It has become one of the hot-button political and economic issues of the year: raising the minimum wage. All across the country, fast-food and other minimum-wage workers are demonstrating and picketing, demanding that their pay be increased to as much as $15 per hour — or more than double what most are earning now.
Not surprisingly, President Barack Obama joined the minimum-wage debate earlier this year when he proposed raising the federal minimum wage from $7.25 to $10.10 an hour. The president and many Democrats believe this will help decrease income inequality, which is a major Democratic priority and election-year talking point.
Now, Mayor Eric Garcetti has also jumped on the minimum-wage bandwagon. He recently proposed that Los Angeles join other cities like Seattle that have raised their local minimum wage. In Seattle, an increase in the citywide minimum wage to $15 an hour will be phased in beginning in April.
Our mayor’s proposal would raise the citywide minimum wage in Los Angeles to $13.25 an hour by 2017.
So, would raising the minimum wage in Los Angeles be helpful or hurtful to our local economy? I believe it would not only be hurtful, but that it could do serious harm to our economy at a time when our city can least afford it.
After more than five years of sluggish (at best) growth, the L.A. economy is finally starting to show some signs of life. This is the time when our local government should be promoting more pro-growth initiatives in order to ramp up economic activity even more.
A mandatory near-doubling of the minimum wage would do just the opposite. First of all, it would stymie hiring by businesses of entry-level workers. It would also force many businesses to lay off some of their entry-level workers in order to cut their labor costs and retain their profit margins.
Think about it: If businesses are forced to pay entry-level workers nearly twice the wage they are paid now, what do you think they’re going to do? Hire more of them? I don’t think so.
This is the simple economic reality that many people like our president and our mayor don’t seem to understand. Democratic political slogans like “income equality” and “a living wage” sound nice in theory, and they play on voters’ emotions. But in the real world, business owners have to manage their costs in order to earn a profit so they can hire and retain employees. The reality is that the higher labor costs that an increased minimum wage would impose have to be paid by somebody: the business in the form of lower profits and growth, customers in the form of higher prices or employees in the form of lost jobs.