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It’s been the year of the worker. West Hollywood employers are so over it

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It’s been the year of the worker. West Hollywood employers are so over it

Across the country, many American workers have enjoyed pay hikes unlike anything seen in decades. And for many American businesses, this also has been a good year for profits, with some corporations notching record or near-record gains.

But don’t try to sing that song of good times in West Hollywood: Business owners there say that paying workers more is killing them, and that goes for some of the low-wage workers that many liberal policymakers worry about.

In an area known for its nightlife, hip restaurants, trendy shops and boutique hotels, workers at or near the minimum pay abound. And, thanks in part to the political muscle of L.A.’s hotel union and the COVID-era shakeup that gave workers greater leverage, city leaders there have approved the highest minimum wage and some of the most generous paid time off to be found anywhere in the country.

The West Hollywood rules, approved two years ago, stand in contrast to the situation in much of the country, where business leaders have successfully opposed substantial increases in minimum wages. The federal wage floor has been stuck at $7.25 an hour since 2009, and two dozen states currently are at less than $10 an hour or have no minimum wage at all.

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In California as a whole, the minimum wage stands at $15.50 an hour, behind only Washington state at $15.74 and the nation’s capital at $16.50.

Many cities have their own minimum rate, and none higher than West Hollywood, where it’s now $19.08 an hour, with paid leave even for part-time staff.

Economists have long argued over what effect minimum wage rules have on jobs. Conservatives have generally maintained that requiring higher minimum pay leads employers to reduce hiring. Liberal economists have denied such a link in all but theory and some rare exceptions.

For restaurateur Craig Susser and other employers like him, that theoretical point of no return has been reached in West Hollywood. Susser, the owner of Craig’s and Craig’s Vegan, said he has reduced the number of servers from 12 to nine, sometimes eight. Other employers have cut worker hours. Many have jacked up their prices.

And by the city’s count, a sizable 177 businesses have closed since 2021, although exit interviews suggest a multitude of reasons, including labor costs, but also inflation more broadly and challenges posed by leases, entertainment industry strikes and changes in consumer behavior post-COVID crisis, according to Laura Biery, West Hollywood’s economic development director.

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Things have gotten so desperate, some employers say, that in a year when picketing workers have become commonplace and autoworkers, screenwriters and health workers have struck for significant gains, in West Hollywood, it’s bosses who’ve been holding up signs and marching in protest.

“For God’s sake, give us a break,” said Genevieve Morrill, president of the West Hollywood Chamber of Commerce.

Until relatively recently West Hollywood had followed the state’s minimum wage, which has been rising every year since 2017, mostly by a dollar at a time, to its $15.50 level today.

But that all changed at the start of 2022. Since then West Hollywood’s wage hikes have been extraordinary — more than $6 an hour for small businesses and $5 for larger ones in a span of just 2½ years.

Even some liberal economists are cringing a bit. “That’s such a substantial increase,” said Harry Holzer, a Georgetown public policy professor and the Labor Department’s chief economist in the Clinton administration. He added that bigger increases matter more in the long haul.

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West Hollywood businesses are having an even harder time swallowing the city’s paid time off rule that was part of the minimum wage ordinance. That requires employers to provide 12 days of compensated leave per year for full-time employees, at least half in vacation or personal time off and the rest in sick leave.

Part-timers also qualify on a prorated basis. And upon separation, all employees must be paid for unused vacation or personal leave, something neither the state nor any other city is thought to mandate.

Labor proponents have argued that even $19 an hour isn’t enough to live in expensive L.A. and that the rapid jump in West Hollywood’s minimum wage came after years in which its pay rate trailed that of Los Angeles and neighboring cities. Now, “it’s on the cutting edge of this important debate” over living wages, said Danielle Wilson, political coordinator of Unite Here Local 11. The union has been striking hotels across Southern California since summer and had an influential role in pushing through the West Hollywood pay increases.

Wilson said businesses in West Hollywood can afford it. And some certainly can. Many workers were already making $19 or more an hour, thanks to the labor market upheaval and tight worker supply caused by the pandemic.

Nor has it stopped new startups. This year more businesses have opened in West Hollywood than have closed, records show. Mario Vollera and his partners are gearing up to open Southern California’s second Roosterfish bar in West Hollywood, in the space where reality TV star Lisa Vanderpump had once operated her restaurant lounge. “I’m not that concerned,” he said of West Hollywood’s pay rules.

