Sadie Keljikian, Top Billion Finance
Los Angeles, one of the country’s primary garment manufacturing centers, is bracing for the impending hike in the city’s minimum wage. The new law, which will increase the city’s minimum wage to $15 an hour by 2020, will be enacted in stages, beginning with an increase in the lowest pay rate from the current $9 an hour to $10.50, next July.
LA garment factory workers’ base salaries are varied. Companies like 5 Thread, pay employees a relatively low base salary, but give incentive pay based on productivity. As a result, some of its employees already make $15 an hour or more.
5 Thread CEO Brian Zuckerman laments that he will have to move his operations out of the city once the wage increase goes into effect. In the interim, he plans to place a hiring freeze on low-skilled workers who require on-the-job training.
Other companies plan to say put and, instead, tweak their economic model to accommodate the increased labor costs. Tianello, Inc., for instance, plans to move into high-margin, labor-intensive luxury products, which are profitable, even when produced in lower volumes.
Despite strong opposition from many in the industry, Los Angeles Mayor Eric Garcetti (D), who fought for the increase, maintains that “there is no question there is going to be some job displacement, but there is going to be net job growth and, most importantly, poverty alleviation.” A study conducted this March by University of California-Berkeley economists concur with the Mayor’s assignment, finding that 600,000 workers will benefit from new law and less than 3,500 jobs lost.