There are few ideas in modern politics more intoxicating to the economically illiterate than the perpetual raising of the minimum wage.
It is, after all, the perfect applause line for a politician who prefers sentiment to substance: stand before a microphone, puff one’s chest with theatrical compassion, and declare that no worker should labor for “less than a living wage.” The crowd cheers. Headlines follow. Yard signs bloom. And somewhere, inevitably, another small business quietly dies.
Los Angeles has become particularly addicted to this ritual.
Every few years – sometimes it feels like every few months – another collection of smiling elected officials announces yet another wage hike, as though prosperity can be legislated by proclamation. One half expects them to declare next that gravity shall be suspended by municipal ordinance. Yet economics, unlike politics, remains stubbornly immune to wishful thinking.
The truth is this: constantly increasing the minimum wage is not merely bad for business – it is bad for cities, bad for communities and bad for the very workers its advocates claim to champion.
Sam Walton, the founder of Walmart, understood this reality long before fashionable politicians discovered the joys of economic grandstanding. He fought minimum wage increases throughout his career, and for this, he was vilified as some Dickensian villain in suspenders. Unions loathed him. Progressives demonized him. Editorialists depicted him as greed incarnate in Arkansas boots.
And yet Walton built the largest employer in American history.
Why? Because he understood a truth so obvious, so basic, and so politically inconvenient that it is rarely spoken aloud in polite company:Â the real minimum wage is always zero.
If you force labor costs beyond what the market can sustain, employers do not simply shrug and absorb the blow like a boxer taking body shots. They cut hours. They reduce hiring. They automate. Or they close.
This is not ideology. It is arithmetic.
The neighborhood dry cleaner in Sherman Oaks does not have Amazon’s balance sheet. The family-owned taqueria in East Los Angeles cannot summon capital reserves like McDonald’s. The boutique retailer in Silver Lake cannot wave a magic wand and conjure new margins because City Hall has discovered another moral impulse.
No – what they do is suffer.
They raise prices and lose customers. They trim staff and overload the survivors. They eliminate entry-level jobs that once served as steppingstones for the young and inexperienced. And if none of that works, they shut their doors, lock them forever and place a melancholy “For Lease” sign in the window.
And thus, with every well-intentioned wage increase, Los Angeles becomes incrementally less hospitable to the entrepreneur, the immigrant shopkeeper, the family restaurateur and the dreamer foolish enough to believe hard work and risk-taking should still be rewarded in America.
But let us not pretend the politicians do not know this. They know precisely what they are doing. No reasonably intelligent public official is unaware that dramatically raising labor costs hurts employers. No serious economist – outside of the more fanciful departments of academia where theory often outruns reality – would deny that excessive wage mandates create distortions. The politicians understand the consequences perfectly well.
They simply do not care.
Why? Because the purpose of many modern politicians is no longer governance; it is performance. They do not solve problems. They monetize grievances. They do not seek sound policy. They seek applause, headlines and, above all, votes. And there is no cheaper way to purchase moral superiority than by spending someone else’s money.
The minimum wage has become the preferred currency of political pandering. It allows elected officials to pose as champions of “working people” while never writing a single personal check. It is generosity by proxy – compassion outsourced to business owners.
Raise wages, they say proudly, while someone else pays.
And if the business collapses? If the owner loses his livelihood? If the employees lose their jobs entirely? If the neighborhood loses another storefront and gains another vacancy? Well, that can always be blamed on “corporate greed” or “market conditions” or whichever villain is currently fashionable.
What they never admit is that, in practice, the minimum wage functions not as a ladder but as a moat. The largest corporations in America adore it.
Who benefits most when labor costs skyrocket? The giant conglomerates have economies of scale, endless automation budgets and national purchasing power. The companies that can spread increased expenses across thousands of locations – the corporations with armies of accountants and lawyers.
Walmart. Amazon. McDonald’s. They can survive what crushes everyone else.
Indeed, one could argue that every aggressive minimum wage hike serves as a kind of protection racket for the Fortune 500 – an elegant mechanism by which government regulation slowly strangles smaller competitors while pretending to help the common man.
The local hardware store cannot survive it. Amazon can. The independent diner cannot survive it. McDonald’s can. The struggling boutique cannot survive it. Walmart can.
And thus Los Angeles, through the delusions of its own leadership, slowly transforms itself into a city of empty storefronts, giant chains, and dwindling opportunity. The first casualty is always the entrepreneur. The second is always the worker.
A healthy city requires thriving businesses. A thriving business requires risk. Risk requires reward. And reward requires an environment where private enterprise is not treated as an endlessly refillable ATM for political vanity.
Los Angeles cannot tax, regulate, and mandate itself into prosperity. It cannot force employers to hire more. It cannot command economics to behave according to campaign slogans. At some point, reality arrives in the form of an invoice. And when it does, no silly but alluring speech from City Hall will save the businesses already buried.
The road to economic ruin, as ever, is paved with good intentions and dreadful mathematics.
Michael Levine is a veteran Los Angeles public relations executive who has represented Academy Award and Grammy Award winners.
