An 11 percent minimum wage increase officially started on Jan. 1 for the lowest paid Californians. But Los Angeles won’t have to wait long before another 50 cent increase starts in July, on the way to a $15 per hour rate – or a 67 percent raise – for the city set for 2020, which has business owners and advocates worried.
The new year rate bump from $9 to $10 per hour can add up to $2,080 extra per year for full-time minimum wage workers.
Miracle Mile Chamber of Commerce President Steve Kramer said dollar-per-hour raises might not sound like much, but the extra $173 per month can make a difference when it comes to household necessities, such as utility bills or groceries.
“When you see what barely passes as a livable wage, it doesn’t pay anything,” Kramer said.
City leaders, county leaders and rate increase advocate groups, such as the Raise the Wage L.A. Coalition, hope increases will help bring people who work full-time out of poverty and help activate the economy in one of the nation’s least affordable environments. There are 2.7 million residents in Los Angeles County living in poverty according to Supervisor Sheila Kuehl’s office, and hundreds of thousands of workers will be affected by the raises in the city of Los Angeles alone.
California and city business leaders oppose, or at least question, the rapid wage increases such as those set for Los Angeles.
Tom Scott, director of the National Federation of Independent Business in California, said the association opposes legislation that would bring the state minimum wage above $10, as well as other government regulations on businesses. He said 85-90 percent of small business owners are against the government telling them how to set wages when increases can cut into what small businesses need most, liquidity and capital. A $3 hourly increase means an additional $7,500 in annual costs for each full-time minimum wage worker’s salary.
“The cost can add up really quick, especially for small businesses,” Scott said. “Average small businesses do not make a ton of money. They aren’t all like the larger chains where they can absorb the costs.”
Biff Naylor, whose family owns Du-Par’s Restaurant and Bakery, employs hundreds of minimum wage workers at the Farmers Market in Los Angeles and four other locations. He said the restaurant will cut approximately 80 total hours of labor per week to make up for the first increase.
“[Du-Par’s] has been at it since 1938 and been dealing with increases ever since,” Naylor said. “But I’ve never seen anything quite like this [rate increase].”
Naylor said he will wait to evaluate how the strategy works before deciding how to move forward after the additional raises roll out.
Because of how quickly the minimum wage will increase, the Los Angeles Area, Hollywood and West Hollywood chambers of commerce expressed hesitations and concerns over unintended consequences and adverse effects, such as hours and job reduction, and increased prices and reduced demand.
“We are not necessarily opposed to increases. We are opposed to the rate of the increases,” said Leron Gubler, President and CEO of the Hollywood Chamber of Commerce.
He explained the chamber pushed for increases to be phased out over a longer period of time and exemptions to be included for small businesses.
With the 60 percent increase in labor costs on the horizon, Ruben Gonzalez, senior advisor for the Los Angeles Area Chamber of Commerce, said increased wages can dissuade companies from locating in Los Angeles and they can take away from the city’s and local businesses’ competitive advantage.
The Los Angeles County Board of Supervisors asked the Los Angeles County Economic Development Corporation (LAEDC) to study the issue last year. Through a survey of businesses throughout the county, the group found that 96 percent of businesses with minimum wage workers said they will likely increase prices to make up for the new labor costs. LAEDC concluded that the increase in wages may slow employment growth and that there will likely be “little impact, if any, on poverty in Los Angeles.”
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