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Sunday, Jun 26, 2022

A $39 Minimum Wage Means $25 Big Mac

Inflation since April 2021 was 8.3%. . . 
We all saw that headline a few weeks back, and I know that we were all feeling it before we read it. My grocery bill has gone up $100 a week, my hope of buying a new car this year is gone, and don’t get me started on gas prices – you could read my column from last month in the Business Journal if you want to know how I feel. The questions all of us should be asking are: Why did it get this bad? And more importantly, how do we fix it?

We all learned about Newton’s third law in school, that every action has an equal opposite reaction. Sure, he was talking about physics, but the lesson applies to everyday life, not just the science textbooks. Let’s apply the same basic principle to our economy.

I think many of us have forgotten that money doesn’t grow on trees. Our local, state, and federal representatives seem to think so, but we actually need to have the money to spend it. Just like money doesn’t grow on trees, the amount of money we have doesn’t grow just because we print more of it. Between hazard pay, stimulus checks, minimum wage increases, and rent moratoriums, we have spent all the money we’ve got, and people are at a breaking point.

I agree – we need to make our economy slow inflation, end homelessness, and ensure working families aren’t living paycheck to paycheck just to buy $7 a gallon for gas. But that can’t happen by putting even more burdens on the industries that are working for us and expecting higher wages without any regard for the economic effects. Take a look at one of the mayoral candidates who proposed a $39 minimum wage. That’s laughable – unless you want to pay $25 for a Big Mac.

And I am not exaggerating. Look around – last year, cities around California implemented $5 an hour extra for hazard pay for grocery employees. We warned them that it would have negative impacts, and that it would exacerbate food deserts in our region’s most underserved communities. Surprise, surprise, multiple unprofitable grocery stores closed, cutting off hundreds of employees and the communities that they served. And for the ones that stayed open? You wonder why groceries are getting so expensive – it’s because their payroll costs are higher. This isn’t rocket science or Newtonian physics. It’s easy math.

Or take the $25 (you read that right) minimum wage ordinance for health care facilities in Los Angeles on the horizon. Not just $25 for health care workers. . .  $25 for parking attendants, security guards, janitors, part-time cashiers. Everyone and anyone whose employment is associated with a health care facility. The ordinance also includes a provision saying that hospitals aren’t allowed to lay workers off or increase the cost of non-wage benefits to offset the new pay. And let’s mention that hospitals absorbed record losses during the pandemic. They are already struggling.

So, what do we do? If a hospital that serves our communities doesn’t have the money to increase wages, and can’t lay off workers, how will they manage? The only possible solution is to increase the cost of care. This will force many individuals seeking care to a breaking point and increases the inflationary costs we are all seeing. Those same workers who are getting an extra $10 an hour on top of minimum wage will now have to pay that $10 straight back to increased costs.

We can’t complain about the costs while also forcing them upon ourselves. You can’t bring people out of poverty by increasing wages 4%, while inflation will go up 8% due to rising employee costs. News flash – when you increase minimum wage, you have to increase everyone else’s wage too, and the same percentage increase is a lot more when you are talking about higher paid workers.

Don’t even get me started on housing. Millions of Californians who stopped paying rent just because there was no rent relief hardship requirement are now the ones complaining that their rent is going up faster than they can pay it.

Every cause has an effect. We’re suffering the effects of bad monetary policies, and we need to stop focusing on the effects as they come and start tackling the cause. We can’t just get caught in a vicious cycle of inflation, wage increases, inflation, wage increases, inflation. Let’s start looking at ways that we can work together to lower costs on families while also providing for the businesses that provide for us. Let’s strike a balance.

And look, it isn’t all negative – “Every action has an equal opposite reaction” goes both ways. If we take positive steps, and invest in our communities, businesses, and economy rather than burdening them with more costs, we will get our investment back ten-fold. How about instead of raising minimum wage to $25, we work with local hospitals to increase services and expand access to health care? Instead of adding hero pay, let’s ask grocery stores what would help them to continue serving unprofitable food deserts. Let’s work with colleges and workplaces to lift people out of poverty through education and job training, rather than raising the minimum wage for jobs that should be reserved for high school students.

Let’s rebalance our economy again, work with businesses, and outreach to communities to get our economy moving in the right direction. Our wallets depend on it.

Stuart Waldman is president of the Valley Industry and Commerce Association, a business advocacy organization based in Van Nuys that represents employers in the San Fernando Valley at the local, state, and federal levels of government.

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