“Exodus Has Begun”
The minimum wage hike is about to smack Los Angeles’ apparel industry businesses and jobs. The LA Times reports the ‘Exodus has Begun‘.
In Greece, 40% of companies say they want to leave the country.
Greek businesses complain of high taxation, stifling regulation, and legal uncertainty generated from the arrival of Syriza to power.
Let’s compare the two setups.
Exodus California Style via LA Times
Los Angeles was once the epicenter of apparel manufacturing, attracting buyers from across the world to its clothing factories, sample rooms and design studios. But over the years, cheap overseas labor lured many apparel makers to outsource to foreign competitors in far-flung places such as China and Vietnam.
Now, Los Angeles firms are facing another big hurdle — California’s minimum wage hitting $15 an hour by 2022 — which could spur more garment makers to exit the state.
Last week American Apparel, the biggest clothing maker in Los Angeles, said it might outsource the making of some garments to another manufacturer in the U.S., and wiped out about 500 local jobs. The company still employs about 4,000 workers in Southern California.
“The exodus has begun,” said Sung Won Sohn, an economist at Cal State Channel Islands and a former director at Forever 21. “The garment industry is gradually shrinking and that trend will likely continue.”
In the last decade, local apparel manufacturing has already thinned significantly. Last year, Los Angeles County was home to 2,128 garment makers, down 33% from 2005, according to Bureau of Labor Statistics data. During that period, employment also plunged by a third, to 40,500 workers. Wages, meanwhile, jumped 17% adjusting for inflation, to $698 per week — although that can include pay for top executives, as well as bonuses, tips and paid vacation time.
Guess Jeans, which epitomized a sexy California look, moved production to Mexico and South America. Just a few years ago, premium denim maker Hudson Jeans began shifting manufacturing to Mexico.
Jeff Mirvis, owner of MGT Industries in Los Angeles, said outsourcing was necessary to keep up with low-cost rivals. MGT, which makes apparel sold to retailers, moved its production to Mexico in the 1990s, China in the early 2000s and Southeast Asia a few years later. Its designs and samples are still made in Los Angeles, Mirvis said.
“Manufacturers really have no choice,” said Mirvis, whose father started the company in 1988. “With the rise of Forever 21 and stores like that, price points have gone down and down and down.”
California Exodus in Mid-to-Late Stage
Clearly, the California exodus is not just beginning. Rather, exodus is in the mid-to late stages.
The minimum wage hikes will simply put the finishing touches on an exodus that began long ago.
Exodus Greek Style
Via translation from Libre Mercado, please consider the ‘Syriza Effect’: 40% of Greek Companies Want to Leave the Country.
The economic situation in Greece remains critical. The Government of Alexis Tsipras proposes another hike in the standard VAT rate from 23% to 24%, further suffocating business activity.
Proof of this is that four out of ten Greek companies contemplate leaving the country, according to a recent survey conducted in late March. The high tax burden is wreaking havoc in many companies. Employers also complain of reduced legal certainty, poor access to cheap funding and the complex Greek bureaucracy.
At the moment, almost 15% of respondents say they have already moved their base of operations abroad, but many more expect to do so in the near future. Companies that decide to emigrate belong to sectors with high added value, such as those related to new technologies and health.
In July 2015 the percentage of companies that wanted to leave the country was 23%. Today the total has nearly doubled and now exceeds 40%.
Pessimism reigns among entrepreneurs, as 56% say that the economic situation will not improve for at least another five years, compared to 4% who thought so in May 2014, shortly before Syriza came to power.
80% of employers indicate that if they could start their new business, they would abroad and not in Greece.
Now that’s a mass exodus for you. And it’s one in the early stages, too. Hiking the VAT and business taxes is idiotic. There still has been no badly needed business reform.
Once again, there is no way for Greece to pay back what is promised. What cannot be done, won’t.
Mike “Mish” Shedlock
Although it is patently obvious that Liberalism is a mental disease, Conservatives cannot claim any higher status until they all unite and reset the political landscape.
Frank Smythe said:
Doufas Gowk said:
We must do everything possible to pay our CEOs more money. They are the most underpaid group in America.
David A said:
While some CEO pay is likely absurd, it is not why cogent to liberal ideology and the problems with too high minimum wage.
