San Jose’s faulty formula zeroed out worker pay increases

An obscure wage formula used by San Jose is getting an update — bringing a pay bump to some of the city’s lowest paid workers following a year when their wages didn’t rise at all.

The City Council on Tuesday unanimously approved changes to its “living wage” policy, a measure covering workers employed by companies that hold service contracts with San Jose intended to ensure their pay keeps pace with the city’s ever-rising cost of living. The change makes technical adjustments to the methodology for setting a minimum hourly wage floor for such workers. It also includes a one-time pay increase for workers that aims to bring the wage floor into line with where it would have been had it been adjusted appropriately last year.

The wonky policy tweak comes in response to warnings from labor advocates and others that a faulty formula has been shortchanging workers for years. Last year, San Jose’s living wage level did not increase at all.

“It was a positive outcome for families that are really struggling right now,” South Bay Labor Council Executive Officer Jean Cohen told San José Spotlight.

The change means workers covered by the living wage policy will see a larger pay increase than they otherwise would have on July 1, the day when the wage floor is adjusted each year. City officials estimate the pay bump will result in about an extra dollar per hour for workers by the time of their next contract negotiations. The city will not grant back pay to compensate workers retroactively for the sluggish wage growth of prior years.

“We’re hoping that what happened on Tuesday is a reset and a reminder about the responsibility to ensure that the contracts that the city has with people are reflective of our values,” Cohen said.

Advocates noted at Tuesday’s meeting that while Bay Area residents faced a 20% increase in the prices of daily necessities over the past six years, San Jose’s living wage has gone up just 14.7% — reaching $26.73 per hour without health benefits this year.

San Jose’s minimum wage, which covers all workers in the city who are not employed by companies with city service contracts, is set at $18.45 per hour.

The living wage policy, first put in place in 1998, covers hundreds of city contracts with companies providing a wide variety of services, such as parking lot management, automotive repair, facility maintenance, food services and pest control. A similar policy using a somewhat different methodology also covers workers employed by companies operating at San Jose Mineta International Airport.

The living wage hourly pay rate, adjusted each year, is based on a combination of two factors: federal poverty metrics and local figures intended to capture the cost of living in San Jose.

To derive these local figures — which take into account daily expenses such as transportation, health services and housing — San Jose has relied on data provided by a third-party vendor. However, officials said the vendor recently changed how it compiles the numbers, leading to inconsistencies with prior reports.

“We started digging into it in the last couple of years, and their change of methodology became really not understandable and unclear to all of us,” Public Works Director Matt Loesch said during the meeting. “So we wanted to make it clear and make it transparent.”

After reviewing similar living wage policies adopted elsewhere in California, San Jose officials proposed to jettison the dubious proprietary data set and instead rely on the federal government’s consumer price index for the Bay Area, a measure of inflation in the region. This is the same approach that has long been used to set living wage levels for airport workers, such as those who work at concession stands.

Loesch suggested the impact of the policy change on the city budget will be minimal, noting that workers covered by the city’s largest contracts — janitorial and security services — are already paid well above the new rates and will therefore not be affected.

While speaking in favor of the formula adjustment, labor advocates urged the city to follow it up with a pay increase for airport workers. The discrepancy between the living wage formula for these workers and others in the city has meant significantly lower pay increases for employees at SJC. This year, airport workers covered by the living wage policy were paid $21.34 an hour before benefits, roughly $5 less than their counterparts elsewhere in the city.

Martha Adame, among the airport workers who spoke during the meeting, said this level of compensation makes it difficult for her to afford rent and other necessities.

“I feel so frustrated because I got a feeling the airport employees — we are not important,” she said.

Contact Keith Menconi at [email protected] or @KeithMenconi on X.