June 18, 2019 Commission meeting, with only Commissioner Fortuna Smukler smartly voting no.

The second and final reading and vote will be held at an upcoming Commission meeting this Tuesday (see Item 9.4 of the Agenda).

Let’s look at the ramifications of this ordinance should it pass.

Currently, the minimum wage in Florida is $8.46 per hour, and is recalculated each year on September 30 based on the Consumer Price Index.  Accordingly, the minimum wage either remains steady or increases by a small amount.

While Florida Statute 218.077(3)(a)(1)-(2) does not limit the city’s ability to establish its own minimum wage for employees, by proposing to nearly double the current minimum wage, it’s painfully clear that the “progressive” members of the City Commission have not considered the dire fiscal consequences of such an ordinance.

The rationale for this proposal is nothing short of preposterous.

The proposed Ordinance 2019-02 states that “the City of North Miami Beach (“City”) has an interest in protecting the public health, safety and welfare of its residents by establishing certain compensation requirements for its employees.”

There is absolutely no correlation between “protecting the public health, safety and welfare” of the city’s residents and the “compensation requirements” of its employees.  One has absolutely nothing to do with the other.

The proposed ordinance also asserts that “sub-poverty level wages do not serve the public interest and place an undue burden on taxpayers and the community, which must further subsidize employers who pay inadequate wages by providing their employees social services such as health care, housing, nutrition, and energy assistance.”  It also claims that “such compensation requirements have the potential to increase consumer income and thereby decrease the number of employees whose incomes are below the poverty level, invigorate neighborhood business, help reduce blight in the City, and reduce the need for taxpayer-funded subsidies.”

Unfortunately, most of that language is nothing but a false narrative designed to justify an unjustifiable decision, regardless of the Commission’s good intentions.

According to a June 18, 2019 Memorandum from City Manager Esmond Scott to the Mayor and Commission, “In determining a base hourly living wage rate, the City relied upon the Massachusetts Institute of Technology (MIT) Living Wage Calculator, which utilizes a market-based approach that draws upon geographically specific expenditure data related to a person’s minimum costs for basic necessities.”

However, his Memorandum neglected to mention that these calculations reflect “the hourly rate that an individual must earn to support their family, if they are the sole provider and are working full-time (2080 hours per year).”

By recommending this ordinance, Mr. Scott did not consider the MIT Methodology Supplement for Part-Time Workers, which “defines a revised methodology for calculating the living wage for a family with two adults and one child, where one of the adults is working only part-time, defined as less than 35 hours per week of work,” the result of which is “$1,188 less on average compared with two adults working full time.”

By their very nature, part-time and seasonal jobs are supposed to be supplemental income, not the sole source of one’s livelihood.  It’s mathematically impossible for part-time employees to earn a “living wage,” even at an hourly rate of $14.50.

A part-time employee working 29 hours a week will still only make $21,866.00 a year.  According to Payscale.com, an annual income of approximately $45,000.00 necessary to live in North Miami Beach, where the cost of living is 3% higher than the national average.  Regardless of the minimum wage, no part-time employee could afford to live in NMB without having another source of income.

A July 10, 2019 Forbes Magazine article, The Unintended Consequences of Raising Minimum Wage to $15, explained:

While some people may benefit with an increase in their hourly earnings, other employees will be let go to save costs.  Employers may elect to cut hours across the board for everyone.  Whichever way the employer goes, some of the workers will be in a worse situation.  Seattle’s move to $15 an hour, a few years ago, resulted in workers given fewer hours and experiencing a net loss in pay.

Traditionally, entry-level minimum wage jobs were never intended to be permanent positions for adults raising a family.  Forbes points out, “The minimum wage jobs were primarily an entry point into the workforce.  The lower-end job was the ideal place to learn about the real world, how to deal with managers, interact with customers and gain the experience to move onto bigger and better things.  They’re either for someone looking to get a foot in the door and join the workforce or someone looking for an extra income or a temporary port in the storm, if they’ve lost their job.  We are misleading people to think that these lower-rung jobs will afford a sustainable lifestyle.”

In the State of New York, for example, the Governor intends to raise the minimum wage $9 to $15 per hour, and business owners in that state are understandably concerned.

Norm Brodsky operates a chain of New York City restaurants with a staff of 45 employees, most of them on an hourly basis.  In his Inc.com article, Beware the Consequences of a $15 Minimum Wage, Brodsky wrote, “I understand the emotional appeal of such a move, and, like most entrepreneurs, I have no problem paying employees as much as the business can afford.  My partners feel the same way.  But if $15 per hour becomes our entry-level wage, there will be consequences.  We will have to make significant changes to our operations to stay in business.  Jobs will be lost.”

While Brodsky is already making preparations to automate and outsource his business to reduce labor costs, he also knows these options will eliminate more jobs.

