Some jobs are disappearing in West Hollywood due to a minimum wage hike. As an economist notes: “Wage hikes kill jobs, West Hollywood edition: Restaurants and bars open for 30+ years are forced to close/sell after the City Council hiked the base wage to nearly $20 an hour.”
The Los Angeles Business Journal reports:
The city of West Hollywood increased its minimum wage by roughly $4 to $19.08 an hour on July 1, and some local business owners are opting to list their properties and move somewhere easier to strike a profit…La Boheme was profitable until the beginning of this year, when the West Hollywood minimum wage rose to $17.64 an hour ahead of the increase to $19.08 an hour. “We’ve been in West Hollywood for 32 years, and we never experienced such a tough financial moment in all (that time),” Tudor said. “We didn’t make any money at all (this year),” despite cutting 1,000 working hours and averaging $600,000 in monthly sales….The policy to increase the minimum wage was approved by West Hollywood’s City Council in November 2021 and took effect on July 1.
Wages will increase annually, up to 4%. The policy also requires businesses to pay workers sick leave and vacation time, a benefit that could be life-changing for them but is rarely heard of in service-industry jobs….Business owners said they want to support paying their employees higher wages, but expressed concern that added costs could force them to lay people off or reduce hours.
It’s difficult to discern how many businesses in West Hollywood will close because of this policy, partly because the city doesn’t keep a record of shuttered establishments, Morrill said. Some, like Tudor, claimed they might leave California altogether: He called the state “overrated.”…Dimitri Komarov, president of 1933 Group, which owns three locations in West Hollywood – Formosa Cafe, Tail o’ The Pup and Harlowe – said the wage increase is “devastating,” especially on the heels of a tough couple o years during the pandemic…. “A lot of these businesses don’t know how they’re going to survive.” Komarov added that across his locations he’s cutting staff hours to stay afloat because “we can’t raise prices too much more, because it’s already ridiculous.”
Economists used to recognize that there are trade-offs in life. For example, minimum wage hikes harm some people while benefitting others: if you increase the minimum wage, some unskilled employees will lose their jobs, and others will have their hours cut back, while still other workers will keep working the same number of hours and make more money at the higher hourly wage. Meanwhile, consumers end up paying somewhat higher prices, and a a minority of businesses close.
But as universities got taken over by progressives, some economics departments, like at the University of California at Berkeley, started being dominated by left-wing radicals who claimed there was no trade-off between higher wages and lower employment.
But the laws of economics haven’t changed. Raise the minimum wage enough, and some jobs will disappear.
Minimum wage hikes can also lead to tax increases. In 2016, California’s legislative analyst estimated that the gradual increase in California’s minimum wage to $15 an hour would cost taxpayers $3.6 billion more a year in government pay alone. Easy-to-perform, unskilled jobs in state and local governments historically often paid less than $15 per hour. States had no difficulty hiring people for far less than $15 per hour, because the jobs were not demanding, and often came with excellent benefits (such as health insurance and sometimes pensions).
Businesses pass on much of the cost of minimum wage hikes to the people who buy their products. As economist James Sherk notes, “Economists find that businesses pass minimum-wage costs on to their customers by raising prices.” As the Associated Press reported in 2018, “Prices rise as the minimum wage increases.”
Perhaps because they increase unemployment among unskilled workers, minimum wage hikes are correlated with increases in the crime rate, as unemployment unskilled workers turn to theft to replace the incomes they lost when they lost their job. Minimum wage hikes are linked to increases in property crime, but not violent crime.
