Despite $15 Minimum Wage Battle, Small Business Is Happy to Be Here

Despite $15 Minimum Wage Battle, Small Business Is Happy to Be Here
a.rios/L.A. Weekly Flickr pool

Despite months of debate over the now-approved $15 minimum wage in Los Angeles, small businesses are upbeat about their prospects, according to a recent Thumbtack Small Business Sentiment Survey.

The folks at personal projects site Thumbtack say they received 5,055 responses from L.A. small business proprietors. They found that, for the month of April, 29 percent of respondents said their financial outlook was "substantially better" than in previous months.

Fifty-two percent said it was "a little better," according to Thumbtack.

More than 28 percent of the owners said they believed their revenues would increase by more than 10 percent during the next three months, according to the data. Nearly half said revenue should rise by 1 to 10 percent during that time.

One in four said profitability would increase by more than 10 percent in the next quarter; about 47 percent said they project a 1 to 10 percent growth in profits.

Seventy-six percent of owners said they planned to keep the same number of employees in the next quarter, according to Thumbtack. More than one in five planned on hiring, the survey found.

The optimism comes at a time when opponents of the wage increase, which would see a gradual rise in pay until it reached $15 in 2020, argued that it would have dire consequences for small business owners in the city of L.A.

A Beacon Economics analysis of the wage hike, prepared at the behest of the pro-business Los Angeles Area Chamber of Commerce, argued that businesses would suffer because those outside city boundaries could pay less for workers and pass the savings on to regional customers.

It also predicts that small businesses would lay off workers in an effort to keep costs steady as wages rise:

If certain workers are going to be paid more, the money must come from somewhere else in the economy. In the case of a minimum-wage increase, the subsidies will be paid either by consumers through higher prices, by businesses in the form of reduced profits, [or] by workers who end up losing their jobs (and income).

It's an argument that hasn't really been proven in the real world.

Seattle's similar minimum-wage ordinance this year has been met not with increased joblessness but with a decrease in unemployment, for example. Anecdotal reports about a handful of restaurant closures in the wake of the Seattle increase turned out to be bunk.

And, to assume that a $15 minimum wage, in a city where it takes $26.04 an hour to be able to afford an average, two-bedroom apartment, would result in layoffs assumes, it would seem, that owners employ more people than they need because the minimum wage has been so low.

It would seem that, in normal circumstances, a profit-minded businessperson would employ as many people as needed to keep his or her operation in the black.

But in this climate of low wages and a top tier of wealthy folks who have seen almost all the nation's economic gains in recent years, the anti-increase argument seems to say, business owners are hiring excess people out of the kindness of their hearts.

Despite $15 Minimum Wage Battle, Small Business Is Happy to Be Here
Thumbtack Los Angeles

The devil's advocate here would argue, Sure, but maybe business owners will just try to make do with fewer people than necessary if wages go up. Do you know many small business owners that don't already make do with the least amount of overhead possible?

In any case, Jon Lieber, chief economist at Thumbtack, notes that the site's survey data is from April, before the City Council officially approved the wage increase plan.

"We don't ask specifically about the policy environment here," he told us. "The [minimum-wage] vote happened in middle of the [broader] survey period, so you might not see the effects until June data comes out."

True, but the wage issue has been in the air for many months now. Proposals to boost the minimum have been deliberated since early last year.

Lieber says that about half of the small businesses Thumbtack surveyed in L.A. have zero employees, so there's that. And about 40 percent have five or fewer.

If nearly 90 percent of small businesses in L.A. have between zero and 10 employees, it makes you wonder just how crushing an impact this wage hike will have on local enterprise. Only time will tell.

Send feedback and tips to the author. Follow Dennis Romero on Twitter at @dennisjromero. Follow L.A. Weekly News on Twitter at @laweeklynews.


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