Ron J said:
“We must do everything possible to pay our CEOs more money. They are the most underpaid group in America.”
With ZIRP, CEO’s have borrowed a trillion dollars and bought back stock to goose the stock price, while stuffing the proceeds of stock option grants in their pockets.
Likewise, with ZIRP, the government is borrowing trillions of dollars.
The FED is distorting the market.
. You Have It All Wrong.
.They Do NOT Care about the Minimum Wage Earners.
They Do NOT Care about Minimum Wage.
They Just want LIP SERVICE to fool the Minimum Educated into voting for them.
It is about the V.O.T.E. They could not give a Darn about the worker or his family.
.Don’t be fooled.
IF IF No one could afford to live there the prices are too high, well then the MARKET
would adjust. This is about giving away taxpayer money to get a V.O.T.E..
Nothing more, nothing less.
Apberusdisvet, that comment of yours was a bunch of flowery gibberish. Are you thinking of going into politics?
Look in the Mirror.
Actually, apberusdisvet hit the NAIL on its head.
Frank Smythe said:
you must be living in a bubble. Bombed Libya much?
Pulling our real estate company out of California due to taxes, fees, and building being almost impossible due to b.s. Planning departments! Adios Kalifornia!
Any company thinking of doing business in California and especially LA must be insane! I was talking to some people of a major chain of retail stores and they told me they thought about closing all California stores. In LA you have to pay 1 1/2 percent of retail sales for a business license even if that store makes no money. In Santa Monica it can take a year or two to get the build out completed on a store due to problems getting it through city planning (see above comment about Greece it applies here, when you have a large number of govt employees they have to spend their time doing something). Insanity is any one who wants to open stores win LA and Cook (Crook) County Illinois. You will never make a profit in these cities.
Stuki Moi said:
As the Greeks elected Syriza on account of them standing up against the banksters, why would they not turn against the pushover clowns the next time around? Based on the program cementing the original Syriza win, you’d think there would be fertile ground for a party with some semblance of a spine, to run in the next election.
Or barring that, just grow the heck up already, and take a hint from the Somalis. It’s the only reasonable endgame anyway, so why not get movin’?
John Branch said:
My wife is Greek and I am around Greeks constantly and spent some time reviewing their history. Basically, in Greece you have a choice of socialists and communists when you vote. It is just a matter of degrees. A huge percentage of the population either works for the government or lives off the government teet. It has been growing that way for 40 plus years. Attempting to start a business is near impossible because govt employees need something to do. Also, established families with govt connections work to stop new businesses. This is one of the reasons products out of Greece are so sub-par! So, in summary you have a huge and growing corrupt govt, barriers are thrown up to eliminate the start of new and improved businesses, teet suckers keep electing the same so they have a teet to suck on, productive people leave resulting in no economy. That summarizes Greece, most South American countries including Mexico, USSR, Eastern Europe and many South-western European countries as well as Scandanavia. Besides my wife being Greek I have done business or lived in many places including Australia, ME, Argentina and Scandanavia. All fit that path and the US is following it also. Not far to go.
michael fitzpatrick said:
Hi Mish! New York’s garment center was the leading producer of clothes of all types at one time not that long ago. It disappeared. It wasn’t the minimum wage laws that destroyed it, but the cause was the same. Instead of high minimum wage laws driving the businesses out it was excessive demands for higher wages just the same. The International Ladies’ Garment Workers’ Union did it. Its excessive demands accomplished the same deadly result as the minimum wage laws. People don’t seem to connect the dots as they treat businesses as captive. If you’re going to produce California grown oranges you are a captive, but oranges can be grown in many other areas of the world, as Brazil is showing both California and Florida. Its not that politicians don’t see that, they do, but the dishonest ones who pass hourly wage laws ignore it for votes. And we know what brought on the rust bowl where once most of the world’s steel was producedBest,Michael FitzpatrickPort Richey, Fl.
Government only adds costs to business AND consumers, but their worst effect is in creating massive debt that it used to simulate redistribution that props up economics that would otherwise be unsustainable. If not for government created entitlements, those who lost their jobs would have been in the street in hunger and surely would have seen the madness in buying imports that were taking their jobs. It is the anesthesia of debt and deficit spending that have ruined us.
