AlleyCat
2017-01-05 02:36:58 UTC
California Raised Minimum Wage Jan. 1 - Then This Happened IMMEDIATELY!
An abject lesson on how a minimum wage of $15 kills many small businesses.
On January 1, California's minimum wage went up to $10.50 an hour and by
2021, the minimum wage will reach $15 per hour, the number that has
gained a great deal of attention over the years as "the fight for 15"
movement has gained traction.
One local business owner in the state penned on op-ed in the Los Angeles
Times that laid out the case for why it's not workable for many small
businesses.
The Federalist Papers reports:
Houman Salem wrote that he is "the founder of a small fashion design house
and clothing manufacturer in San Fernando." He continued:
After two years in business, my company now has more than 150 clients
from all over the world and 18 employees. It's what's known as a cut-and-
sew house, part of the garment industry that generates about $17 billion
in annual economic activity in Los Angeles County, including $6.9 billion
in payroll, according to a 2016 industry report by the California Fashion
Assn. This is the epicenter of apparel design and manufacturing in the
United States; domestically manufactured clothing is more expensive, but
retail and wholesale customers who care about quality and working
conditions have historically been willing to pay for it.
Unfortunately, the industry is on a downward trend. 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. One Los Angeles Times headline, quoting a California State University
economist, warned that "the exodus has begun."
Salem noted that while he's not an "opponent of higher pay," and that
he has "genuine concern" for his employees, there are certain financial
limitations that he went on to break down:
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.
The wage increase has pushed Salem to move to Las Vegas, Nevada, where
the minimum wage sits at $8.25 an hour.
An abject lesson on how a minimum wage of $15 kills many small businesses.
On January 1, California's minimum wage went up to $10.50 an hour and by
2021, the minimum wage will reach $15 per hour, the number that has
gained a great deal of attention over the years as "the fight for 15"
movement has gained traction.
One local business owner in the state penned on op-ed in the Los Angeles
Times that laid out the case for why it's not workable for many small
businesses.
The Federalist Papers reports:
Houman Salem wrote that he is "the founder of a small fashion design house
and clothing manufacturer in San Fernando." He continued:
After two years in business, my company now has more than 150 clients
from all over the world and 18 employees. It's what's known as a cut-and-
sew house, part of the garment industry that generates about $17 billion
in annual economic activity in Los Angeles County, including $6.9 billion
in payroll, according to a 2016 industry report by the California Fashion
Assn. This is the epicenter of apparel design and manufacturing in the
United States; domestically manufactured clothing is more expensive, but
retail and wholesale customers who care about quality and working
conditions have historically been willing to pay for it.
Unfortunately, the industry is on a downward trend. 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. One Los Angeles Times headline, quoting a California State University
economist, warned that "the exodus has begun."
Salem noted that while he's not an "opponent of higher pay," and that
he has "genuine concern" for his employees, there are certain financial
limitations that he went on to break down:
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.
The wage increase has pushed Salem to move to Las Vegas, Nevada, where
the minimum wage sits at $8.25 an hour.