Posted tagged ‘Minimum Wage’

To Business Owners: Keep a Low Profile When Leaving California

January 25, 2017

Time and again I’ve encouraged smaller companies planning to escape California’s business-hostile environment to avoid publicly discussing their move. What follows is the story of an honest business owner expressing his legitimate concerns about operating in the state – and the unfortunate blowback that resulted.

city-of-los-angeles-sealHouman Salem, who owns a small apparel design and manufacturing business, wrote in the Los Angeles Times that higher labor costs are forcing him to leave California for Nevada. His article contained common sense, non-incendiary views:

“The biggest reason [to relocate] is the minimum wage, which will rise to $15 by 2021 in the county and by 2022 statewide. I write with some hesitancy, because I’m in no way an opponent of higher pay. When you have a company with fewer than 50 employees, you get to know them pretty well and have a genuine concern for them as individuals. But that has to be balanced with concern for keeping your clients, who can always take their business to other countries or states.”

He added, “When the $15 minimum wage is fully phased in, my company would be losing in excess of $200,000 a year (and far more if my workforce grows as anticipated). That may be a drop in the bucket for large corporations, but a small business cannot absorb such losses. I could try to charge more to offset that cost, but my customers – the companies that are looking for someone to produce their clothing line – wouldn’t pay it. The result would be layoffs.”

The reaction on social media was one of rage rather than reflection, according to Michael Saltsman of the Employment Policies Institute, writing in the Orange County Register:

“Good riddance,’ said one of the top comments on Facebook. ‘If you can’t pay your employees a living wage, you don’t have my sympathy,’ said another. Other comments accused Salem of being a bad businessman, of keeping too much money for himself and of exploiting his employees. Some readers even left negative reviews of his business online – even though they’d never met him or done business with him.”

Salem, the founder and CEO of ARGYLE Haus of Apparel, said he fears that the outraged reaction will discourage other affected businesses from speaking out and telling their own story.

He is correct. As a consultant who helps companies find business-friendly locations in which to locate, I encourage clients to keep a low profile. Otherwise, they will be hammered without mercy from an uninformed public and sometimes from public officials who know little about what it takes to run a business.

Publicly held corporations must divulge a relocation because that is considered a “material” event.  That is why within just a few years we’ve seen media coverage of many companies moving jobs out of Los Angeles County to out-of-state locations. Examples: Toyota, Hilton Hotels, Sony Pictures Imageworks, Occidental Petroleum, Northrop Grumman and Walt Disney Co.

Salem also said he is “contacted on an almost daily basis by other L.A.-based companies in my industry who are scared about the future. They are looking to me for leadership, and want to talk about my decision to leave the state.”

He added that “When politicians talk about an ‘economy working for everyone’ – let me tell you, it’s not working for the small business owner.”

Salem chafed at critics who suggested he’s taking advantage of his employees. He has always paid above minimum wage even though doing so causes increases in payroll taxes and workers compensation.

Saltsman wrote: “Despite the challenges of doing business in California, Salem (unlike some of his competitors) is still committed to making his products domestically. ‘I’m an American – I want this country to do well, to succeed….’ He told me he’s not opposed to raising wages – but that the entire burden can’t rest on small business owners. ‘I need the government to meet me halfway. In California, unfortunately, that kind of compromise doesn’t exist.’”

Other businesses have cited the minimum wage increase while loading moving vans, namely: California Composites of Santa Fe Springs when shifting work to Texas (the company owner said if he were to stay “it would probably make me a nonprofit within a couple years or so”); Competitive Edge Research & Communications that relocated from San Diego to Texas; and Woof & Poof of Chico, which makes handcrafted pillows and stuffed figures, when transferring work to North Carolina.

I noticed something about this event that adds insult to injury. Salem’s website states, “Based in the San Fernando Valley of Los Angeles, ARGYLE Haus is a founding member (emphasis added) of the L.A. Mayor’s Fashion Council, an organization dedicated to building and reinforcing the vibrant fashion and apparel industry in the greater Los Angeles area.”

A founding member? Have public officials shown any gratitude? Well, not that I know of from politicians like Gov. Jerry Brown, Los Angeles Mayor Eric Garcetti or any member of city council. I wonder if any of them think they could run ARGYLE Haus better than Mr. Salem has.

