California’s minimum wage is set to increase to $10 per hour in January but some cities like Los Angeles have preempted the hike with their own, prompting certain businesses to weigh relocation.
Neighboring regions, like Ventura County, may reap the benefits.
LA recently approved an ordinance that would incrementally raise the minimum wage from $9 to $15 an hour by 2020 in an effort to improve the quality of life for low-income workers. Los Angeles County is considering its own set of wage increases and the state Assembly is evaluating another statewide hike that would bring the rate to $13 per hour by 2017.
While proponents argue that higher wages would stimulate local economies, businesses caution that the new law could lead to job cuts.
Brian Gabler, Simi Valley’s director of economic development and assistant city manager, said he’s talking to about 10 companies in LA that are looking to relocate to Simi and possibly elsewhere in Ventura County.
“This may be the final straw for a lot of companies,” who already have to comply with California’s high cost of doing business, Gabler said.
Simi, which is located on the border of Ventura and LA counties, is attractive because it is not exploring similar ordinances and also boasts zero utility taxes and lower property and sales taxes, Gabler said.
Some employers are tired of the government meddling with their businesses and others are concerned about recruitment. Employers who aren’t subject to the minimum wage increase have to compete with higher-paying job opportunities, he said.
“Also, because the benefits package is often a percentage of the wage, when you pile it all together it suddenly becomes a much bigger number,” Gabler said.
The new law could translate to staff reductions, not necessarily through layoffs but more likely through attrition or not hiring someone they would’ve otherwise, said Bill Watkins, executive director of the Cal Lutheran University Center for Economic Research and Forecasting.
“If it’s a small enough area, some might make a move. If it’s not, businesses may replace people with machines,” he said. “If they sell tradeable goods, they may have to figure out how to produce for less.”
Companies might start thinking about moving to Texas, he added.
Ventura-based bra maker Fashion Forms decided to move to Austin’s better business climate in July.
Watkins is in favor of getting rid of the minimum wage in lieu of earned income tax credit, which gives low-income people straddling the poverty line incentive to work.
“Otherwise, earning one extra dollar could mean they don’t qualify for a tax break,” he said.
The Ventura chapter of the CPA/Law Society will hold a discussion about increasing the minimum wage and its impact on the economy and businesses at the Spanish Hills Country Club in Camarillo at noon on Aug. 28.
It will feature Bruce Stenslie, president and CEO of the Economic Development Collaborative of Ventura County.