California’s $15 minimum wage does not go into effect until 2022, but one Santa Fe Springs-based manufacturing company has already decided to leave the state this year to take advantage of cheaper wages in Texas.
“This is the last thing I want to do, but I don’t see that I have a choice," said Fred Donnelly, president of California Composites, which makes parts for commercial airplanes.
Donnelly, who has lived in California for almost seven decades, said he is moving is company out of California because of its “dysfunctional” worker's compensation system, excessive state and local regulations and the forthcoming $15 minimum wage.
He says his employees make on average a little less than $15 an hour now – so he would have to give them all a big raise. He said he can’t afford to do that because his company is locked into long-term contracts with customers where the price is already set.
“If I were to stay, it would probably make me a nonprofit within a couple years or so,” said Donnelly.
Donnelly only expects about 15 of his 45 workers to make the move to Fort Worth.
“They’re distressed about it," he said. "A number have volunteered to go, but for others it’s not possible."
Donnelly said he plans to hire an additional 30-35 workers in Fort Worth once the company relocates starting in June and renames itself Calcomp. He says he has been treated much more warmly by Fort Worth than government agencies in California.
“They are actively working with us to provide everything we need to provide a manufacturing business there,” Donnelly said. “They seem to want manufacturing companies, as opposed to my take in California is, they would just assume not have me here, especially as a manufacturing company.”
Donnelly expects other businesses to relocate too, given the increasingly high cost of doing business in California.
“I’ve talked to some of our suppliers and other people in the business – in particular owners that are in small manufacturing – and they’re thinking about it.”
The Fort Worth Chamber of Commerce told the Star-Telegram that another California company is expected to relocate to Fort Worth in the coming weeks, but did not name it.
Airplane parts manufacturers have been leaving Southern California steadily over the years. Employment is down 40 percent since 2004, according to the Los Angeles Economic Development Corporation. Employment in higher-tech aerospace manufacturing was up 64 percent over the same period.