Adam Carolla famously compared the state of California to a hot woman who’s a little crazy. His analogy goes that California has mountains and beaches within a few hours of each other. The weather is gorgeous year-round and people love to live there. And because it’s so pretty to look at it gets away with astronomical taxes and onerous regulations because they know people don’t want to leave.
But at some point, no matter how hot of a woman California is, the crazy gets to be too much and the six who is sane starts to look like the one you’d rather have.
This is where clothing designer Houman Salem, founderand CEO of ARGYLE Haus of Apparel in San Fernando, finds himself. He says in an L.A. Times op-ed that prepared to leave California for Nevada due to the upcoming minimum wage hike to $15 in the next 3-5 years.
Salem explains his reasons for finally hitting the point where moving operations to Nevada makes more sense than staying in California. It’s simple economics.
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 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.
Nevada’s minimum wage is only $8.25 right now, so I can keep my current pay structure or possibly increase wages. Even in the event that Nevada raises its minimum wage, I’ll still be better off with reduced regulations, no state taxes, and significantly less expensive worker compensation insurance. I have had the opportunity to meet with Las Vegas city officials (including the mayor) and I am confident that we are entering a very business-friendly environment.
But he notes that “Still if not for the $15 minimum wage, I’d have zero interest in leaving California.”
As progressive states like California and Washington continue to raise their minimum wage companies will continue to look at moving operations elsewhere. Businesses can only last so long operating at a loss before they pick up and leave.
California is still one of the biggest economies in the world but as Salem points out, California has decided that it doesn’t want blue collar industries or businesses that have a price threshold that a $15 minimum wage cannot be met.
Way to go, California.