Rob AriasAmid rising labor, health care, rents, food costs, and throw in drought and fuel related surcharges, it’s a wonder why anyone would want to open a restaurant in this business climate. I can’t imagine living in a city where only big business thrived but it’s not one I personally would want to live in. The City has stacked the deck against small business in our town and it’ll will be very interesting to see how this pans out leading into 2019 when small businesses will be subjected to the highest wages in the nation. A Huffington Post article posted today outlines these challenges and how restaurateurs are altering their approach for dealing with them.
This spot at the prominent intersection of MacArthur and Adeline “For Lease to a Restaurant/Cafe” has failed to attract any occupants since it was completed in 2009.
Surviving & Thriving: The Top 3 Challenges Facing San Francisco Bay Area Restaurants
This year was the first time in United States history that Americans spent more money on dining out than groceries. Nowhere is that more evident than here in the San Francisco Bay Area, where new restaurants have been opening up almost weekly. The strong economy has allowed pop-ups to become brick and mortars, cooks to become restaurateurs, and others to expand their restaurant empires. However, despite the seemingly rosy outlook, restaurateurs are stressed about a few trends that are looming.
Rising Costs
San Francisco, Oakland and Emeryville have all raised their minimum wages to $12.25, with Emeryville’s jumping to $14.44 for employers with more than 55 employees. These jumps were significant particularly in Oakland and Emeryville, where the leap was 36% (60% in Emeryville for the larger employers). And although the San Francisco increase was more modest, because it already had a higher minimum wage than the other jurisdictions, San Francisco’s minimum wage will reach $15 an hour by 2018.
Read more on HuffingtonPost.com →
Sad that spot has sat vacant. Tough location I think. Have you heard about any traction on the place across the street with the striped awnings? I heard rumblings of a small grocery and/or a brewpub or some such
Construction at “The Intersection” development is underway but I haven’t heard any lease signings.
Right, a town without small businesses is not one many of us would want. But who’s to pay If small businesses are to prosper? Employees receiving less than a living wage? Or those of us who prefer small businesses in our town?
Wages need to rise, locally and nationally, for employees of businesses big and small. The fact that local governments are beginning to recognize this is a good thing!
I like your thinking regarding who should pay, but it doesn’t help to raise wages only to also increase costs. If you factor in that raising the minimum wage actually puts low skilled workers out of jobs while primarily giving money to people living far above the poverty line, you realize why most economists think raising the minimum wage has virtually no impact on the poor (but is great for unions).
The better option would be to increase the Earned Income Credit (an idea almost every economist views as more effective than the minimum wage) and pay for it by increasing the estate tax. This path, unlike minimum wage hikes, actually has a large impact on the poor AND is paid for by the rich rather than you, me, and those living in poverty.
So things will work out better if we keep wages low, and some taxpayer will make up the difference? Good luck with that!
The minimum wage doesn’t keep wages low. In fact, it has almost no effect on what people make. It just limits how many of them can be employed.
When you raise the minimum wage about one third of the people making the minimum wage lose their jobs, and the money they were making transfers to the other two thirds.
The more you raise the wage, the more you cast people into poverty who previously had the opportunity to climb out of it.
If you were selling cars, would you assume you could sell more cars by raising prices? If you raise prices a little, you might make some extra money. Raise them a lot and you make less money.
The first recession we have under a $15 minimum wage will be deadly for the poor. Unemployment will hit levels we’ve never seen in this country. You can’t force people to pay more than they can afford for a car, and you can’t force employers to pay more than they can afford for labor.
Anonymous above says, “When you raise the minimum wage about one third of the people making the minimum wage lose their jobs, and the money they were making transfers to the other two thirds.”
This could happen if *none* of the following happened:
-worker productivity didn’t increase when wages were raised
-the employer couldn’t make do with lower profits
-the business didn’t raise prices to cover the cost of wage increases
But we have reports of all three scenarios happening as a result of a rise in wages, so there’s no reason for Anonymous’s gloom. Some folks may simply want to continue to enjoy the services of people who are underpaid, but that attitude is just going to widen the gap between the rich and poor that is growing every day.