It’s hardly surprising that Salem concluded, “We need more stable, blue-collar jobs in places like the San Fernando Valley – the kind I thought I was helping create. California, however, has put up a giant ‘Go Away’ sign.’”

Mr. Saltsman’s Orange County Register column is here: “Los Angeles’ ungracious response to minimum wage consequences.”

Mr. Salem’s Los Angeles Times opinion column is here: “Leaving for Las Vegas: California’s minimum wage law leaves businesses no choice.”

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One focus of this blog has been to address California’s difficult business environment, as described in the study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

Case Study: How Politicians Like Sen. Connie Leyva Motivate Companies to Leave California

September 13, 2016

Manufacturing is the number one industry in California to pack up and move to states considered to be friendly to business. Since such losses are happening more frequently, let’s take a look at the record of a politician from a district that will soon lose a major employer. In this case, it’s Senator Connie Leyva who represents Colton.

seal_of_san_bernardino_county_california-svgBut, first things first. Ashley Furniture has announced it will stop manufacturing in Colton and furlough 840 employees.

The company didn’t say that California’s difficult tax and regulatory environment figured into its decision, but I can’t see how any business leader could ignore such factors when deciding whether to stay in or leave the state.

A company statement said that closing the facility will strengthen its production capability and cost structure so as to compete effectively.

The work will be transferred to Wisconsin, Mississippi and North Carolina, all of which have reasonable labor rates, lower workers’ compensation costs, a thoughtful regulatory environment, lower energy costs and a merciful litigation environment.

I have no connection with Ashley Furniture. But in my experience I’m confident that the company could reduce costs by 20-35 percent for each job moved, helping it to remain competitive in the dog-eat-dog retail world.

Consider the experience of Bing Energy, a “green” fuel-cell company, that relocated its headquarters and manufacturing from Chino to Florida.

Bing CFO Dean Minardi said the “tipping point” in his decision was Florida’s friendlier laws and its move to phase out the corporate income tax. Minardi said of eliminating the tax, “It’s huge. The more income a company can keep the more people it can hire…. I just can’t imagine any corporation in their right mind would decide to set up in California today.”

My firm completed a study – California Business Departures: An Eight-Year Review 2008-2015 – that estimates more than 3,000 manufacturers diverted capital out of California because of facility relocations, opting for expansions in other states, or deciding to go elsewhere after considering California.

The difficulty of operating here keeps increasing as our politicians (virtually always Democrats) repeatedly pass costly measures. More tax hikes. More regulations. More fees. More penalties. Much of that translates into bureaucratic harassment.

Ashley Furniture gave employees 60 days notice and met regulations governing layoffs. I’m sympathetic and understand why workers organized a protest in front of an Ashley retail store.

But by protesting at the company’s door, the workers drew attention to the effects of Sacramento’s actions.

It would be nice to see protests at the doors of the politicians who support business-killing, economy-killing, job-killing policies. In other words, speak out against the causes of California’s job losses.

The top political figure I hold responsible for our deteriorating business environment is Gov. Jerry Brown. But he has, for want of a better word, collaborators.

Since Colton has lost jobs before, I decided to examine the work done by the state Senator who represents that community, Connie Leyva. Her website focuses on social issues relating to homeless students; the rights of housekeepers, nannies, and caregivers; and safeguarding children from predators.

All are noble causes, but I didn’t see efforts to boost a business’s prospects for success. In fact, Leyva voted for California’s absurd one-size-fits-all minimum wage, requiring employers in her lower-cost district to pay San Francisco-like high wages, especially when veteran employees demand to be paid more than unskilled workers.

I can’t say that the “Leyva minimum wage” caused Ashley Furniture’s decision, but it’s reasonable to suggest a link between it and the upcoming out-of-state relocation.

According to the California Manufacturers & Technology Association’s legislative scorecard for last year, Leyva has a feeble record of supporting job-creating bills. Another report, one by the California Chamber of Commerce, shows that every time she voted for a business-friendly bill, she voted three times for business-hostile legislation.

As President John F. Kennedy proved years ago, lower taxes boost economic vitality. Thus, it was logical for me to scan the scorecard from the Howard Jarvis Taxpayers Association, which gave Leyva an “F.”