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The city of about 35,000 is part of L.A.’s affluent Westside, home to the Sunset Strip, and its area of 1.9 square miles is chock-full of swanky bars, dance clubs and celebrity hideaways. But although a sliver of West Hollywood touches Beverly Hills, the cities are quite different in demographics and wealth. West Hollywood’s residents are more transient and household incomes and housing values aren’t far off from L.A. County’s averages, census data show. Most workers are employed by small service employers.

The irony is that a Starbucks in West Hollywood now has to pay its employees at least $19.08 an hour, but another one down the road on Sunset Boulevard in Beverly Hills could, at least legally, bring on a worker at the state’s minimum of $15.50. (The current minimum wage for the city of L.A. is $16.78, and it’s $16.90 for Santa Monica.)

“Beverly Hills is actually looking pretty competitive and cheaper than West Hollywood,” said the chamber’s Morrill, letting out a chuckle.

She said it’s doubly hard for employers because the city’s socially progressive history and support for labor have made them reluctant to stick their heads out and complain publicly.

“I’m definitely in support of people making more money,” said one longtime restaurant owner who asked that he remain anonymous. “But it’s going to end up hurting the people it’s intended to help.”

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This business owner was one of 21 employers that received a temporary exemption from the paid-leave rules, after supplying proof that the rules would lead to a substantial cut in staff or work hours.

Other employers and their supporters, about 30 in all, took to the streets on Thanksgiving week and marched to West Hollywood’s city hall. Their demands: a long pause on future minimum wage increases; a new minimum rate for tipped employees, some of whom employers say make much more than a living wage; and a rescission of the paid leave provision for part-time employees.

West Hollywood’s City Council responded by giving employers relief on an annual business tax and parking and outdoor dining fees, totaling about $2.5 million, and said it would conduct a survey of businesses and consider amendments, but it made no time commitments.

Just how West Hollywood became, almost overnight, the minimum wage leader in part reflects a labor revival after decades of stagnant incomes and pandemic-induced anger that manifested itself in the Great Resignation and worker shortages. Low-wage workers have seen the biggest gains.

West Hollywood labor had a powerful ally in Local 11, which maximized the moment by using its broader political leverage to lean on city officials, according to knowledgeable sources. And what initially began as an effort targeting hotels morphed into an expansive ordinance that passed on a late November 2021 night.

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Employers say they were blindsided by the new rules. And while experts say that the changes, on the whole, may not make a big difference for employment, they could for businesses on the margins. More than many others, West Hollywood depends on hospitality businesses, which are labor-intensive and tend to come and go. Some say they may move or expand elsewhere. Others may adopt labor-saving strategies, such as more automation, or simply make do with fewer employees.

“People think of it as a free lunch, but you have to pay for it somewhere,” said David Neumark, a UC Irvine economist who has long studied the effects of minimum wage increases.

“The workers who get higher wages and keep their jobs and hours — they’re better off,” he said. “It’s workers who lose their jobs and hours. There’s the tradeoff.”

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Column: They say San Francisco is coming back as a tech hub, but it never really left

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Column: They say San Francisco is coming back as a tech hub, but it never really left

Michael Suswal’s first eye-opening encounter with the vibrancy of San Francisco came in 2017.

That’s when he and his fellow co-founders of Standard AI, an artificial intelligence startup funded by the incubator Y Combinator, moved from New York to San Francisco for the summer.

“Initially we planned on going back to New York,” says Suswal, 44. “But after living in the Bay Area for two or three months, between us we had way more network contacts than we had had in our combined 50 years living in New York.”

Where else would you go that would have more support, more connections, the right type of environment and the right investors?

— Michael Suswal, Generation Lab

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When COVID hit, Suswal told me, he moved to Seattle and worked from home. Last year, when he and a partner opted to co-found a new company, they pondered the best place to start.

“We thought, where else would you go that would have more support, more connections, the right type of environment and the right investors? Building a company is hard. It takes everything you’ve got, and even then there’s an 80% chance of failure. So why would you stack the deck against yourself? It was a no-brainer to come back here.”

Generation Lab, which Suswal co-founded with longevity expert Alina Su and UC Berkeley bioengineering professor Irina Conboy, aims to market a technology that can help customers identify and manage long-term medical conditions.