California like a third world country with a significant disparity in wealth. Bakersfield is a world away from the SF bay area. When and not if the stupid Tech Bubble breaks, they are going to be back to issuing IOU’s for tax returns. I hope that happens on Jerry Brown’s watch so he can get all the credit.
Wherever you have a large population of third world people you have a great disparity of wealth. Chicago, California, Egypt, and Nigeria all have great disparity of wealth. The disparity is not caused by the wealthy, but by unproductive poor people who breed as though their children have a God given right to a share of the wealth created by others.
In Egypt and Nigeria there is very little from the state and so people have to set about finding a living , and they generally do . The trend of redistributing wealth and managing the whole is a western trend . As that is what is promised by our societies it is no wonder others turn up for the manna, and there will be no surprise when the state ‘finds’ it has not ‘calculated’ properly either, as it has decided to arrogate the mutual out of opportunity … just to make sure it all goes according to a plan for which credit might be taken.
Carl R said:
That article was not as enlightened as it seemed. Along with the article talking about the expected job losses was a simple bar graph “who wins with a higher minimum wage”, which gave a breakdown of who currently earns minimum wage. But, of course, a portion of those will lose their job when the job vanishes. The title more accurately should have said “who currently earns minimum wage”.
The people most affected by the minimum wage, both good and bad, are those currently earning minimum wage. Some will be winners, if they are able to remain employed. Some will be losers, when they lose their job.
Government has come to rely on business activity for most of their revenue, yet they are killing their golden goose. Proof if there ever was any that liberalism is a mental disorder. We complain about the destructiveness of unbridled capitalism (like we have ever seen such an animal) yet will completely dismiss the ABSOLUTE power and destructiveness of GOVERNMENT. The day we see government actually held accountable for their destruction (as we do daily of private individuals and business), is the first day of my optimism for this world.
“The people most affected by the minimum wage, both good and bad, are those currently earning minimum wage.”
There’s more to it. Union pay scales are pegged to min-wage in some way so the biggest proponents of the increase are gov’t union workers. Sorry, I don’t have the details (Davis Bacon?) but perhaps someone can point it out.
Not a direct correlation I guess. But the state estimates gov’t payrolls will rise hundreds of millions due to the change.
Old Guy said:
Jim go research the Davis-Bacon site. You will find the Federal minimum wage lower then a State minimum wage, unless you are working on a commercial job. Davis Bacon is a federal level wage report. They will not change the minimum to 15 P/H simply because CA and other states do this. Therein lies the rub, state are raising the minimum wage while the fed does nothing. I used to enforce Davis-Bacon when working for HUD.
Any person can use the Davis Bacon site by the way. With the cost of living in CA so high, why is 15P/H so unreasonable in those high cost of living areas? You still cannot afford to actually live in LA or SF on those wages, much less buy a home!
There is no such thing as a living wage, but one would think people would move on to other jobs or professions if they cannot live in CA or any other high cost of living area.
Ron J said:
“With the cost of living in CA so high, why is 15P/H so unreasonable in those high cost of living areas? You still cannot afford to actually live in LA or SF on those wages, much less buy a home!”
Why is it reasonable to distort the market? Why is it reasonable to price labor out of the market? Why is it reasonable to price businesses out of the market?
Of what benefit is it to be unemployed at $15 an hour?
The left acts as if they just pass a law and that’s it. It doesn’t work that way. For every action, there is an equal and opposite reaction. That is why affordable college, isn’t and affordable health care, isn’t and affordable housing, isn’t. Equal and opposite reactions occurred.
3,000 millionaires left Chicago. 7,000 millionaires have left Paris. Toyota moved their headquarters out of California. A number of California businesses have moved elsewhere, as well. The trend is set to continue.
David A said:
If the business leaves the state, then everyone employed is affected.
pvt. mushroom said:
Syriza must stop loaning Puerto Rico and Greece money they can ‘t repay.
Greece has public property sufficient to pay their debts:
Major highways and bridges
Harbors and ports
railroads and terminals
Mediterranean oil claims
Water purification distribution and sewage
Electric power generation and distribution
Historical tourist monuments
There is a difference between can’t and don’t want to. Greeks spent the money. They must repay.
Public property did not spend the money and there is no lien .