Politicians failed to learn from the event seven years ago when CalPortland Cement closed its plant – also in Colton – because of high state-related costs.

Then, company President James Repman testified that staying in business “is becoming increasingly more difficult due to the myriad of regulations and agencies that oversee every aspect of our business…. The next new plant probably won’t be built in California meaning more good, high paying manufacturing jobs will be lost to Nevada or China or somewhere.”

The biographies for Gov. Brown, Sen. Leyva and most Democrats show that they’ve never run a company. Until voters who want good jobs become wiser about who they elect to office, we will see more businesses leave the state.

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One focus of this blog has been to address California’s difficult business environment, as addressed in the study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

 

California Legislature Considers More Business-Bashing, Job-Killing Bills

March 31, 2016

As each year passes the California legislature introduces and often enacts increasingly severe measures that damage the state’s business climate.

We need only look at the newest summary of legislation that the California Chamber of Commerce issued yesterday. Seeing some of the shocking language in the bills – note especially the italicized parts – makes me wonder what planet Sacramento legislators came from, or perhaps I should say what solar system California voters came from.

Calif State Assembly logoAfter reading the list, will anyone wonder why some businesses can’t wait to leave California for a friendlier state?

A shortened and edited version of the announcement follows:

The California Chamber of Commerce released a preliminary list of job killer bills to call attention to the negative impact that proposed measures would have on the state’s job climate and economic recovery if they were to become law. The list is preliminary because CalChamber expects to add more bills to the list as legislation is amended.

“These job killer bills represent the worst of the worst legislative proposals currently under consideration by lawmakers,” said Allan Zaremberg, President and CEO of the Chamber.

“Whether they create barriers to providing affordable housing for workers, or increase costs for companies trying to grow or stay in business, these job killer bills should not become law,” he said.

The preliminary list of 2016 bills along with 2015 carry-over bills follows:Calif Senate Logo

Increased Labor Costs

SB 1166 (Hanna-Beth Jackson; D-Santa Barbara) Imposes New Maternity and Paternity Leave Mandate — Unduly burdens and increases costs of small employers, with as few as 5 employees, as well as large employers by requiring 12 weeks of protected employee leave for maternity or paternity leave, in addition to up to four months of existing pregnancy disability leave, for employees who have worked for the employer one day, as well as exposing employers with 50 or more employees to lawsuits for failing to provide 24 weeks of protected leave in a 12-month period.

SB 878 (Connie Leyva; D-Chino) Mandated Scheduling Requirement — Eliminates worker flexibility and exposes employers to costly penalties, litigation, and government enforcement, by mandating employers in the retail, grocery, or restaurant workplace, including employers who have hybrid operations that include a retail or restaurant section, to provide a 21-day work schedule and then face penalties and litigation if the employer changes the schedule with less than 7 days notice, even when the change is at the request of the employee.

SB 3 (Mark Leno; D-San Francisco) Automatic Minimum Wage Increase — Unfairly imposes a potential 50% increase in the minimum wage by 2022 (actually an 87% increase over an 8-year period when combined with the last increase just implemented in January 2016), and automatically adjusts minimum wage beyond 2018 according to national inflation, with no “offramps” to suspend the indexing if employers are struggling with other economic factors or costs.

Tax Increases

SCA 5 (Loni Hancock; D-Berkeley) Split Property Roll — Undermines the protections of Proposition 13 by unfairly targeting commercial property owners and increasing their property taxes by assessing their property based upon current fair market value instead of acquired value. Such costs will ultimately be passed on to consumers and tenants through higher prices and will result in job loss as businesses struggle to absorb such a dramatic tax increase.

ACA 8 (Richard Bloom; D-Santa Monica) Lowers Vote Requirement for Tax Increases — Adds complexity and uncertainty to the current tax structure and adds pressure to increase taxes on commercial, industrial and residential property owners by giving local governments new authority to enact special taxes for storm and wastewater infrastructure, including parcel taxes, by lowering the vote threshold from two-thirds to fifty-five percent.