Suswal’s take is different from what you might have heard from the news media and red-state politicians over the last few years. They spin a narrative of a region — indeed, the entire state of California — in secular decline. Of a Silicon Valley whose best days are behind it. Of wholesale flight of money and talent to new, welcoming places such as Miami and Austin.

But there has never been much truth to that narrative generally, and it’s more dubious than ever today, when the Bay Area has emerged as a center of artificial intelligence investing.

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There is no shortage of newsy nuggets to illustrate the “doom loop” narrative about San Francisco.

On Tuesday, for instance, Macy’s announced that it would close its gigantic store overlooking Union Square sometime in the next three years. But the closure is part of a major corporate retrenchment involving the closings of 150 stores nationwide, 30% of the total.

Nor is there anything historically new about San Francisco-bashing. The practice dates back to the Gold Rush, when the city’s powerful attraction as a jumping-off place for Forty-Niners seeking their fortunes in the nearby hills generated an equally potent counter-narrative.

Hinton R. Helper, a visitor from North Carolina who would eventually gain notoriety as a white supremacist, reported in 1855 on the city’s “rottenness and its corruption, its squalor and its misery, its crime and its shame, its gold and its dross…. Degradation, profligacy and vice confront us at every step.”

It’s a short distance from Helper’s screed to the map that Florida Gov. Ron DeSantis displayed during a televised debate with Gov. Gavin Newsom in November, purportedly showing deposits of human waste around San Francisco. (That didn’t help DeSantis’ presidential campaign avert an early demise, any more than Helper’s critique stemmed the flow of fortune-seekers into California.)

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It’s true that the frenzy in artificial intelligence investing has brought a jolt of capital to the entrepreneurial economy of the Bay Area, but that’s merely the latest iteration of a story that dates back to the emergence of Silicon Valley in the late 1960s — or even to the founding of Hewlett-Packard in Palo Alto in 1939.

The region has undergone a long sequence of technology booms and busts over the decades, but each bust has set the stage for the next boom. In the 1980s, the valley’s chipmakers lost their dominance in semiconductor memory to Japanese competitors.

But within a few years, as UC Berkeley economist and political scientist AnnaLee Saxenian observed in her definitive study of the region, “Regional Advantage,” in 1994, new semiconductor and computer startups such as Sun Microsystems had emerged and Silicon Valley had “regained its former vitality.” By 1990, Silicon Valley was home to “one-third of the 100 largest technology companies created in the United States since 1965,” Saxenian wrote.

The key to its enduring stature atop the innovation economy has been the Bay Area’s infrastructure of institutions (Stanford and UC Berkeley) and legal, technical and financial professionals, and its population of technology workers — all having created “dense social networks and open labor markets.”

By contrast, the Silicon wannabes tend to put all their eggs in one basket, and when that basket’s contents spill out, there’s little to fill it up again.

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Miami is a telling example. Its mayor, Francis X. Suarez, tried to establish the city as the center of cryptocurrency financing and innovation. The FTX crypto exchange bought naming rights to the arena where the NBA’s Miami Heat play. International conferences for bitcoin and crypto adherents filled the conference center in 2022.

Miami associated itself with the first “city coin,” a crypto token that Suarez claimed would help boost the municipal budget.

The effort hasn’t panned out. FTX collapsed as its founder, Sam Bankman-Fried, was indicted and subsequently convicted of fraud; the Heat’s arena now carries the name of Kaseya, a Miami software firm.

Attendance at crypto conferences has dwindled. MiamiCoin, which was valued at 5 cents when it came on the market in August 2021, now trades for about 16-thousandths of a cent, if anyone cares — there doesn’t seem to have been a trade in eight months. The city is searching for relevance in the modern technology landscape.

The same sources that talked up the flight of entrepreneurs from the Bay Area to Miami, Austin and other Silicon wannabes are now running articles about startup founders moving back; often the return is accompanied by complaints about the lack of a true innovation culture in their new homes, as well as traffic congestion and housing prices soaring out of reach — much the same as one would find in any large city.

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As my colleague Hannah Wiley reported recently, San Francisco’s adherents are trying to seize the narrative reins by reminding people that the city and region offer unique advantages to entrepreneurs, especially in technology-related fields.

One is Angela Hoover, 25, who launched her consumer-oriented AI search firm, Andi, in Miami with backing from Y Combinator. At first, Miami seemed inviting because it seemed to be host to a healthy startup community.

