2020 Future Fiscal Impacts - Professional Service Providers

The SAMLARC community includes thirteen (13) parks, four (4) Junior Olympic sized pools, the 33 million gallon Lago Santa Margarita, and the Lago Santa Margarita Beach Club. Additionally, SAMLARC owns and maintains more than three hundred sixteen (316) acres of community landscaping, which includes medians, parkways, greenbelts, and parks. The parks have features such as picnic shelters, restrooms, barbecues, athletic courts, and sports fields. SAMLARC was designed with community relationships in mind, and these important spaces offer families and friends the opportunity to gather together.

To ensure that SAMLARC’s amenities and landscape meets community standards and expectations, SAMLARC contracts with professional service providers. These vendors perform services year-round, such as janitorial and security services, as well as landscape, sports field, and pool maintenance. However, minimum wage increases and rising costs of business have impacted these providers’ ability to operate at current contract rates.

Many professional service providers employ a labor force of hourly, minimum wage workers. In 2016, the state of California implemented a law to raise minimum wage. Historically, wages have risen from 1% to 3% annually. However, the recent wage increase schedule will create a 50% increase over the span of six years – an unprecedented increase. The Wage Schedule will bring wages up from $10 per hour in 2016 to $15 per hour in 2022. Roughly one-third of California employees are compensated at minimum wage, and the increases are affecting all industries, from retail to food service to homeowners associations.

Minimum wage increases directly affect businesses’ ability to retain and fairly compensate a consistent pool of workers. First, as national unemployment rates decline, fewer individuals elect to fill minimum-wage jobs in labor-intensive fields. Companies are then forced to compete for a diminishing pool of workers, offering higher rates of pay than mandated by the state. That tension contributes to wage compression, caused when employees are compensated at different rates due to external forces, regardless of skill or tenure. Not only is the employer required to increase their minimum wage workers’ pay, but the compensation of tenured employees may also need to be readjusted to create a more equitable pay scale. Readjusting the pay scale affects the company’s operating budget, which in turn necessitates an increase in contract pricing. Those increased costs are then passed on to clients such as SAMLARC.