Doing business in a country with the highest minimum wage in America

Josiah Citrin, the owner and chef of a two-Michelin-starred Santa Monica restaurant, opened a new steakhouse on the Sunset Strip a few months ago. He’s already worried about whether the restaurant can survive.

The reason, Mr. Citrin said, is unique: a mandate from the city of West Hollywood that workers be paid at least $19.08 an hour, the highest minimum wage in the country.

“It’s quite a challenge,” said the 55-year-old Mr. Citrin on the new minimum wage, which went into effect about two weeks before he opened his doors in July. “Really, it’s almost impossible to operate.”

His sentiment is widely shared among business owners in West Hollywood, a city of 35,000 known for its restaurants, boutiques and progressive politics. In recent weeks, many owners have written to lawmakers, calling for a moratorium on further minimum wage increases; another one is planned for July, based on inflation. And last month, a number of people marched to a local government building with signs reading “My WeHo” and “RIP Restaurants in West Hollywood.”

Their sense of constraint comes partly from geography. The irregularly shaped city is bordered by Beverly Hills to the west and Los Angeles to the north, south and east. Some streets start in Los Angeles, cut through West Hollywood and end in Beverly Hills. You can be in three cities in just a few minutes – without traffic, of course.

And that means West Hollywood’s small businesses have competitors down the street with lower costs.

In addition to raising the minimum wage, the West Hollywood ordinance, which the City Council passed in 2021, requires all full-time employees to receive at least 96 hours of paid leave per year for sick leave, vacation or other personal needs, as well as 80 hours that they can take without pay .

The minimum hourly wage in the state of California is $15.50 third highest in the country, behind only the District of Columbia at $17 and Washington State at $15.74. But just as each state’s minimum wage could replace the federal minimum of $7.25 an hour, more than two dozen California cities, including West Hollywood and several in the Bay Area, have higher minimum wages than the state, according to the Economic Policy Institute. an impartial think tank.

In San Francisco it is $18.07; in Los Angeles, $16.78.

Chris Tilly, a professor at the University of California, Los Angeles, who studies labor markets and public policies that shape the workplace, said research has shown that gradual and moderate increases in the minimum wage do not have a significant impact on employment.

“The claim that minimum wage increases are job killing is an exaggeration,” Mr Tilly said. But “there are potential downsides,” he added. “One is that economic theory tells us that too much of an increase in the minimum will certainly deter companies from hiring.”

Over the past year, workers in several industries in California have seen significant wage increases, in many cases thanks to the victories of organized labor. Health care workers at Kaiser Permanente facilities have signed a contract that includes a state minimum wage of $25 per hour. Fast food workers across the state will soon earn a minimum wage of $20 per hour, and hotel workers have received significant raises across Southern California.

Until recently, West Hollywood followed the state’s minimum wage increases, which have risen every year since 2017, often a dollar at a time. But that changed with the new regulation, which included a series of increases.

Genevieve Morrill, president of the West Hollywood Chamber of Commerce, said that while her group wanted workers to earn a living wage in an increasingly expensive part of the country, she felt the ordinance had done more to hurt workers, who lost hours or, in some cases, their jobs after places close.

Around the time the recent wage increase took effect, Ms. Morrill helped more than 50 local businesses, including Mr. Citrin’s restaurant, write a letter to the City Council outlining their concerns. They called for a moratorium on further minimum wage increases until 2025 or until the rate is in line with the rate in Los Angeles. They also asked the city to reverse its mandatory leave policy.

Incorporated in 1984, West Hollywood was the first city in the country with a majority-openly gay city council. It has promoted itself as “a leader in many critical social movements,” including advocating for HIV causes, affordable housing and women’s rights, among others, according to a post on the city’s website.

When you walk along Santa Monica Boulevard, which runs through the center of this city, a vibrant energy fills the sidewalks. Several residents are catching up on phone calls while walking their dogs, and others are grabbing a latte or strolling through an art gallery. People do gymnastics in a park. In the evening, the city’s lively bar and restaurant scene provides plenty of fun.

Mayor Sepi Shyne, who was sworn in this year, said businesses have long been part of the community.

“Our companies are also the backbone of support for workers: lifting fair pay is part of securing economic justice and a better future for all,” said Ms. Shyne, who supports the minimum wage regulation but is listening seriously to the opposition . from the business community.

Last month, the City Council, of which Ms. Shyne is a member, approved about $2.8 million in waivers, credits and marketing dollars to help the business community. The City Council, she said, has also directed staff members to get employee feedback on the effect of paid leave.

A strong supporter of the ordinance was UNITE HERE Local 11, which represents 30,000 workers at hotels and restaurants throughout Southern California.

Kurt Petersen, co-president of the local community, said West Hollywood set a standard that should be followed throughout California and the country. “It has raised living standards and given workers the security of paid leave,” he said.

Near the intersection of Santa Monica and La Cienega Boulevards, Paul Leonard plans to open a location for his pet care business Collar & Comb. He has been operating in other locations a few blocks away in Los Angeles since 2019. The most popular service, Mr. Leonard said, is full-spectrum specialist grooming for dogs under 20 pounds for $166.

In an interview, Mr. Leonard said he wasn’t concerned about the minimum wage because he paid his groomers at least $23 an hour.

“Everything is going up, and that includes wages,” he said.

Steve Lococo, who has been part of the business community for decades, said small business owners have been “not heard at all” in West Hollywood over the past two years. He has raised prices — an average haircut that used to be $150 is now $195 — and his company, B2V Salon, which he co-owns with Alberto Borrelli, has cut employees to five from nine. At the start of the new year, Mr. Lococo said, the salon will reassess staffing levels.

“There needs to be changes in this ordinance,” he said. “Lately you have the feeling that as an entrepreneur you have no say in how things are going in the city.”

Meanwhile, Mr. Citrin, who has run restaurants in the Los Angeles area for more than 25 years, said the workforce at his West Hollywood restaurant, Charcoal Sunset, which specializes in prime cuts of meat, has dropped from about 50 to 35.

At high-end restaurants like his, Mr. Citrin noted, servers often make good money — sometimes more than $50 an hour when tips are included, he said. Most nights, his West Hollywood restaurant generates revenue comparable to what his restaurants in Los Angeles and Santa Monica bring in, but his overhead costs are higher in West Hollywood. For now, he is unsure about his future in the city, he says.

He often wonders if it wouldn’t be easier to simply focus on his restaurants elsewhere in the area.

“That’s something I’ll have to answer in the coming months,” he said.