Los Angeles to increase the minimum wage to $15 per hour over 5 year period.

By Rob Janicki
In an act of pure political posturing and pandering for Democrat votes, the City of the Angeles voted to increase the minimum wage to $15 dollars for all businesses within the city limits.  Apparently the LA City Council is not familiar with labor economics and the results that increasing the minimum wage will have on the unskilled labor market, already stressed due to the almost nonexistent economic recovery under Obamanomics.

LOS ANGELES — The nation’s second-largest city voted Tuesday to increase its minimum wage from $9 an hour to $15 an hour by 2020, in what is perhaps the most significant victory so far for labor groups and their allies who are engaged in a national push to raise the minimum wage.

What the geniuses in the LA City Council don't seen to understand is that low skilled minimum wage jobs will decrease.  It's inevitable that these jobs will decrease for several reasons.  So, the very people that the LA City Council seeks to help will be helped out of a good portion of these minimum wage jobs as higher wages for unskilled jobs drives profit margins even tighter.  When push comes to shove, employers will reduce job numbers while pressuring the remaining minimum wage workers on their payroll to increase their productivity or risk losing their jobs.  

In addition, expect to see more businesses move out of the Los Angeles City limits to avoid the increase in the minimum wage.  It will happen because it makes economic sense for employers to move out from under the fist of government mandated labor costs to those nearby areas where wages are determined by the available labor market.

But opponents of higher minimum wages, including small-business owners and the Los Angeles Chamber of Commerce, say the increase approved Tuesday could turn Los Angeles into a “wage island,” pushing businesses to nearby places where they can pay employees less.

“They are asking businesses to foot the bill on a social experiment that they would never do on their own employees,” said Stuart Waldman, the president of the Valley Industry and Commerce Association, a trade group that represents companies and other organizations in Southern California. “A lot of businesses aren’t going to make it,” he added. “It’s great that this is an increase for some employees, but the sad truth is that a lot of employees are going to lose their jobs.”

Additionally, an unintended consequence will be that costs to consumers will necessarily rise to pay for the increase in the minimum wage for these unskilled workers.  The problem is that these increased costs to consumers will be paid for by those who are most unable to pick up the greater costs that can be attributable to the increase in the minimum wage.  Inner city residents have a higher rate of unemployment and a lower annual income.  The cost to these residents of Los Angeles will necessarily be greater for the poor and those on the low end of the middle class.

In other words, those who can least afford an increase in the cost for consumer goods, will be the poor who are hardest hit by the increase in the minimum wage and the inevitable rise in consumer costs.  Way to go liberal government.  Screw those who you proclaim to support, all to gain votes.

Blame it on #BUSH! Why Are Seattle Restaurants Closing?

by Kim D.

Last week the impending minimum wage hike, soon to hit Seattle, Washington on April Fool's Day, turned into a cat fight when Seattle Magazine asked "Why Are So Many Seattle Restaurants Closing Lately?" But this controversial topic is not a joke. On April 1st, Seattle business owners will be required to pay $11 per hour at a minimum with a scheduled increase to reach $15 per hour by January 2017 for large business owners and 2018 for smaller ones.

Conservative-minded pundits were quick to point out the obvious, taking their cue from the Washington Policy Center:

The shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help.  Instead of delivering the promised “living wage” of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.

The more liberal-minded folk are, needless to say, freaking out and hitting back hard with their alternative "closing" theories, like poor location, but to be fair, not a one has put the blame on the Koch Brothers or George Bush . . . yet.  So despite a legal challenge from franchise owners who claim this law is unfair, the Seattle wage-hike experiment will begin April 1st now that a judge has ruled not to block any part of the new law.

According to Congressional Research Service, inflation is the driver behind the need to increase the minimum wage: 

The minimum wage is not indexed to the price level. It has been legislatively increased from time to time to make up for the loss in its real value caused by inflation. 

Under the leadership of FDR, the government began a national minimum wage in 1938. Employers were then required to pay a minimum of 25 cents per hour. The minimum wage reached $1 in 1956 thanks to Eisenhower. Under George Bush, two increases were legislated, and to date the national minimum wage is $7.25, signed into effect by Barack Obama in July of 2009.

Thanks to his nifty, non-challenged, phone and pen, President Obama would love nothing more than to drastically raise the national minimum wage. So, for now, all eyes are on Seattle and how small businesses fare with the new law and challenges to keep the doors open. 

But the real question should not be how many Seattle businesses will close. Rather, by how much will prices increase? How many minimum-wage employees will have hours reduced? How many employees will end up on unemployment?