Attending AI events in San Francisco, however, made it “abundantly clear that the AI community was in San Francisco. It almost feels like you have a front-row seat to a play, and at the same time you’re in the play,” Hoover said.

“Despite what all the doom-and-gloom critics say, [the Bay Area] is still a hotbed of innovation,” Ali Diab, chief executive of Collective Health, told me. That’s what prompted the firm, which manages employer health plans, to return its headquarters to downtown San Francisco after allowing its workforce to disperse to a work-from-home system during the pandemic.

“Obviously, you have the AI revolution being driven from here,” Diab says, “but you also have powerhouse enterprise software companies like Salesforce and Slack.”

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Collective Health also discovered that the cost of office space in San Francisco was lower than elsewhere in the Bay Area, including Silicon Valley proper. About 120 of Collective Health’s 783 employees work in San Francisco, with the others distributed among offices in Chicago, Texas and Utah, or working remotely.

Diab was an early critic of the “doom loop” argument against San Francisco, observing in a mid-October op-ed in the San Francisco Chronicle that “as a Bay Area native, I’ve had to listen to people predict the demise of my city for my entire life.” In truth, he wrote, “the oft-cited challenges San Francisco faces are no different from those experienced by any other major city in the United States.”

Housing is “prohibitively expensive in almost every major American city,” he added. “New York, Chicago and Los Angeles haven’t solved their homelessness problems and neither have many other large cities.”

The story of a Bay Area exodus always was overstated. The image of Texas’ attraction for entrepreneurs has never moved much beyond three major tech companies that moved their headquarters there from California — Hewlett Packard Enterprise in Houston and Oracle and Tesla in Austin.

And the significance of these moves may be more imagined than real. In 2020, when Oracle announced its move to Austin from Redwood City, south of San Francisco, it said it was building a campus for 10,000 employees; the company has 164,000 workers worldwide.

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When Elon Musk sought a location for Tesla’s “global engineering headquarters,” the seat of the company’s innovative brainpower, he found it in Hewlett Packard’s former corporate headquarters — not in Austin, but Palo Alto. He announced his decision to move into that space in February 2023 at a joint event with Gov. Newsom.

Other states have never come close to California in the volume of their venture investments. In 2022, according to the National Venture Capital Assn., California firms raised $78.3 billion in venture funding, more than 40% higher than second-ranked New York. Florida ranked fifth with only $2.6 billion, followed by Texas with $2.4 billion (and Texas’ total fell by about half from the previous year).

San Francisco companies attracted nearly $31 billion in venture funding in 2022, according to CBRE. The Bay Area all told attracted $61 billion, accounting for 35% of all venture funding in the U.S.

Venture investing fell appreciably in 2023, and venture-backed companies experienced a spike in “down rounds” — in which their valuations are lower than they were in the previous round of venture infusions — starting in late 2022. But those trends appeared across the entire venture funding universe, and were more likely related to the run-up in interest rates and fears of a recession than to any California-centric phenomena.

In any case, AI was a distinct bright spot, accounting for about 1 in 5 of all venture deals in 2023 and one-third of all venture dollars invested, according to the accounting firm EisnerAmper.

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No one doubts that San Francisco and the Bay Area present challenges. Suswal says he was concerned that recruiting staffers to come to the area would be difficult. When he himself was considering moving back to San Francisco from Seattle last October, he “bought into a lot of the negative aspects of the city that were being published at the time,” he says. “But the city is in better shape than it gets credit for. … All the best people come here, because it’s well worth it.”

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Northrop Grumman could eliminate as many as 1,000 jobs in Southern California

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Northrop Grumman could eliminate as many as 1,000 jobs in Southern California

Defense contractor Northrop Grumman Corp. has told its employees that it could cut as many as 1,000 jobs in Southern California.

The affected employees are part of the company’s space sector and work at facilities in Redondo Beach, Manhattan Beach and Azusa. The company said it is working to match those employees with other, existing jobs within the company.

Although Northrop Grumman did not specify a reason for the cuts, the U.S. Space Force recently canceled a multibillion-dollar program to develop a classified military communications satellite with the company after cost overruns, a schedule delay and development difficulties, according to Bloomberg.

Recently, space has been a difficult place to do business. Earlier this month, NASA’s Jet Propulsion Laboratory laid off 530 employees, or 8% of its workforce, in anticipation of massive federal budget cuts.

