Wednesday, May 20, 2015

L.A. City Council Votes To Increase Unemployment, Destroy Tax Base

Ah, Lah Lah Land! While it's not quite the People's Republic yet, it's getting there fast, with a nice side order of corrupt banana republic.

Today,they voted 14-1 to increase the minimum wage to $15 an hour, joining Seattle, San Francisco and several other municipalities:

Los Angeles became the largest US city to raise its minimum wage to $15 an hour on Tuesday, as a wage increase bill passed the city council by a vote of 14-1.

It is now up to city attorney Mike Feuer to draft an ordinance to implement the new minimum wage requirements. The ordinance will then return to the council for a final vote before becoming law. Under the proposed legislation, the city’s minimum wage would increase to $10.50 in July 2016, and would increase incrementally every year until it reaches $15 in July 2020. For small businesses with 25 or fewer employees, the wage hike would come on a modified schedule with the incremental increases starting in July 2017 and the minimum wage reaching $15 by July 2021.

The current minimum wage in California is $9 an hour and is set to increase to $10 in January 2016.

The one no vote might have come from this guy, who before getting into politics was L.A's no-nonsense police chief:

Council member Bernard Parks has previously expressed concern about $15 minimum wage leading to higher unemployment in the area.

“Every minimum wage increase that we’ve seen, if it’s too high, causes unemployment,” Parks told NPR in February. “If you have a big city like Los Angeles doing something, you’re going to find a lot of people will fall in line without any thought, because they believe that we’ve done the research. The fact is, we have not done the research.”

Proponents of the new law responded that they had done some research..from the Institute for Research on Labor Employment from University of California, Berkeley. And Berkeley, or Berserkely as we natives fondly refer to it, has a certain reputation in matters like these as some of you may know.

So, how will this new law effect Los Angeles? Believe it or not, a lot of the workers whom were egging the council on to pass this will end up far worse off.

The first thing that will happen is that lots of them will be fired. If you own a small business where you were paying people $12 an hour and you now are mandated to pay them $15 per hour so your bottom line costs go up 1/3, you'll either raise your prices (which will cut into your business), cut your work force by 1/3 or both. Or you'll move somewhere else.

San Francisco and Seattle, aside from their radical politics are both fairly small cities. San Francisco in particular is somewhat isolated on its little peninsula unless you take the ferries or pay toll to use the bridge, and it has the advantage of being a major tourist town. so it's a lot easier to get away with this there, to an extent.

Los Angeles isn't like that at all. It's a large, heavily populated area clustered with smaller, independently incorporated cities like Glendale, Burbank, Torrance and Calabasas.All of them are thriving because they've avoided L.A's ridiculous restrictions, costly permits and high taxes on business. The result is that when people start a business , lots of them do it outside Los Angeles unless it's something like a franchised fast food restaurant like a McDonald's where their location is mandated by the franchise. This does not do wonders for the city's tax base.

Next, the ones that still have jobs will be introduced to the wonders of unsubsidized ObamaCare and life without food stamps, section 8 rent subsidies or earned income credit refunds on their federal taxes, because they will no longer qualify for them.

And finally, those of them whom work at jobs where tips are a big part of their income can largely forget about that. In Seattle and San Francisco,the new normal is 'service charges' and no tips. In Seattle, the service charges are running a hefty 18.5% at restaurants like Ivar's and the Whale Wins. And no, the wait staff doesn't get that, the restaurant does to offset that $15 per hour wage, although some restaurants might choose to share a portion of it with the help..who will now be taxed on every cent they receive. Or, since people will be eating out less because the service will deteriorate and the cost will be much higher, restaurants will need those service charges to stay in business. Yes, those waiters and waitresses who used to make more than their co-workers by hustling and taking good care of their customers will have absolutely no incentive to do so. Talk about penalizing hard work and enterprise!

I can just imagine how that's going to work in a spread out, car friendly city like Los Angeles. People will eat out less, or they'll travel outside the city limits to do it. One huge trend in the L.A. area is specialty food trucks featuring gourmet and ethnic cuisine, and I would expect them to get a lot more business as well, since they're mostly small, family owned businesses.

I can hear the wheels turning in those of my reader's heads with socialist leanings. "Why, we can just mandate it in all of L.A. County. Or in all of California! And why not a federal minimum wage law? No one will be able to avoid it then, bwah ha ha ha!"

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Well, that's the way it is in much of Europe. It hasn't exactly worked out the way it was supposed to, and those legendary EU high unemployment benefits are already becoming a casualty out of sheer necessity,what with the double digit unemployment and all,

Here's something to think about.

Minimum wage jobs were never intended to be careers. They were always intended to be one of two things. Either they were entry level positions, with the low starting salary a sort of compensation for the employer training you and taking a chance on someone without experience so that you could either move up where you were or find a better paying position as an experienced worker elsewhere. Or they were a stopgap, a temporary situation designed to keep things together until you (a) got that big break (b) finished your schooling or training for something better or (c) were ready to move on somewhere else.

I've had such jobs before. My very first one, at age 15 was working at a gas station owned by a friend of my father's after school. I swept up, pumped gas, checked oil and tires and even did the odd lube job or tire change. I was absolutely thrilled to have it, even though I was paid in cash at slightly less than the minimum wage back then.Aside from being able to give my parents a little money, it meant I had money of my own to spend (there was no such thing as allowances in my house), and it introduced me into the adult world of work and responsibility. That experience was one of the many things I have to thank my father (Z"l) for.

No, I never had to support a family on that. But then, it never would have occurred to me to start a family I couldn't support either.

Attempts like this to bypass economic man never really work. What you end up with is collective misery and massive corruption as people do what they need to do in order to bypass the system. Just talk to anyone who used to live in the Soviet Union.

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