Correspondence - #30 - Laserfiche WebLink

Home Browse Search

Consumer and Community Impacts of Hazard Pay Mandates Higher costs passed along to consumers Aggregate impacts. If a $5.00 per hour wage increase were imposed statewide and all of the increase were passed along to customers in the form of higher product prices, Californians would face a rise in food costs of $4.5 billion annually. If imposed locally, the City of Los Angeles's $5 per hour proposal would raise costs to its residents by $450 million annually, and the $4.00 per hour increase in Long Beach would raise grocery costs to its residents by about $40 million annually." Impact on household budgets. The wage increase would add about $400 to the annual cost of food and housing supplies for the typical family of four in California.12 While such an increase may be absorbable in higher income households, it would hit low- and moderate -income households especially hard. The impact would be particularly harsh for those who have experienced losses of income and jobs due to the pandemic, or for those living on a fixed retirement income including many seniors. For these households, the additional grocery -related expenses will make it much more difficult to cover costs for other necessities such as rent, transportation, utilities, and healthcare. According to the BLS Consumer Expenditure Survey, California households with annual incomes of up to $45,000 already spend virtually all of their income on necessities, such as food, housing, healthcare, transportation and clothing.13 For many of these households, a $33 per month increase in food costs would push them into a deficit. These increases would add to the severe economic losses that many Californians have experienced as a result of government -mandated shutdowns in response to COVID-19. According to a recent survey by the Public Policy Institute of California, 44 percent of households with incomes under $20,000 per year and 40 percent with incomes between $20,000 and $40,000 have reduced meals or cut back on food to save money.14 Clearly, imposing a $4.5 billion increase in grocery prices would make matters worse, especially for these lower -income Californians. Higher costs are offset by job and hours -worked reductions If grocers were not able to pass along the higher costs resulting from the additional $5/hour wage requirement, they would be forced to cut other costs to avoid incurring financial losses.ls Given "Our estimates start with national U.S. Census Bureau estimates from the Annual Retail Trade Survey for 2018 (the most current data available), which indicates that nationwide sales by grocers (excluding convenience stores) was $634 billion in 2018. We then apportioned this national data to California as well as the cities of Los Angeles and Long Beach based on relative populations and per -household expenditure data from the Consumer Expenditure Survey. We then updated the 2018 estimate to 2021 based on actual increases in grocery -related spending between 2018 and 2020, as reported by the U.S. Department of Commerce, and a projection of modest growth in 2021. Our estimate is consistent with the industry estimate of $82.9 billion for 2019 that was by IBISWorld, as adjusted for industry growth in 2020 and 2021. (See IBISWORLD Industry Report, Supermarkets & Grocery Stores in California, Tanvi Kumar, February 2019.) 12 Capitol Matrix Consulting estimate based on U.S. Bureau of Labor Statistics, Consumer Expenditure Report, 2019. htts: www.bts.gov/o12ub /rel2orts/consumer-exi2enditures /2019 /home.htm 13 U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, State -Level Expenditure Tables by Income. https://www.bts.gov/cex/csxresearchtabtes.htm#stateincome. 14 "Californians and Their Well -Being", a survey by the Public Policy Institute of California. December 2020. https: //www.ppic. org/publication/ppic-statewide-s urvey-catifornians-and-their-eco no mic-well-b eing-december-2 0 2 0 / is Circumstances where stores would not be able to pass forward high costs include communities where customers are financially squeezed by pandemic -related losses in jobs or wages, or where the increased is imposed locallyand customers are able to avoid higher prices by shifting purchases to cross -border stores. 9