77% of voters approved San Francisco’s Prop J last year – and on May 1st the San Francisco minimum wage increased to $12.25. This is the first minimum wage hike of many, as Prop J will raise the minimum wage in the city to $15 by 2018. Although raising the minimum wage seems like the socially optimal option, especially in a city with such a high cost of living, is it feasible for the smaller establishments and local shops that many San Franciscans know and love? Brian Hibbs is the owner of Comix Experience, a comic book store he has run for over 20 years. With the increase in minimum wage on the way, he would need an additional $80,000 in revenue to pay his employees. Another beloved small bookstore, Borderlands, announced its closing a few months ago in light of the higher minimum wage. Through crowdfunding it received enough funds to continue into next year. Large corporations with hundreds of chain stores across the country are often targeted for paying their employees barely enough to make a living, and people forget that every bookstore, coffee shop and boutique will also have to follow through with paying their employees more. If these smaller stores cannot stay solvent with the new minimum wage, they will close – and only the larger establishments will remain.
Being a tech and startup epicenter, as well as a bustling urban area in one of the most expensive states in America, it’s no wonder San Franciscans want to be paid more – but is it worth losing the hole-in-the-wall restaurants, comic book stores and novelty shops that makes San Francisco truly stand out? Hibbs of Comix Experience argues that letting the market solve the problem, rather than a fixed price in the form of minimum wage, is a better way to go. “My employees are well-respected and know the value of their work…why can’t two consenting people make arrangements for less than x dollars per hour?”.
The pushing out of small businesses is only exacerbated with San Franscisco’s tax breaks for large tech companies like Facebook and Twitter – an attempt to get the companies to build headquarters in SF. So in addition to a higher minimum wage forcing small companies to close their doors, high-paying corporations are opening theirs – most likely unaffected by the minimum wage hikes and benefiting from tax breaks. In the light of the increased cost of living and companies always looking to save money on the backs of their employees (e.g. the “as-needed” hours I wrote about last week), raising the minimum wage is definitely an important step. However, maybe Prop J was too earnest and the minimum wage issue is a bit more complex than we initially thought.
I don’t understand why some small businesses can in fact pay a higher wage, and other can’t.
Could it perhaps be the virility of their business plan? the skill of the owner and management team?
Big box stores have killed more mom-and-pop businesses than a minimum wage hike will- where was this outrage then?
I applaud your more in depth look at the complexity of raising the minimum wage. Its not nearly as easy as people think. The definition of being in business is to make a profit. Making money isn’t a bad or an evil thing- whether you are a big corporation or a small business. Profits allow for hiring workers,capital investments and growth. While of course there needs to a be a living wage, it should be dictated by the business and its profit margins, not the government. Not all businesses have the same margins because of the type of business-cost of goods, competition, fixed assets, etc. all play a role.
As noted in the article, increasing wages means the business must ramp up revenue to cover the increased payroll costs-where does that revenue come from? Perhaps raising prices, cutting costs (using less expensive parts or ingredients) , not making improvements-as consumers as that what we want? Higher prices will eat away gains in income.Or lower the most expensive part of most businesses-payroll. If you employee 10 people at $10/hr for 40 hrs =$4000. Now if those same people get $15/hr it goes to $6000. If the owner cant make it up elsewhere, there may have to be a cut in the staff- in fact 3.4 people. So, raising the wage across the board may in fact lose jobs.
Also, raising wages may stifle advancement. How can you have a supervisor making $3/hr more than an entry level position and then have that wiped out? Is the business owner supposed to raise everyone’s wages the same increments? Or can he even afford to advance his employees? Then once again, there is no wage movement.
Yes, wages need to be increased, but there has to be thoughtful consideration and not a one size fits all. The economy is run by small business people that put their heart,soul & money into it. More often than not they aren’t wealthy, but provide jobs for others. Hopefully there is more thought into future wage raises and how it affects both the employer and employee.