The Golden State could have looked in its own backyard to see the negative consequences of increasing the minimum wage.
The Golden State could have looked in its own backyard to see the negative consequences of increasing the minimum wage.
L ast month, California implemented an unprecedented $20 minimum wage for fast-food workers. Now, labor unions and their activist partners want to extend this wage rate across industries.
Golden State lawmakers don’t need to speculate about the consequences of such a policy; a near-$20 minimum-wage experiment has already played out in their own backyard.
In 2021, Unite Here Local 11, a controversial Los Angeles-based labor group, picketed its way into a $17.64 minimum wage for hotel workers in the City of West Hollywood, the highest rate in the country. The union didn’t stop there; within the same year, it successfully pushed to spread this policy to all industries in the city.
As a result, West Hollywood’s minimum wage increased sharply, rising from $13–$14 in 2021 (depending on business size) to a peak of $19.08 per hour last July.
The consequences of the policy were devastating and immediate.
Numerous businesses slashed hours, cut staff levels, or closed their doors. Carmen Bolas, a small-business owner in West Hollywood, laid off 40 percent of her staff in a last-ditch effort to keep her business alive after the wage hike. The New York Times reported on another local restaurateur, Josiah Citrin, who was forced to reduce his staff by 30 percent.
Marco Capanni, who closed his restaurant after 30 years, lamented, “For a small business like ours, it’s costing us a few thousand dollars to meet this new minimum wage . . . which is the highest in the country. It’s really tough for us.” This wasn’t an isolated event. Roughly eighty-five businesses shuttered in West Hollywood last year alone.
Perhaps unsettled by these consequences, the city commissioned a study in February of this year to assess the impact of the minimum wage on local businesses and employees. The results were sadly predictable.
The study found that 22 percent of hourly workers in West Hollywood lost their jobs, with an additional 17 percent experiencing reduced hours. Employers saw similar stats. Forty-two percent of businesses were forced to lay off workers or cut hours. Over one-third of businesses that reduced employee hours turned to technology to fill the void.
West Hollywood was scheduled to have another wage increase this July, compelling over 50 restaurants to petition the City Council to suspend the hikes. The council agreed in a 4–1 vote, postponing future wage increases until January 1, 2025.
While West Hollywood is a case study on the impacts of a broad $20 minimum wage, California legislators can also look at the failed $20 minimum wage for fast-food workers. Just a month into its implementation, businesses statewide are plagued with problems that virtually mirror those in West Hollywood. This misguided policy not only led to job losses and business closures but also spurred price increases for customers, worsening an already-fragile economy.
City and state lawmakers don’t need a crystal ball to predict the outcome of a $20 minimum wage — they just need to ask their own constituents who are living through it. The only question that remains is whether California will acknowledge that its desperate search for “economic justice” has put it on the road to economic ruin.