Businesses To Bear The Burden Of Another Government Mandate

On the second business day after the state’s higher minimum wage took effect, employers in Los Angeles County had another weight dropped on them. The County Board of Supervisors approved a $5 an hour increase in “front-line” workers’ wages. It applies to “stores located in the unincorporated areas of the county of Los Angeles” that “are publicly traded or have at least 300 employees nationwide and more than 10 employees per store.”

The wage hike, to be paid out to stores’ entire employee pools, was putatively passed to help the “heroes of this pandemic.” They’re to be rewarded for “putting their lives on the line – often for low wages and minimal benefits – in order to sustain our food system and maintain healthy communities.”

A world-weary cynicism, though, is not required to conclude that the policy is as much a means for consolidating political power as it is an aid to workers.

During the Jan. 5 board meeting, KTLA reported, Supervisors Hilda Solis and Holly Mitchell “cited a Brookings Institution analysis of 13 companies – including two large national grocer chains, along with Walmart, Target, Amazon and a range of other retailers – that showed top retailers boasted an average 40% increase in profits in 2020.”

Too many politicians see businesses as eternal fonts of money they can tap into and redistribute to others. Public choice economic theory assumes their actions “are motivated not by greed, but by power-hunger.” Finding new ways to bog down the private sector with rules, mandates, and levies expands that power.

The KTLA story noted that some grocery workers saw their wages grow earlier in the pandemic, and implied their higher compensation influenced the Los Angeles supervisors’ decision to approve the “hero pay.” But those temporary wage hikes were voluntarily, determined by judgments made by private companies, which were aware of the risks and the benefits of their decisions. A private business knows when boosting its payroll costs makes the best use of its resources, and when those resources need to be applied elsewhere, say, for expansion, which increases the number of jobs as well as service to consumers.

In stark contrast, when government mandates higher wages, it does so without the information that’s needed to make critical decisions. Only through the narrow lens of politics is a growth in profit taken as a signal that wages should be automatically and immediately bumped up.

Of course the meddling won’t stop with Los Angeles County. Long Beach, Santa Monica, and the city of Los Angeles are considering similar mandates, while San Francisco supervisors have “unanimously approved a resolution urging large chain grocery stores to raise hourly wages for employees by $5 during the pandemic.” From this humble beginning, the idea is likely to spread across the state like a peak-of-the-season wildfire.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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