How will businesses react to L.A. minimum wage boost? 

los angelesThe Los Angeles City Council tentatively voted to increase the city’s minimum wage to $15 an hour by 2020. The business community opposed the move. How business will react is unclear but there was much discussion during the debate over issues such as lost jobs and companies eyeing more business-friendly locations.

The wage increase is to be phased in over time, so the immediate impact may not be felt. But businesses ought to keep score when the effects hit so that officials will be cognizant of the consequences. If the wage increase does not cause economic disruptions and businesses do not actually leave Los Angeles, the business community’s credibility will suffer in the face of a mere exercise in rhetoric.

The vote to pass the minimum wage increase was 14 to 1. The council gets to vote once more on the measure after an ordinance is drafted by the city attorney, but the lopsided vote indicates there is no turning back. The council even set the wage above the recommended level offered by Mayor Eric Garcetti, who initially proposed an increase to $13.25 an hour.

The city council’s version contains an inflation clause and offers an extra year for small businesses and nonprofits to comply.

However, the business community does not consider these admissions enough. Ruben Gonzalez of the Los Angeles Chamber of Commerce said, “There is simply not enough room, enough margin to absorb a 50 percent increase in labor costs over a short period of time.”

The chamber’s president and CEO Gary Toebben wrote to his members about the many small business owners who testified in various hearings on the measure. He wrote, “They also talked about the likelihood that in order to provide a wage increase for some employees, they would have to reduce hours for others.”

Toebben noted wryly, “Last week, there were banners hanging throughout City Hall celebrating Small Business Week. There are many small business owners in L.A. who don’t feel like the city is celebrating them today.”

Earlier on the day of the vote, the Los Angeles County Business Federation (BizFed) released a survey on business conditions in the area. According to a release from BizFed, “The city of Los Angeles stood out again as being cited most frequently by employers as unfriendly.  Santa Clarita and Glendale were ranked in the top 5 most business friendly cities, which is notable because officials from those two cities are actively courting city of Los Angeles businesses in light of the proposed city of Los Angeles minimum wage increase.” (Author’s emphasis.)

So what will Los Angeles businesses do? Once the minimum wage law takes effect will there be jobs lost or hours cut? How many businesses move to a different location? Business credibility is on the line. Crying wolf and not acting will damage efforts to turn around what many decry as unfriendly business policies.

5 comments

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  1. Queeg
    Queeg 22 May, 2015, 09:28

    Mussolini and his facist bureaucrats by fiat and clubs forced businesses to turn decision making over to government.

    Italy has been a basket case ever since….Huge grey market and sophisticated criminal enterprises, generous welfare, draconian labor regulations, nonexistant native population growth, brain drain, marginal low skill service jobs gazoo….

    LA has evovled-to-date to Somolia lite and rapidly moving toward a Brazilian slum.

    How nice!

    Reply this comment
    • californianative
      californianative 23 May, 2015, 02:12

      Italy and L.A… at least the weather is beautiful in both places!

      Reply this comment
      • SkippingDog
        SkippingDog 24 May, 2015, 15:00

        Italy is a beautiful country with great people. We could do a lot worse, Queeg.

        In answer to the original post, businesses will pay the increase in wages and raise their prices to cover it. It’s not rocket science.

        Reply this comment
        • ricky65
          ricky65 26 May, 2015, 15:05

          Not true dog. Like most economically challenged liberals your static thinking assumes businesses will not react to large cost increases and cuts to their bottom line.
          Let’s take the fast food businesses for example. Initially owners will try to raise prices to cover new costs but its likely they will face stiff resistance from customers who already pay nearly ten bucks for a full meal combo. Customers may do as I do and actually cook their own meals at home because its so much cheaper. Next or maybe simultaneously business owners will cut employee hours, benefits, and turn full time employees into part timers to try to absorb the blow. Or .some may just give up and close down and go some place where they can make a living
          And finally this possibility…coming to a fast food restaurant near you: Robo-King!
          This is an industry ripe for automation and here’s how it will work. So you hit the drive up and push the various menu buttons for your meal selection. Insert your credit or debit, debit or cash to pay for it. You drive to the drive up window and your meal will be pushed out to you and away you go.
          The burgers and fries or whatever garbage you eat will be cooked to perfection by robots. Ingredients will be apportioned exactly the same each time you order. Almost no humans needed and all of this brought on by morons who defy economics and the law of supply and demand. I think it was who Churchill once said of that type of thinking : It’s like a man standing in a bucket and trying to raise himself by the handles.

          Reply this comment
  2. Queeg
    Queeg 26 May, 2015, 20:41

    Poodle would you pay ten bucks for your snow cone in Adelanto?

    Reply this comment

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