More On The Minimum Wage Side Effects

As a follow-up to my previous post on the subject, many of the unintended consequences of raising the minimum wage to $15/hour in Los Angeles, San Francisco, Oakland, and Seattle are continuing to come to light. One of the biggest effects still being ignored by those who successfully convinced the powers-that-be in those cities to more than double the .federal minimum wage is the damage it is doing to businesses, particularly small businesses.

The pending 67% minimum wage hike in LA (from $9 to $15 per hour by 2020), which is the same as a $6 per hour tax (or $12,480 annual tax per full-time employee and more like $13,500 per year with increased employer payroll taxes. (Emphasis in original post.)

Call it yet another unintended consequence, that being the employer isn't just paying the employee even more money, but has to pony up even more cash to pay the payroll taxes - meaning social security - as well as state disability and unemployment insurance costs. (Those costs go up as wages go up.)

Let's see how one small business owner is reacting to LA's move.

I will be moving my two companies out of Los Angeles when the lease is due to renew. I’ve been here since 1966, grew up in L.A., but I cannot make it anymore. When the city compels me to pay employees $15 per hour, it comes out of my pocket. Last year, my employees made more than I, the owner, did. I am still trying to pay off the line of credit that got me through the recession.

I am not a charity. I can’t raise my product prices because of pricing pressure. I can’t reduce my expenses; in fact, salaries are my greatest expense, and $15 per hour increases my expenses and reduces my profit.

Just when small-business owners were clawing out of the recession’s devastation, the L.A. City Council hits us with this. We are the ones who hire people, expand the economy, market our products or services, risk capital for research and development, and buy inventory.

As a result of this decision, L.A. will have a mass exodus of employers from the city, leaving increased unemployment, less tax revenue and increased city debt in its wake.

Woodland Hills, Calif.

Now multiply that by hundreds, if not thousands of small businesses who cannot foot the bill for even higher labor costs. How many will lose their jobs? How many businesses will close their doors or move out?

How many minimum wage earners will actually benefit from a $15 minimum wage? I bet the number will be much smaller than the Minimum Wage Social Justice Warriors believe it will be. Much smaller.

In the end unemployment will go up as jobs will disappear because entry-level employees will have been priced out of the market.