If you want to understand why businesses are leaving California, investors are looking elsewhere and common-sense economics seems to have disappeared from public policy, look no further than Los Angeles.In a move that should surprise absolutely no one familiar with California politics, Los Angeles leaders approved a plan to push hotel and airport worker wages to $30 per hour.Supporters call it the "Olympic Wage," arguing that workers should benefit from the economic activity generated by the 2028 Summer Olympics.
While that may sound compassionate, it reveals a fundamental misunderstanding of how businesses operate and how capitalism works in America. The problem isn't that politicians want workers to earn more money.Everyone wants workers to earn more money.
People need a decent living wage.The problem is that Los Angeles continues to believe it can create wealth by passing laws instead of creating conditions that allow businesses to thrive.LA HOTELS HIT BY LARGEST JOB LOSSES IN A DECADE AS 'OLYMPIC WAGE' MANDATES BITE, DATA SHOWSThat's not economics.That's fantasy land.
As an owner of six small businesses, I’m the last person who wants government to dictate the margins in my business.Here's the reality politicians refuse to acknowledge right now.Wages are not created by city councils.
They are created by owners who become successful in free market society and pay those employees who help them get there along the way.Businesses pay people more when they generate more value, earn more profit and compete for talent.
That's how free markets work.Higher wages are typically the result of successful businesses, not government mandates.When government mandates that labor costs rise dramatically, business owners don't simply absorb the expense and carry on as usual.
They are forced to make difficult decisions.Some raise prices on consumers.
Others reduce staffing levels, cut employee hours, delay expansion plans or accelerate investments in automation.And in a ...