When Mayor Nutter signed an executive order last year requiring certain contract workers doing jobs for the city to be paid at least $12 an hour beginning in January, it seemed like a smart political move, especially given the attention the matter has received from progressives and Democratic politicians, including President Obama.
Several weeks into the new year, however, the city is starting to get pushback from some contractors, especially nonprofits, that say they can't afford the new wage scale without help from the city. They want more money from the city or an exemption to allow them to pay less than $12 an hour.
Nutter's order - since affirmed by voters and City Council in May - established that contractors and subcontractors that receive at least $10,000 in city contracts (or $100,000 for nonprofit contractors) pay their workers at least $12 an hour beginning Jan. 1.
The majority of the contractors requesting waivers perform work for the Department of Human Services. Some of the jobs, such as after-school aides, group-home care aides, and custodians, traditionally pay very little in the private sector.
Several of the affected companies have been doing business with the city for many years, when they routinely paid their workers $8, $9, $10 an hour or less.
Nutter's order, which went into effect in May, set the hourly minimum at $10.88 starting July 1, but that minimum jumped to $12 on Jan. 1. In the future, the hourly minimum is to be adjusted for inflation.
That jump from $10.88 to $12 in the middle of a budget year put some of the contractors in a bind, the companies said.
"If we increase to $12, we will be in a $153,000 deficit for the year," said Marty Friedman, executive director of the Philadelphia nonprofit Education Works.
Education Works has a $3 million subcontract with the city to provide after-school and summer programs for city youth, including homework assistance, art programs, and college and career readiness. The company is one of two dozen applicants that asked for a waiver at a Jan. 13 hearing before the city's Living Wage and Benefits Committee.
A raise to $12 an hour would make a big difference for some workers.
"I could make it out of my aunt's [house]," said Kahleel Frazier, 20, an Education Works employee who has a part-time job as a door monitor at Cleveland Mastery Charter Campus.
Frazier, who graduated from Creative Learning Academy in 2013, started in November. He is paid $7.25 an hour, the federal minimum. Making $12 an hour could help him get his own place. He is also "thinking about" going to college but conceded: "The way the money is set up right now, it would be hard."
In an interview last week, Friedman said that he would like to pay his employees on the city's contract $12 an hour, but that current finances would not let him.
"Everybody is in the same boat," Friedman said. "If we get the increase, then we will pay the minimum wage."
But with the city strapped for cash, it's hard to see how the city will be able to push more funding to these groups.
DHS, which has a $657 million budget for the 2014 fiscal year, received $98 million from the city. The rest of its funding comes from federal and state grants.
"The challenge for many of them is that they need to pay these contracts with funds the city provides them," Manny Citron, an assistant managing director who has been overseeing introduction of the new minimum-wage standard, said last week.
City Councilman Wilson Goode Jr., who sponsored the legislation that got the ball rolling for the wage increase, said the city does not need to provide more money.
"There are executive directors making six-figure salaries, and the cost of moving up employees' [pay] is only tens of thousands," Goode said. "There's income inequality."
Citron said there conversations were going on about how to make the wage increases work for the city's nonprofit subcontractors. Some might have to rely more on fund-raising, he said.
Or, they, like all contractors, can get an exemption from the city's Living Wage and Benefits Review Committee, which City Council established and which consists of representatives from the city, labor, and business.
DHS Commissioner Vanessa Garrett Harley, whose agency has the most contracts with providers affected by the wage increase, said those waivers should be granted until the providers get their finances in order.
During a Jan. 13 hearing before the Living Wage committee, she testified on the contractors' behalf.
"Because of the absence of a revenue increase we would be able to provide, it would be a hardship on them to meet the [$12-an-hour] requirement," Harley said of the Boys & Girls Clubs of Philadelphia, which has a $1.6 million subcontract with the city. The agency said in its waiver application that increasing workers' pay to $12 would cost it $120,000 this fiscal year.
Harley gave the same message over and over when testifying on the two dozen waiver applications before the committee.
Organizations that want waivers and are not bound by collective-bargaining agreements must be able to prove that paying the $12 minimum would create a hardship for them and that the waiver would be for "the benefit of the city."
The city has granted 15 waivers since July 1.
Nonprofits that have received exemptions include Vision Quest, a social-services nonprofit with a $12 million contract that provides programs for delinquent youth; and the Animal Care and Control Team, the city's animal-control contractor.
Some committee members said that though they were willing to grant waivers this fiscal year, they did not want to have the same conversation a year from now.
"Those standards should be met or at least have a process that you can show in your waiver . . . that you're planning on meeting that standard," Daniel Bauder, a committee member, said.
The Living Wage committee's next hearing is scheduled for Monday, when the committee is scheduled to consider 15 waivers.