The city of Los Angeles has agreed to draft an ordinance raising the minimum wage from $9.00 an hour to $15.00 by 2020 in the hopes of aiding in the quality of life for those who are functioning at the lowest rung of the socio-economic ladder. I want to start by saying that I couldn’t agree more with employers doing what they can to take adequate and fair care of their employees. But is this significant wage hike really the best way to go about improving the lives of workers?
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This wage hike will have a serious impact on Los Angeles businesses. The most obvious is that the prices of products and services are guaranteed to increase as well. This is the only way small business owners will be able to continue operating at a profit. A company can’t continue to operate with increased expenses and not raise prices to compensate. Not only will the wage base increase, but payroll taxes, worker’s compensation, and any other expense associated with payroll. All employees (not just those who received a wage increase) will be hit with higher costs of living, and therefore will be worse off than before the increase.
A simpler more practical way of viewing this issue is that even though a person making minimum wage would now be making 50% more on their paycheck, that extra money is going to be spent on the newly increased product/service prices that had to increase to cover the new payroll requirements. And keep in mind a pay increase will raise the amount of taxes due to the government as well.
In my opinion this move is nothing more than smoke and mirrors. Honestly I don’t see this as a genuine attempt to solve anything, but simply a superficial and ineffective move to appease the masses who don’t see that this won’t improve their financial situation. The alternative to a company raising their prices but still staying profitable is to lay people off and expect the remaining employees to take up the slack. One final option is to move out of the area, which many companies have begun to do such as Toyota, Farmer Brothers, and Kubota.
In reality we will be seeing all of these situations happening around our community and my very real concern is that the bi-products of a so called attempt to stimulate growth is not going to change anything, except for some of those unlucky ones who quite possibly might lose their jobs so their employer can afford to pay someone else this new rate. It’s actually quite ironic that some who are fighting so hard to improve their station in life might actually be setting themselves up for unemployment.
What do you think about this mandatory minimum wage increase? I’d love to hear your thoughts.
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