Will, I’m just restating what the Congressional Budget Office reported with respect to a raise in the federal minimum wage to just over $10 per hour. The situation will be MUCH worse in Emeryville at $16 per hour.
What happens when “worker productivity goes up”? You need less people to do the same job. “Improvements in worker productivity” = “needing fewer workers” which is the same thing as “increasing unemployment”.
It actually is normally the other way around though. The employer who has to raise wages, cuts the weaker members of his staff (exactly the ones who have trouble escaping poverty), and requires the remainder to pick up the slack. The moment you get rid of weaker workers, productivity, by definition, rises.
Businesses are reporting that they are cutting hours, decreasing the need for workers by dropping services, eliminating tipping, raising prices, and going out of business. If this was positive for business, you wouldn’t have seen so many of the local businesses petitioning City Council to do something more reasonable.
Raising the minimum wage has been sold as ‘helping the poor’ by the labor unions. But, most economists will tell you that it has little to no impact on poverty (primarily because most of the people making minimum wage are not living in poverty).
To improve the plight of the poor, there are solutions that economists agree work wonders. But, instead of doing what economists agree works, we’re doing something that economists agree does virtually nothing for the poor…but which injures the community, youth, seniors, entry level workers, and small businesses.
Let’s do something smart instead of doing something which sounds good but hurts the people it’s intended to help.
You know where I stand Will. We have to do this as a region. Emeryville is trying to be the leader in this area but is really just serving as the guinea pig for labor. The process that this was administered under was corrupt, rushed and undemocratic to say the least.
Anonymous has said it’s better for the poor if wages are kept low, citing the Congressional Budget Office, and now adds that businesses can help the poor by not improving productivity.
Here’s what the Congressional Budget Office actually found: https://www.cbo.gov/publication/44995
and here’s what economists actually say about raising the minimum wage:
http://mic.com/articles/80359/this-is-what-600-economists-said-about-raising-the-minimum-wage-to-10-10
http://www.huffingtonpost.com/2013/02/28/economists-minimum-wage_n_2782488.html
One side says that the extra wages that these earners will get will get pumped back into the economy and perpetuate it. One side says this will lead to reduced opportunity for teens and overall lower employment and an exodus of business. I hope we can agree that since this has never been done before at this magnitude, we honestly don’t know what is going to happen and usually when you’re not certain, you exercise a bit of caution. Council exercised ZERO caution with their approach.
Caution would make a lot of sense. The argument that ‘more money gets pumped back into the economy’ is economic nonsense. There is NO new money.
When banks loan money, new money is created (since they can loan more than they have). When the government spends money it doesn’t have, new money is created. When businesses export goods at a profit, new money is created. When you transfer money from one pocket to another by changing the wage structure, no new money is created.
Parents do not increase a family’s overall revenue by increasing their son’s allowance.
When you raise wages above your neighbors, money is sucked out of the local economy into your neighbor’s economy. As prices rise in Emeryville, people stop shopping here and shop in Oakland and Berkeley. Given that minimum wage workers can’t afford to live in Emeryville to begin with, nearly 100% of the increased wages are immediately leaving Emeryville’s economy and going to Berkeley and Oakland.
So, to summarize:
We take money from Emeryville residents in the way of higher prices.
We take money from Emeryville businesses in the form of higher labor costs.
We take money from Emeryville businesses in the form of reduced sales.
We take money from Emeryville employees who lose their jobs.
We give this money to Berkeley and Oakland residents who spend it in their local cities where things are cheaper.
It’s not that complicated. It’s common sense. Raise prices, people go elsewhere. If you make everything more expensive in Emeryville than surrounding cities, Emeryville’s businesses and residents suffer.
The only people and businesses who stay here are those who can afford it. So, you gentrify your city by eliminating businesses that support entry level workers (restaurants, manufacturing) and by eliminating the poorest people living in your city. Those businesses get replaced by high-margin boutiques and white collar firms. If that’s your goal, great.
Is that our goal?
From the Economist this week: “A Reckless Wager”:
http://www.economist.com/news/leaders/21659741-global-movement-toward-much-higher-minimum-wages-dangerous-reckless-wager