As president and chief executive of the West Hollywood Chamber of Commerce, I have a unique perspective on what happens when a perfect storm of issues hits the community and what it means to their families, employees and the city they love. This is not exclusive to West Hollywood, but this storm has been amplified in our community due to having the highest paid time off and wages in the nation.

Our city is grappling with this perfect storm of issues. We are dealing with the country’s highest minimum wage – $19.08 an hour as of July 1 – a global supply chain crisis, soaring costs of goods and materials, a significant increase in labor costs over a short period and the impacts of a long, harsh winter. Additionally, we are contending with historic inflation rates, escalating rents, unpaid pandemic-era rent, outstanding Covid-related loans and reduced consumer spending power. Public safety issues, including increased crime and untreated mental illness among unhoused individuals, are further exacerbating our challenges.

In this complex landscape, it’s crucial to recognize that business owners, managers, and staff are a team. Businesses and their employees rise and fall together. We mutually depend on and appreciate one another. The notion that businesses do not value the very people who enable them to stay in business is absurd.

Restaurants, bars, nightclubs and hotels provide valuable jobs with opportunities for growth and financial stability. Rather than a one-size-fits-all ordinance, we need dynamic wage policies that account for the diverse needs of our small and local businesses. This approach is not only essential for West Hollywood but also for communities like Culver City, where small businesses are the lifeblood of the economy.

Since West Hollywood implemented its minimum wage ordinance, community-owned businesses have suffered greatly. These businesses, which define our city’s unique character, are grappling with reconciling their desire to pay living wages while facing overwhelming financial pressure and the stark reality of math. If a business only has a 2% net margin, how do they survive and continue employing every valuable team member when operating costs have increased by 30% across the board? For many, the calculus simply doesn’t add up. Some are forced to make heart-wrenching decisions, including closing down, relocating, or laying off up to 20% of their workforce because they cannot afford the sudden sharp increase in labor costs.

While raising the minimum wage is well intended, the reality is it often leads to job losses and reduced hours for workers. Our experience in West Hollywood should serve as a warning for Culver City, whose city council moved forward earlier this month to study a $30 minimum wage ordinance for hospitality workers that mirrors a similar proposal pending in the city of Los Angeles. When the minimum wage is raised to a level that is unsustainable for community businesses, no one gains. That’s particularly true when so many hospitality businesses are still struggling to recover from the pandemic and our region’s other complex challenges. 

A study by Oxford Economics on L.A.’s proposed ordinance helps put some of these unintended consequences into perspective. Its analysis projects a $1.1 billion annual drop in visitor spending in the city of Los Angeles as prices rise and fewer visitors come to the city, leading to a loss of nearly 15,000 jobs. This estimate aligns with our experience in West Hollywood, where many businesses are contemplating layoffs of up to 20% of their workforce. These aren’t abstract numbers; they represent families, homes and communities that risk losing everything. And it won’t just be jobs provided by hospitality businesses that are impacted. Restaurants, retailers, entertainment venues, and all types of companies that benefit from visitor spending will feel the pain. 

On top of the workers who are hurt, it also could impact the city’s budget. Hotels are a significant contributor to local taxes through transient occupancy taxes. Oxford Economics estimates L.A.’s wage ordinance could result in a $55 million loss in local taxes as hotels and other affected businesses pay less. With tighter local government budgets, the community will suffer due to fewer available resources for local services like homelessness. 

Given these estimates, it’s essential for Culver City’s leaders to have unbiased information on the economic impacts of their proposed minimum wage specific to their city. 

They must be cautious given the potential unintended and devastating consequences. Businesses often adapt by reducing employees’ hours, resorting to layoffs or adopting automation, where ultimately both employees and operators lose. 

We all want to help workers afford our region’s high cost of living. But sometimes, the cure can be worse than the ailment it aspires to treat. That’s been the case in West Hollywood, where an unreasonable minimum wage is compounding the challenges for small businesses already facing the perfect storm of problems. 

Culver City’s leaders must learn from our challenges and find the right balance to support its communities.

 As they consider raising the minimum wage to $30 for hospitality workers, they should closely examine the real-world outcomes in communities like mine.  

Genevieve Morrill is president and chief executive of the West Hollywood Chamber of Commerce.