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Mercury Air Cargo Contends with Big Jump in L.A.’s Living Wage

Like many businesses in Los Angeles, Mercury Air Cargo is bracing for the impact of a major increase in the living wage for the city of Los Angeles.

The living wage ordinance (LWO) applies to contractors with the city of Los Angeles (including Mercury) and ensures that employees working on city contracts are paid per the city’s living wage ordinance (which consists of a cash wage rate and an employer’s health benefits contribution).

“It's been a difficult annual exercise  because it’s an automatic increase which is far greater than the minimum wage and our clients don’t want to pay for it but the bottom line is this is a municipal mandate, and there's nothing we can do to avoid it,” said Chief Operating Officer and Executive Vice President John Peery.

Peery explained that in the past, the living wage has seen increases anywhere from 1.0 to 3.6 percent. This year, however, the city determined that in July, the increase in labor rate would be a whopping 13.8 percent above what it was last year.

“That means we have to go to all of our customers and say, 'We must increase our rates to you, or charge it to your importers thru terminal service charges, ,’” he explained.

Other cities where Mercury Air Cargo operates also have similar programs which increase labor wages greater than the State minimum wage . In San Francisco, they have the Quality Service Program, which also rose dramatically in January (22 percent). San Jose has a Living Wage Ordinance as well, but their increase was approximately 3 to 3.5 percent.

“And you can work with that – you can efficiency your way out of that” Peery said. “But you can’t with 13.8 percent.”

The bottom line, Peery said, is that if a client decides they don’t want to pay additional costs or increase terminal fees for their clients, our only option will be to reduce labor.

“It's a mathematical equation,” Peery said. “There's so much in overhead, so much in operating expenses, so much in labor, and there’s got to be a profit in it for us. I've done the analysis on every operation we have, every carrier, every client, and I know where I have to be, and if they don't want to assist us in mitigating these increased labor expenses, I have to reduce manpower,”he said.

“It's very linear: there's no magic in it, it's all math,” Peery said.

The new LWO went into effect on July 1.