26 May 2015

Business Owner’s Response to LA Mayor on Minimum Wage is a MUST READ

“I am disappointed that neither you nor the Councilmembers who voted to support this misguided bill understand basic economics.”
A business owner’s response to the Mayor of Los Angeles’s email regarding minimum wage is something everyone should read.
Fresh off the City Council’s 14 50 1 vote to raise the minimum wage to $15 an hour over the next 5 years, Mayor Eric Garcetti sent out a celebratory email.
One local business owner decided to respond to the mayor, and his common sense is being celebrated by those who see minimum wage laws as harmful to economic activity.

Garcetti’s email was title “A Most Significant Victory” and read:

Gary —
That is how the New York Times described yesterday’s LA City Council vote to raise the minimum wage in Los Angeles.
I kicked off this effort last year on Labor Day so that no Angeleno working full-time lives in poverty. Yesterday, the City Council voted to accomplish just that.
Will you join me in sharing the news with your friends?
Today, help is on the way for nearly one million hard-working Angelenos struggling to make ends meet. This initiative is the largest anti-poverty program in our city’s history.
As the New York Times said, that is significant. Help share this news.
Thank you for all you do.
Eric Garcetti
Mayor

But Gary Aminoff, the Director of a local real estate company responded:

Dear Mr. Mayor,
I have been pleased, for the most part, with your activities as Mayor. I think you have done, by and large, a good job of managing this almost unmanageable city.
I feel the need to express, however that your passing the minimum wage increase is not a “significant victory”, nor will it help alleviate poverty by any stretch of the imagination. What this increase in minimum wage will accomplish is to reduce the number of available entry-level jobs to those just entering the work force. It will also have the unintended consequence of causing inflation, over time. Many businesses will not be able to absorb the initial costs of the increase, so they will be left with three unappealing options:
1) Let some workers go, or stop hiring to keep payroll costs manageable;
2) Raise prices to cover the increased payroll costs;
3) Close the business here, and reopen somewhere else with a more favorable climate for small business.
All of the above are inflationary. So the employee whose salary increases will get a temporary benefit until inflation wipes out that benefit. Those employees looking for entry-level jobs will see that it is more difficult to find one. Prices across the spectrum will rise over time to adjust for the increase in wages.
People who work in minimum-wage jobs do not live on their salaries. They live at home with parents or relatives, or they share accommodations with others. They don’t expect to support themselves or their families with their salaries. They could hardly do that even if you raised the minimum wage to $25 an hour in Los Angeles. The minimum wage job is the first job one gets. He doesn’t stay there long if he is responsible. So raising the minimum wage will do nothing to alleviate poverty, and it might even increase poverty because fewer people will now be able to find entry-level jobs.
I know I don’t need to give you a lesson in economics. The less government intervenes in setting prices and wages, the more successful the economy runs. When government artificially increases the cost of an item to run a business the business suffers.
I am disappointed that neither you nor the Councilmembers who voted to support this misguided bill understand basic economics. Although, if I were a cynic I might think this was merely a political ploy to garner votes at the next election. However, I am pretty sure you are above such political shenanigans.
Gary Aminoff, CPA
Playa del Rey, California

Similar laws have been passed in cities such as Seattle and San Francisco, and the results have been economic upheaval, not the surge of prosperity lawmakers promised.

You cannot mandate prosperity, all you can do by raising the minimum wage is add costs to businesses and exclude non-skilled workers from the workforce.
Something Mr. Garcetti might understand if he had ever tried to run a business like Mr. Aminoff.

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