Forced $15 minimum wage pushing businesses out of California

California is forcing businesses out of the state due to the job-killing push of a statewide $15-per-hour minimum wage. This exodus is only surprising to the union-backed socialist activists who spearheaded the movement. The rest of us are shouting a resounding chorus of “duh” because we saw this coming a mile away.

One man’s personal story graced the pages of The Los Angeles Times describing in detail how this has affected his business in the garment district of Los Angeles County. Houman Salem operates a “cut-and-sew house” providing apparel for over 150 clients all over the world. At the “epicenter of apparel design and manufacturing in the United States,” Salem employs 18 Southern Californians who work in an industry “that generates $17 billion in annual economic activity” for his community.

But with only two years in business, Salem has already seen a downward trend thanks to government intrusion that is forcing company’s like his to consider moving out of state.

“Los Angeles County used to have more than 5,000 apparel factories,” he writes. “Today, my company is one of roughly 2,000 — and  many (e.g. American Apparel) are looking for a way out.”

A favored tactic of these aggressive wage activists is to shame the greedy capitalist overlord bosses for making profits and not sharing it with their employees in the form of a living wage. In reality, that’s just short-sighted emotionalism, as Salem admits, he’s not against higher wages for his employees — he actually cares about them and wants to see them succeed. Imagine that. But he understands “that has to be balanced” with all the other intricacies of running a business.

Salem describes how a forced $15 wage will look like for the future of his business:

Here’s what the math looks like: I pay my employees $10.50 an hour, plus productivity bonuses. In addition, I pay payroll taxes and one of the highest worker compensation rates in the state. Even still, I could likely absorb a minimum wage as high as $11.50 an hour. But a $15-an-hour wage for my employees translates into $18.90 in costs for me — or just under $40,000 a year per full-time employee.

When the $15 minimum wage is fully phased in, my company would be losing in excess of $200,000 a year (and far more if my workforce grows as anticipated). That may be a drop in the bucket for large corporations, but a small business cannot absorb such losses. I could try to charge more to offset that cost, but my customers —the companies that are looking for someone to produce their clothing line — wouldn’t pay it. The result would be layoffs.

And layoffs there will be, as only half of his employees will be able to make the move to his new facility in Las Vegas:

When Los Angeles County’s minimum wage ordinance was approved in July, I began looking at Ventura County, Orange County and other parts of the state. Then, when California embraced a $15 wage target, I realized that my company couldn’t continue to operate in the state. After considering Texas and North Carolina, I’ve settled on moving the business to Las Vegas, where I’m looking for the right facility.  About half of our employees will make the move with us.

There, he will be able to maintain his current pay structure, and with a lower minimum wage in Nevada than California ($8.25), he will likely be able to increase salaries. Plus, Nevada has no state taxes, lower workman’s comp rates, and less regulation overall.

“I am confident we are entering a very business-friendly environment,” Salem says.

But this isn’t an ideal situation, he adds, “If not for the $15 minimum wage, I’d have zero interest in leaving California… but businesses can’t operate at a loss.”

Salem said he was trying to bring “more stable, blue-collar jobs” to LA County. “California, however, has put up a giant ‘Go Away’ sign,” he writes. “If President-elect Donald Trump is interested in learning more about the hurdles to adding manufacturing jobs in America, looking at the Golden State’s steep pay requirements would be a good place to start.”

This isn’t isolated to California. It’s happening all over the country where employees are demanding $15 an hour even for menial jobs. But instead of getting what they want, they’re swiftly being replaced with automated machines.

Hate to say we told you so.

H/T Instapundit