Academics Duel Over Wage Report; Community Weighs In

By Jorge Casuso

It was as much emotion as an economist is likely to display.

After most of the more than 300 supporters and foes of a proposed living wage measure had left the packed City Council meeting at the Civic Auditorium Tuesday night, Dr. Robert Pollin lashed out at his chief critic, calling UCLA Professor Rick Sander's criticisms of his report "outrageous."

Sometimes waving his hands and seemingly trying to control his anger, Pollin defended the methodology he used to conclude that most businesses in the Coastal Zone that gross more than $3 million a year can absorb the costs of a $10.69 living wage.

"His comments about my report are outrageous," said Pollin, who authored a 370-page analysis for the City. "They are gross misrepresentations of what I have written. I knew they (the hotels) had hired him because he would say what they wanted him to say.... His comments are laced with hyperbole, sarcasm and misrepresentation."

Pollin's comments - which escalated during a face-to-face confrontation with Sander the following day at a Chamber of Commerce forum -- capped a five-hour council meeting that drew the largest crowd in nearly a decade. The meeting often resembled a bipartisan political rally more than it did a presentation on the Economic Analysis of Santa Monica's Living Wage Proposal.

Pollin started out his presentation acknowledging that there were likely mistakes in a report that someone had jokingly called "the 'War and Peace' of living wage studies."

"Of course there's mistakes in it," Pollin said. "How can there not be? There are zillions of calculations. Are there some serious mistakes? I don't think there are. What we have done is maybe lay out in excruciating detail all our calculations."

With members of the public wearing stickers and holding placards, the council listened to the hopes of workers, who according to the report could see wages go up an average of $5,819 a year, and the fears of business owners, who contend it will drive them out of business.

"All jobs are honorable," said Luis Marquez, a housekeeper at the Loews Santa Monica Beach Hotel and a member of the hotel workers' union organizing committee. "We deserve a dignified wage. We are the ones that deserve to gain for our work."

"He (Pollin) proves that the majority of the workers in Santa Monica don't make enough to lead a decent life," said Francisco Vasquez, who works in the kitchen at Loews and also is a member of organizing committee.

The clergy also weighed in. Rev. Juan Romero, the pastor of St. Clement Catholic Church, submitted a letter lauding the report and denouncing the persistence of "poverty in the midst of plenty."

"A good number of our parishoners regularly make use of the Food Bank run by St. Joseph Center which shares our premises," Romero wrote. "Too many of them are full-time workers who do not earn enough to provide the basic necessities for their families.

"These are the housekeepers, janitors, dishwashers and other workers who labor for poverty wages in this City's booming tourism industry," Romero said. "Justice has to come before charity."

Several former council members and City officials also backed Pollin's findings. Former mayor Dennis Zane argued that the living wage was a fair payback by business for the City's investment in making the Coastal Zone - which includes the bustling pier and the booming Third Street Promenade -- a world renowned tourist destination.

"I'm here tonight because I believe in prosperity... without victims," Zane said. "This prosperity rests on public investments made by the City. It is disturbing that the prosperity is not shared."

"It's not about getting them or pushing them to increase prices but sharing the wealth," said former councilman Tony Vazquez, "We're looking at sharing the profits."

Other speakers denounced a business-backed living wage initiative that covers businesses with city contracts and subsidies and erases any wage measure the council might pass.

"Once this law passes, that's it," said George George. "That's the shaft."

Business owners - particularly those who own restaurants -- lashed out at Pollin's conclusions, contending that their establishments would have a difficult time competing outside a level playing field. The increased costs, they argued, would drive customers to restaurants not covered by the proposal and which could therefore keep their prices down.

"This is serious stuff," said Tony Palermo, who owns Teasers Restaurant on the Third Street Promenade. "It's a competitive market. We're going to take ourselves out of the competition the way it's being set up now. It's very easy to throw stones if you haven't walked the walk."

Some business owners outside the Coastal Zone -- which extends from Fourth Street to the ocean north of Pico Boulevard and from Lincoln Boulevard to the ocean south of Pico -- worry that they will feel the ripple effect of the proposal. The businesses covered by the initiative, they contend, will lure their best workers with higher wages.