Burdensome Environmental Regulations

SB 32 (Fran Pavley; D-Agoura Hills) Slows Economic Growth — Strengthens the already excessive authority of the California Air Resources Board and Increases costs for California businesses, makes them less competitive, and discourages economic growth by adopting further greenhouse gas emission reductions for 2030 without regard to the impact on individuals, jobs and the economy.

SB 654 (Kevin de León; D-Los Angeles) Creates Unworkable Hazardous Waste Permitting Process — Discourages investment in upgrading and improving hazardous waste facilities by shutting down hazardous waste facilities if the Department of Toxic Substances Control (DTSC) fails to take final action on the permit renewal application within a specified timeframe, even if the permit applicant acted diligently and in good faith throughout the permit application process.

California Oil Production Barriers

AB 2729 (Das Williams; D-Santa Barbara / Thurmond; D-Richmond) Gas Price Increase — Jeopardizes the production of California based fuel supply and increases costs to the industry by revising the definition of an idle well and requiring permanent closure of 25% of California’s long-term idle wells each year.

AB 1759 (Rob Bonta; D-Alameda) Gas Price Increase — Jeopardizes the production of California based fuel by banning the use of hydrogen fluoride and hydrofluoric acid at facilities that use more than 250 gallons and are located within two miles of a residence, notwithstanding the fact that there are significant safety regulations in place at the local, state and federal levels.

AB 1882 (Das Williams; D-Santa Barbara) Gas Price Increase — Jeopardizes the production of California based fuel by substantially complicating the existing permitting process for the Underground Injection Control program by imposing duplicative requirements and requiring the Division of Oil, Gas and Geothermal Resources to cede aspects of its permitting authority to the regional water quality control board.

Affordable Housing Barriers

AB 2162 (Kasen Chu; D-San Jose) Erodes Housing Affordability — Increases the cost of and delays housing and other development projects by eliminating existing mitigation options for impacts to oak woodlands under the California Environmental Quality Act and instead imposes an entirely new and separate permitting process for the removal of even one valley oak tree.

AB 2502 (Kevin Mullin; D-South San Francisco / David Chiu; D-San Francisco) Erodes Housing Affordability — Increases the cost and reduces the supply of housing by authorizing local governments as condition of development to impose a costly and inflexible price-controlled inclusionary housing requirement and, in doing so, legislatively repeals an established court decision upholding developers’ ability to set initial rental rates for new dwelling units.

SB 1150 (Mark Leno; D-San Francisco) Erodes Housing Availability — Increases risk and the cost of residential loans by allowing a party not on the mortgage loan to interfere with appropriate foreclosures and creates a private right of action for violations of overly complex and burdensome requirements.

SB 1318 (Lois Wolk; D-Davis) Erodes Housing Affordability— Inappropriately leverages necessary affordable housing in order to solve infrastructure issues with the consequence that the housing won’t be built by imposing requirements on water or waste water districts to serve certain communities first.

Meritless Litigation

SB 899 (Ben Hueso; D-Logan Heights) Increased Meritless Litigation Costs — Drives up consumer costs and increases frivolous litigation similar to the disability access lawsuits in California, by prohibiting a retailer or grocery store from discriminating against a person on the basis of gender with the price of goods and subjecting them to a minimum $4,000 of damages for each violation.

Arbitration Discrimination

AB 2667 (Tony Thurmond; D-Richmond) and AB 2879 (Mark Stone; D-Scotts Valley) Arbitration Agreements Discrimination — Unfairly discriminates against arbitration agreements and therefore is likely preempted by the Federal Arbitration Act, which will lead to confusion and litigation. Such will be the result by prohibiting arbitration of Unruh Civil Rights violations made as a condition of a contract for goods or services (in AB 2667) and by prohibiting an employer from requiring an individual who is a member of the military to sign a mandatory arbitration agreement as a condition of employment (in AB 2879).

To see future changes to the CalChamber list, go to www.cajobkillers.com

If you are a California resident and want to see your legislator’s record on business-related votes in 2015, see here.

One focus of this blog has been to address California’s hostility toward business, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. He offers an introductory consultation at no cost to help company leaders understand the Site Selection process and explore whether a project makes sense.

Joe is a keynote speaker on the benefits of relocating out of high-tax, high-cost, over-regulated states to friendlier business environments. For more information, see Biography and Speaking Availability. On Twitter, Joe is known as @LocationConsult.