He explained, “I realize that these types of changes will have some negative consequences, both for businesses like mine and for society as a whole.  Entry-level, minimum-wage jobs are the first rung on the ladder you have to climb to have a career. In all the businesses I’ve run, we’ve recruited people for better-paying, higher-level positions from the entry-level pool.  A $15-per-hour wage will put some people on more solid economic ground but at the same time make it harder for thousands of others to find work and get started on a career.  Those who say raising the minimum wage will have no effect on employment are dreaming.”

Despite the ordinance’s language claiming that paying employees a “living wage” will “invigorate neighborhood business, help reduce blight in the City, and reduce the need for taxpayer-funded subsidies,” the reality is that most of the city’s employees don’t live or spend their paychecks in North Miami Beach.  They commute to work from other cities in Miami-Dade and Broward County, and they leave at the end of the work day.

While it’s important for Commissioners to be concerned with the morale and welfare of the public workforce, the primary concern of elected and city officials should be to serve the interests of the residents they represent and to be responsible stewards of taxpayer money.  That responsibility includes providing the best possible services in the most effective and efficient manner, as well as maintaining a healthy reserve for unforeseen emergencies.

There is something even more important that the North Miami Beach Commissioners may not have considered – snowball effect and their proposal’s true cost to the city.

As Norm Brodsky clearly pointed out in his article, “If the minimum rises, not only will we have to pay more to entry-level people, but everyone above them will have to get a raise as well.  You can’t pay someone who does food preparation what you pay someone who buses the tables and sweeps the floors.”

If Ordinance 2019-02 passes, it will nearly double the minimum wage for a handful of entry level positions, and will start an avalanche of pay raise demands by every single class of public employee in the City of North Miami Beach.

If the part-time janitor or teenage camp counselor earning $8.46 is suddenly being paid $14.50 an hour, the higher tiered employee now earning $12 will expect – and by all rights be entitled to – a raise of at least $4 to $7 per hour.

After all, to paraphrase Norm Brodsky, you can’t pay an office administrator the same wages as the housekeeper.

Once this begins, every single employee of every single pay level will have to receive raises in order to earn more per hour than the employees under them.

And so on, and so on, and so on.

But that’s just the beginning.

Along with employee pay raises come increases in the city’s portion (half of 15.3%, or 7.65% of each employee’s gross pay) of Social Security and Medicare (FICA) taxes.

By way of example, for each full-time employee earning $8.46 an hour, or $17,596.80 a year, the city is responsible for $1,346.16 of that employee’s FICA taxes.  Thus, the true cost to the city of that employee is $18,942.96 a year.

At a pay rate of $14.50, that employee will now earn $30,160, and the city’s portion of his FICA taxes will be $2,307.24.  Not only will the city have to pay that employee an additional $12,563.32 in wages, but also an additional $961.08 in taxes.  Therefore, the true cost to the city of this employee’s salary will increase by more than 71% to $32,467.24 a year.

This lowball estimate does not include additional pension costs, insurance, etc., that must also be calculated.

And that amount is just for one employee at the lowest level on the pay scale.

Using 71% average increase, the total true cost to the city of the inevitable pay raises that will be owed to the city’s 323 person workforce (the current payroll of which is $20,584,784 according to the FY 2018 Adopted Budget) will cost almost  $15,000,000 a year.

And that’s not even including the increase in pension costs (see: Actuarial Valuation October 2018) to match those pay raises (which we can’t even begin to calculate since that job is way above our pay grade).

That fifteen million dollars will have to come from somewhere.  North Miami Beach city officials will have to either increase the tax millage rate, raise the fees for business licenses, reduce the city’s reserves, or downsize the city’s workforce, none of which is a palatable option.

If the North Miami Beach City Commission desires to raise employee wages, a better method would be to do so gradually over a period of several years.

For example, the tax firm of Ernst & Young LLP reported that the State of Illinois “recently enacted Senate Bill 0001 (Public Act 101-0001) [which] will increase the state minimum wage incrementally to $15 per hour by 2025, starting with a jump from the current $8.25 to $9.25 effective January 1, 2020 and to $10 per hour effective July 1, 2020. (Governor’s press release.)”

With new development projects in the works that will gradually result in increased revenue, the city will eventually be in a sound enough financial position to pay for the cost of employee wage increases without having to raise taxes or reduce reserves.  This is the only “living wage” proposal that makes any sense whatsoever.

Now that they have been fully apprised that this ordinance is a bad deal for the residents, business owners, and the employees of North Miami Beach, hopefully the Commissioners will reject this proposal and save the city from what is sure to be a major fiscal disaster.

Concerned residents would do well to attend the Commission meeting on July 16, 2019 and tell their representatives to vote NO on Ordinance 2019-02.

Stephanie