Minimum Wage Law May Cause Firms To Leave L. A.

See Wage Debate Upends L.A. Garment Makers by Eric Morath and Alejandro Lazo of the WSJ. Excerpts:

"Contract apparel manufacturer 5 Thread Factory, whose garments include shirts for men and women, mountain-bike gear and other products, has outgrown its two floors of space in a gritty downtown neighborhood just three years after it opened. But with wages rising, CEO Brian Zuckerman said he won’t sign another lease in the city.

“The simple answer to this whole conversation is we’re moving out of the city of L.A.,” he said."

"Under the current wage system, some 5 Thread employees do earn $15 an hour or more through incentive pay, but many less-productive workers earn far less than that. When $15 an hour becomes the minimum, Mr. Zuckerman said it would end his ability to hire lower-skilled workers and train them. He would rather move than make that change. Staying would mean that within 5 miles of his building, apparel makers in other nearby cities would have a large cost advantage."

"Women’s clothing brand Karen Kane Inc., which has operations in Los Angeles and nearby Vernon, Calif., plans to keep a careful eye on labor costs when selecting contractors to manufacturer clothes. President Lonnie Kane, also chairman of the California Fashion Association, said “We’re going to have to look closer at contractors outside the city.”"

"Karen Kane employs about 200 U.S. workers, 165 of which are in the Los Angeles area. But if minimum-wage increases expand to other parts of the state “it’s going to be harder to produce domestically,” he said. “We’ve already had conversations about importing more.”"

"The wage law also will result in higher prices, said Steve Barraza, chief executive of Los Angeles designer and manufacturer Tianello Inc."

"“We won’t hire as many people, but the people we do hire have to be high-quality tailors,” he said.

He does fear that his suppliers, however, will move out of the city.

Brian Weitman, chief executive of STC-QST LLC, a supplier of items such as zippers, pocket linings and buttons, says the exodus is already on its way. He said clients have told him they plan to move out of downtown L.A. before the wage law is fully phased in."