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Northrop Grumman said it has notified the state’s Employment Development Department and filed a Worker Adjustment and Retraining Notification Act notice about the job cuts, as required by law.

“This is ongoing, and a higher number of employees will receive WARN notices than may ultimately be impacted,” the company said in a statement.

Although Northrop Grumman is based in Falls Church, Va., California is a major hub for the company. The defense contractor’s historic 110-acre Space Park facility in Redondo Beach was built at the height of the Cold War and is the birthplace of the intercontinental ballistic missile, as well as the rocket engines that lowered the first crew onto the moon and, more recently, the building of the James Webb Space Telescope.

The company also has a major aircraft facility in Palmdale, where it is building the new B-21 stealth bomber, the center fuselage for the F-35 fighter jet, the RQ-4 Global Hawk drone and the MQ-4C Triton drone.

Northrop Grumman also has facilities in San Diego, Sunnyvale, Northridge, Woodland Hills and Ventura County. In all, the company employs about 30,000 people across the state.

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Video shows burglar vandalizing East Hollywood restaurant, causing $80,000 in damage

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Video shows burglar vandalizing East Hollywood restaurant, causing $80,000 in damage

It was a typical Sunday at El Zarape.

Families enjoyed Mexican food and good vibes at the East Hollywood restaurant inside a strip mall on Melrose Avenue as CicLAvia shut the street down to traffic.

But the next morning, when the first cook of the day showed up Monday at the restaurant, an entirely different scene awaited. She called the owner, Beto Mendez, right away.

At first, Mendez thought it might be some graffiti on the outside of the restaurant. He was wrong.

El Zarape on Melrose remains closed after burglar vandalized the restaurant.

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(Jason Armond/Los Angeles Times)

“The minute I got there I was in shock,” Mendez told The Times in an interview. “I saw the place completely destroyed.”

Mendez said there was $80,000 worth of damage inside.

Chairs were flipped over and tables were askew. One bar had been bashed in with a hammer while all the TVs were spray-painted with graffiti. Spray paint covered one of the bar’s surveillance cameras and seemingly all of the restaurant’s walls. A safe with $20,000 was taken.

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The incident was first reported by L.A. Taco.

Surveillance video shows a man in a light-colored hoodie and dark pants and Nikes shaking a can of spray paint inside the bar before any damage was done. The man then sprays one of the surveillance cameras with paint, video shows. While Mendez could not see any other people in the videos, he assumed that there was more than one vandal, based on the amount of damage, which included “C14” tagged on the walls.

Alberto Mendez is the owner of El Zarape on Melrose.

Alberto Mendez, the owner of El Zarape on Melrose, stands in his restaurant which was recently damaged when burglars broke in and ransacked the place.

(Jason Armond/Los Angeles Times)

Police told Mendez that the vandalism was related to the C-14 gang, also known as Clanton, he said. The Los Angeles Police Department did not immediately provide comment on the situation.

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C-14 is a gang that has existed in Los Angeles for about a century, originating on Clanton Street, which was later renamed 14th Place, according to a website that documents street gangs.

The gang is active in the neighborhood, with tags up and down Melrose.

The group even tagged a local house of worship, Trinity Episcopal Church, scrawling “C14” on its marquee in spray paint.

“This area is like an epicenter for a couple gangs,” said a man who works near El Zarape, who asked to remain anonymous out of safety concerns. “MS-13 and C-14 as well as some other little local cliques. There’s a lot of tagging all around the neighborhood.”

“If someone tagged the inside of the restaurant, it’s pretty serious,” he said.

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For Mendez, the destruction of his restaurant could not come at a worse time. Just two weeks ago, his ex-wife died. Mendez shared custody of their two teen daughters with her and now has full custody of them.

“They have that pressure and that stress of losing their mom already and I haven’t really told them nothing about the restaurant right now,” he said. “I would rather keep it to myself and handle it.”

Mendez is trying to raise money to reopen the restaurant and fix the damage via GoFundMe.

While Mendez said that the restaurant has had relatively few problems in the seven years it has been open, there was an incident after the Super Bowl on Feb. 11, according to Mendez and the other person who worked at a nearby business.

That day, the two men said, after the Kansas City Chiefs beat the San Francisco 49ers in Las Vegas, a man fired a gun into the air near El Zarape, then barricaded himself inside and police SWAT teams had to respond to arrest him.

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