If you’re curious about why businesses are leaving California and investors seem to be looking elsewhere, just take a glance at Los Angeles.
Recently, city leaders approved a plan to boost wages for hotel and airport workers to $30 an hour. Some supporters have dubbed this the “Olympic wage,” claiming that workers should benefit from the economic boost expected from the 2028 Summer Olympics. While that sounds good in theory, it suggests a misunderstanding of how businesses operate and how capitalism functions in the U.S.
The goal isn’t to deny workers higher pay—everyone wants that. It’s essential for people to secure a living wage, after all. However, the issue lies in Los Angeles’ belief that wealth can be manufactured by passing laws, rather than fostering an environment where businesses can flourish.
This isn’t just a challenging economic situation; it’s a bit surreal. As someone who runs a few small businesses, I can’t support the government specifying profit margins for me.
Politicians often overlook this reality: wages aren’t determined by city councils. They come from business owners who thrive in a free market and compensate the employees who contributed to that success. Companies typically pay more when they create more value, earn bigger profits, and compete for skilled talent. Wage hikes are generally a reflection of business performance, not imposed by government directives.
When the government demands significant increases in labor costs, business owners must respond. They can’t just absorb the expenses and carry on like nothing has changed. Some will raise prices for customers, while others might downsize their workforce, cut hours, delay hiring, or invest in automation. And, in states like California, some businesses may simply decide to relocate their investment elsewhere, perhaps to Nevada, Florida, or Texas.
It’s not realistic to think that doubling labor costs can happen without any repercussions on prices, profits, or employment. That’s just wishful thinking, not how economics operates in Los Angeles.
Businesses have limited resources. When expenses rise in one area, something else must give way. The real question isn’t whether businesses will comply with a $30 minimum wage; it’s how they’ll adapt to these costs. History has shown us their responses rarely align with what politicians promise.
It’s frustrating to see Los Angeles keep making the same mistakes—struggling with affordability, homelessness, safety issues, and an unwelcoming business climate. Yet, the typical response from elected officials is to demand more regulations and higher costs for the private sector.
It almost seems like city leaders think businesses can absorb endless new costs without any fallout. Spoiler: they cannot.
The local hotel industry is already warning that rising labor expenses could lead to job losses, stalled renovations, and reduced competitiveness as a destination. Despite the upcoming Olympics, this decline is already becoming evident. Airlines, hospitality, and business sectors have consistently pointed out that lawmakers are ignoring fundamental economic principles, favoring political rhetoric instead.
Ironically, Los Angeles stands on the brink of an incredible economic chance. The 2028 Olympics should act as a catalyst for attracting investment and creating jobs, not a reason to implement policies that deter the very businesses that could capitalize on this opportunity.
Many policymakers seem to overlook that capital is mobile. Entrepreneurs, businesses, and investors have the freedom to choose where to allocate their resources, and more are opting for locations with lower taxes and less red tape—essentially, places where leaders recognize businesses as allies in economic growth rather than adversaries.
This cycle is becoming all too familiar. The same politicians who create the challenges seem surprised when companies choose to grow in other regions. This leads to a less favorable business climate, fewer job opportunities, and ultimately a weaker tax base to support the programs these officials promote.
The key to driving higher wages is still straightforward: foster entrepreneurship, cut unnecessary regulations, and support business growth. When companies prosper, their workers do too, and as competition for talent increases, wages tend to rise naturally.
This is how America rose to become a leading economic power.
Los Angeles seems set on pursuing a different approach, thinking that prosperity can be achieved merely by legislative action. Unfortunately for taxpayers, workers, and business proprietors alike, the reality always catches up.
Los Angeles isn’t struggling with wage issues; it’s facing a leadership problem.
