$15 Wage Hike Forcing Businesses Out of California

No one should be shocked by this news.

Unless you’re a big fan of socialism, it’s obvious the $15 minimum wage hike is a terrible idea. It’s already wreaking havoc across the country after union-backed wage activists forced the increase. But instead of earning workers a “living wage,” many are finding themselves without a job at all and replaced by automated machines. Washington, Colorado, Maine, and Arizona are all feeling the pinch, and in California, businesses are starting to leave because it’s no longer viable to run a business in The Golden State.

One business owner, Houman Salem, wrote an op-ed in The Los Angeles Times explaining why he’s forced to move his clothing business to Las Vegas before the $15-per-hour wage begins in his city.

Salem is a part of the garment district in Los Angeles and runs a “cut-and-sew house” in the “epicenter of apparel design and manufacturing in the United States.” The industry generates around $17 billion per year for LA County, Salem said, and he has been proud to bring steady, blue collar work to the area. However, all that’s changing because of the push for $15.

“Unfortunately, the industry is on a downward trend,” he writes. “Los Angeles County used to have more than 5,000 apparel factories; today, my company is one of roughly 2,000 — and  many (e.g. American Apparel) are looking for a way out.”

Salem pointed to another recent LA Times headline that quoted a warning from a California State University economist, “The exodus has begun.” 

But Salem’s decision to leave the state isn’t because he is a greedy capitalist pig who is only interested in making a profit like the socialist wage activists would have us believe. He has 18 employees whom he has a relatively close relationship with so, yes, he is actually concerned for their well-being. However, he knows that must be “balanced” with the realities of running a business.

Salem breaks down the numbers:

Here's what the math looks like: 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.

Salem said he looked to move to nearby counties but discovered that the $15 wage was going to be mandated statewide in the future and decided he would have to leave the state. Alas, there will be layoffs:

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.

So much for the “good intentions” of those wage strikers. 

Salem said Nevada is a much better choice because it doesn’t collect a state tax, has cheaper workman’s comp, and less government regulation on business.

“I am confident that we are entering a very business-friendly environment,” he said. “California, however, has put up a giant ‘Go Away’ sign.”

Salem hopes President-elect Donald Trump will do something about California’s “steep pay requirements” once he takes office.

“[I]f not for the $15 minimum wage, I’d have zero interest in leaving California,” Salem said.

Issues

Organizations