"I make 5 percent net profit and I don't gross $3 million," said Patty Phillips, who owns Patty's Presto Pizza on Sixth and Montana Avenue. "But I'm going to be competing with the guy that's paying $10.69."

Some workers, who said they had started out cleaning rooms and washing dishes, argued that they were given a chance to move up because the wages didn't lure more skilled competition.

"I started out as a house man. They gave me the opportunity to perform at the front desk," said Juan Miramontes, who works at the Georgian Hotel on Ocean Avenue. "This is not going to help people like me. It's not going to be a house man that's going to be at the front desk, it's going to be a college graduate."

"If this thing happens, my restaurant will be the first to close," said Carlos Martinez, who has worked in the restaurant business in Santa Monica for 22 years. "When I came to this country, I washed dishes and cleaned floors. The best weapon is education."

Movie theater operators warned that they might have to close their doors if the proposed measure is approved by the council, depriving the Promenade of a crucial lure for visitors.

"Theaters in Santa Monica haven't been real profitable," said Cameron Garcia, who manages the AMC Theater on the Promenade. "If you apply the wage proposal we would operate at a loss. Operating a theater in Santa Monica would be a liability."

The operators and workers at Pacific Park, the fun zone on the pier, also worried that the business - which relies on many teenage workers -- wouldn't be able to absorb the cost.

"Our company offers entry level jobs for our youth," said Josefina Padilla, who has worked at Pacific Park for three years. "We may find ourselves unemployed if this measure is approved."

Tom Larmore, who heads the Chamber of Commerce's committee on the living wage, criticized the Pollin report's conclusions that businesses can raise prices to help absorb the costs of higher wages.

"The report treats very cavalierly that prices can be increased," Larmore said. "If they had done that, they would already have done that."

At the start of the public hearing, Sander and Dr. David Neumark, who was brought in by the City as a peer reviewer, weighed in on Pollin's report.

"There are winners and losers potentially," said Neumark, an economics professor at Michigan State University who is a visiting fellow at the Public Policy Institute of California. "The central question becomes, 'Do the gains to the winners outweigh the loss to the losers?' It's very difficult to answer because this is all speculation.

"What will happen when businesses raise prices, and they will raise prices?" Neumark said. "The answer that's given (in Pollin's report) doesn't follow from the evidence.... Some people will retain their jobs, others will lose their jobs."

Sander, who authored a 68-page report, then stepped up to the podium and leveled some pointed criticism at Pollin's analysis, which cost $50,000 and took nearly six months to complete.

"There are some very serious problems with the Pollin report," said Sander, a law professor with a doctorate in economics from Northwestern University. "Almost none of his conclusions would withstand scrutiny. Some of the mistakes are huge. There are some serious problems."

Sander criticized Pollin's survey of the employees covered by the proposed measure, saying it is "an extremely poor way of targeting workers."

After sitting through more than four hours of public testimony, Pollin angrily took on the contentions of Sander, who had left the meeting.

"He doesn't challenge a point, he just throws out sarcastic comments," Pollin said. "He ignores crucial points."

Pollin then answered Sander's allegations one by one. His numbers were not "cooked," but took into account not only a random sampling of workers but also data from the current population survey. He didn't underestimate the potential job loss but if anything overestimated it.

Pollin then cited eminent Harvard economist Richard Freeman, whose peer review supported Pollin's findings.

"Either Professor Richard Freeman doesn't have a clue, or else Sander is just making everything up," Pollin said. "There is just no in between."

The feud escalated Wednesday at a forum sponsored by the chamber, with Pollin accusing Sander of engaging in "an egregious, outrageous distortion of my work."

The forum quickly became a debate between Sander and Pollin and ended after a heated exchange with a loud pound of the moderator's gavel.

"I denounce these tactics," Pollin said angrily. "They have to stop."

On Tuesday, the chamber asked the City to consider direct wage subsidies to low-income workers as a "more effective, efficient and equitable means to address the increasing problem of needy families," according to a statement.