Los Angeles County recently approved a $15 minimum wage. Then the state of California followed suit.
That’s fine for big businesses where even entry-level employees make considerably more. But for smaller businesses with many unskilled employees, such a massive minimum wage increase can mean the difference between being competitive and going out of business.
That’s why Houman Salem is moving his clothing design and manufacturing shop out of California. He writes in the L.A. Times this week:
I pay my employees $10.50 an hour, plus productivity bonuses. In addition, I pay payroll taxes and one of the highest worker compensation rates in the state. Even still, I could likely absorb a minimum wage as high as $11.50 an hour. But a $15-an-hour wage for my employees translates into $18.90 in costs for me — or just under $40,000 a year per full-time employee.
When the $15 minimum wage is fully phased in, my company would be losing in excess of $200,000 a year (and far more if my workforce grows as anticipated). That may be a drop in the bucket for large corporations, but a small business cannot absorb such losses. I could try to charge more to offset that cost, but my customers —the companies that are looking for someone to produce their clothing line — wouldn’t pay it. The result would be layoffs.
When Los Angeles County’s minimum wage ordinance was approved in July, I began looking at Ventura County, Orange County and other parts of the state. Then, when California embraced a $15 wage target, I realized that my company couldn’t continue to operate in the state. After considering Texas and North Carolina, I’ve settled on moving the business to Las Vegas, where I’m looking for the right facility. About half of our employees will make the move with us…
We need more stable, blue-collar jobs in places like the San Fernando Valley — the kind I thought I was helping create. California, however, has put up a giant “Go Away” sign.
It is possible that California has enough businesses (tech companies especially) that pay well above minimum wage that this sort of move may go unnoticed for a time. But not every business is so glamorous that it can bear a 50 percent increase in labor costs, based not on any market reality, but solely arbitrary government fiat.
Salem’s full op-ed is well worth reading.