When you lend repayment is your problem – let us see , what was the clause that secured the deal apart from ‘European common good faith etc. ‘ … no bailout, no default , no exit .
Sounds just a bit … stupid (?) to me , given you are playing with the politics, wealth and lives of hundreds of millions of people … but hey , if you think a few people sat at a table signing those words makes all the difference (don’t you think , seriously , that you are being … beyond words… though) .
The government borrowed the money (on behalf of its population, non signatories that may or may not have benefited ) , so liquidate the government – done.
We are simply witnessing the reality of sovereign debt being the basis of a money , but where in the case of EU , it is just little bit obvious .
Greece is not author of that money , simply participative , it shows . It shows because instead of national politics determining the value of its currency (by the policy methods that will adjust fx or be adjusted by fx) , Greek policy is now determined by outside protocol – those who fixed on a bet to lend into Greece based on a currency value supported by their own nations , including the political leverage available due to that.
Who arbitrates this situation ? The only real worth that can be extracted from Greece if it refuses to honour or claims the debt is odious , apart from some domestic political grandstanding (not) , are whatever foreign assets Greece has lying around in friendly jurisdictions .
But you are going to walk in and claim public property by force ?
Of course not , you are going to humiliate the Greeks and bribe their politicians and threaten their economy and European ties , to have them sign off on what you like (raise taxes , sell assets … borrow at foreign prices now pay at foreign prices – why would you even care if Greece is socialist or not in terms of repayment , if it were not for the belief in a supposed leverage of EU denominated debt based on its ‘sounder’ meaning ? ) .
But you will not be liked for it by a large part of the everyday public.
(When I use the word ‘you’ here it is figurative – for all I know you were being sarcastic) .
One alternative to repaying the debt would be operating Greece without banks, Euros, government payrolls, and most commerce. Another option is Grexit and a new worthless Greek currency. Frankly, my dear, I don’t give a damn.
I would go for the worthless Greek currency as it would be tied into Greek reality .
I flew to Athens once with no money , and had a two day walk to an uncle in laws house along the coast . Towards the end of the second day, with an hours walk left , I found a few hundred Drachmas by the side of the road . There was an old traditional tavern just off the path , set by itself almost at the waters edge of some rocks , and I was served a meal that I remember to this day .
Worth is relative .
Greeks twice elected the atheist marxist who openly spurned the Greek Orthodox Church.
Frank Smythe said:
Yep! Greece will be smashed by the CIA-backed ISIS.
ISIS is Putin’s psy-op that has propelled Putin’s demographic weapons of mass destruction into Europe to undermine the EU and NATO
Ron J said:
“ISIS is Putin’s psy-op that has propelled Putin’s demographic weapons of mass destruction into Europe to undermine the EU and NATO”
It isn’t Putin that has been trying to overthrow Assad.
Mox Nix said:
Here that sound? It’s the sound of legitimate jobs running away while underground (illegal) workers migrate to cover what can be covered. There goes real Estate values, tax revenues, road repairs, and pension funds (to name just a few). Good job, Democraps!
Total Greek public debt (inclusive Target 2) will be close to € 600 bn after drawdown of the latest € 85 bn package. Greek GDP is around € 180 bn with a 50% public sector share. So a € 90 bn private sector is supposed to service its own debt plus the € 600 bn debt. We are way past the point of no return.
We should stop comparing debt to GDP and compare it to private sector GDP. After all, private sector is the debtor.
We need a musical tribute here. How about “Gimme More” by Britney Spears sounds about right.
Ron J said:
To top it off, Last week L.A. mayor Garcetti proposed to give all LAUSD high school graduates a free year of community college.
Where is the mayor planning to get the money from for this free year of community college? That he hasn’t said.
When Garcetti became mayor, he acknowledged that businesses were being over taxed, the way that L.A. taxes businesses, but that in balancing his budget at the time, he was unable to provide them any relief. Now he attempts to add on another tax payer expense, which i presume will leave no room for tax relief for L.A. businesses.
Firstname Lastname said:
Since a high school education has become worthless LA should make it optional and charge nominal tuition (with a complimentary Michelle Obama lunch included). They’d save a ton of tax money. A few years later the shirkers will then have to pay to take the GED thereby teaching them the value of an education.