Economist article describes Emeryville Minimum Wage “Leap of Faith”

Published On June 28, 2016 | By Rob Arias | Local Business, Minimum Wage, News & Commentary

As Emeryville approaches the one year anniversary of its implementation of its highest in the nation Minimum Wage Ordinance (MWO), another national publication has turned a curious eye towards our city. International news source The Economist joins The Nation, CNN and The LA Times as publications that are looking to understand the impacts that Economists and labor activists seem to disagree on. Publications looking to forecast what’s to come for other cities as they look to emulate what our city has volunteered to be the guinea pig for. One question that no publication has asked is “Why Emeryville?” and investigate the relationship between labor groups and the local politicians that orchestrated this.

The article titled “Maximin” outlines the history and drivers behind the $15 movement that originated in New York and provides a data-driven assessment of what the known impacts are. The article notes that as many as 17m employees have received a pay increase as a result of local minimum wage ordinances including ours. More cities are slated to follow suit with an eventual $15 wage and the entire state of California is slated to reach the mark in 2023.

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During the local MWO study sessions, Small Businesses pleaded for an impact study that would take into account their unique operating models that differ from the formula retail and fast food businesses that were often cited. While chains generally receive little sympathy from the public, small businesses within our community are more scarce and are cherished for the vibrancy and uniqueness they bring to our city. Council ultimately opted to forgo the study and implemented the ordinance 60 days after the first reading.

In The Economist piece, Mayor Dianne Martinez alludes to a forthcoming economic impact study, but justifies council’s “fast track” approach saying “there are times where you have to take a leap of faith”. It’s worth noting that Martinez and fellow Councilmembers Scott Donahue and Jac Asher all declared a preference for an East Bay “regional” approach presumably in alignment with Oakland’s Measure FF prior to the 2014 election before changing their stance and pushing for Emeryville to adopt its own unique model.

emeryville-minimum-wage-target-automation

The Oakland/Emeryville Target is the latest corporation to embrace automation like these self checkout stands as a way of combating rising labor costs.

Progressives and labor groups have continually noted that despite most economist warnings, large jumps in the minimum wage would be offset by higher employee retention and the low wage earners themselves contributing back into the local economy. There’s also the argument that government subsidies would be reduced as full-time employees would make enough to no longer need or qualify for them.

Jobs that are not physically tied to our city or compete in global markets can more easily dodge these impacts by moving jobs or their location outside our city. One of these businesses is a small sports analytics company called Match Analysis that hires entry-level data collection employees and competes with companies that use cheaper labor from countries like India and Russia. Match Analysis reduced staff by 13 positions recently as a direct result of our Minimum Wage Ordinance.

Match Analysis is surely not the only company that has reduced staff, eliminated shifts or even shuttered completely due a sharp rise in labor costs, but exactly how many jobs have been lost (or gained) due to our MWO is unknown. The Economic impact study is reportedly finally underway with the hiring of new Economic Development Manager Chad Smalley. A study that will hopefully shed light on whether the MWO is lifting workers out of poverty as desired … or causing layoffs, business closures and expediting automation. The larger question is if adjusting minimum wage is truly the best way of remedying poverty and alleviating affordability largely fueled by our ongoing housing crisis.

 

emeryville-progress-reports-new-business-closures-april16

The only economic data the city currently provides is their monthly progress reports that track new business licenses and closures. These reports indicate that Emeryville has shed more businesses than it’s added for four out of the past 5 months. The data does not account for if the business fits the city’s large or small business threshold or is in fact a sole proprietorship and not applicable. On July 1st, large Businesses over 55 employees will increase to $14.82 and small businesses of less than 55 employees will jump $.75 to $13/hr.

The Economist is a weekly news publication founded in 1843 and based in London. According to Wikipedia, The Economist takes an editorial stance of classical and economic liberalism which is supportive of free trade, globalisation, free immigration and cultural liberalism. In 2006, its average weekly circulation was reported to be 1.5 million, about half of which were sold in the U.S.


20160625_USP004_1

MAXIMIN: Some cities have raised minimum wages dramatically.
They may regret it

EMERYVILLE, a tiny city of 12,000 lying on the eastern shore of the San Francisco bay, is rather cruelly known by residents of its bigger neighbours primarily as a place to buy furniture. A huge IKEA, a Swedish homeware shop, greets visitors to the city, which has no fewer than four shopping centres. But Emeryville has a better claim to fame; its many shoppers are served by some of the best-paid retail staff in the country. Since July 2015 the city’s minimum wage, for all but the smallest firms, has been $14.44 an hour, nearly double the federal minimum of $7.25 and almost 50% higher than the state minimum of $10. Emeryville is one of dozens of cities across America to have boosted its minimum wage in recent years, but it has gone further than almost any other towards the $15 campaigners seek.

That goal emerged in New York in 2012, when 200 fast-food workers went on strike demanding higher pay and a union. Those strikes were repeated, grew, and then spread nationwide (the last national strike was in April). At the same time, local politicians began to take action. After more than a decade with barely any changes to local minimum wages, they rose significantly in a handful of places in 2013. The next year 12 localities raised them, including Bay-area cities Berkeley, Oakland and San Francisco. In 2015, sixteen more, including Emeryville, followed suit.

Read more on The Economist →


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About The Author

is a third generation Californian and East Bay native who moved to Emeryville in 2003. A new parent in the community, he can often be seen walking his French Bulldog rescue "Fiona" around his Park Avenue District neighborhood, traversing the greenway on his bike or enjoying his favorite Emeryville small businesses. Rob's "day job" is as a creative professional.

23 Responses to Economist article describes Emeryville Minimum Wage “Leap of Faith”

  1. Mike Anderson says:

    Ah yes, “The Economist” — well there’s an unbiased source for economic analysis.

    LOL, NOT.

    Example: The article cites a lot of statistics in its analysis. Tell, me did The Economist look at whether the quality of life improved for workers who received a higher salary because of the increase in the minimum wage?

    Oh… they didn’t, did they.

    • Anonymous says:

      Mike, uh no, they actually did. It’s right there in the article: “But, thanks mainly to local laws, almost 17m workers have benefited from higher minimum wages since the “fight for $15” began, according to the National Employment Law Project.”

      The Economist almost always gives a fairly even-handed and analytical treatment of complex economic topics. You’d be hard pressed to find a more respected and widely read economic magazine.

      • Mike Anderson says:

        I’m talking about workers in Emeryville. Do they talk to a single worker in Emeryville? No, they couldn’t be bothered.

        Instead, they focus on a single business — Match Analysis, which, as nearly as I can tell, collects data on soccer games for people who want to bet on them. Ok…

        They mention Ikea — any word on whether they’ve decreased hiring or not? How about any of the other much more massive and meaningful businesses as compared with Match Analysis? They say Target installed self-serve checkouts, but say nothing about whether the number of employees has changed. Instead, they speculate (without any actual confirmation) that it’s because of higher labor costs.

        Pretty thin gruel there.

      • Anonymous says:

        Mike, would you have wanted them to interview one of the workers who was laid off, one whose job went away when their employer went out of business, or one whose income largely remained the same because their benefits disappeared? Or perhaps, you’d prefer they interview the waitress who was already making $50K with tips whose raise cost the cook who was making $34K his annual raise? Or the minority high school student who would have loved a summer job to put on his college application but found that no one is hiring inexperienced high school students any more? Or maybe the $60K union worker whose salary is tied to minimum wage costing a dishwasher and security guard their jobs? Just making the point that it’s easy to repeat the simplistic story that has already been told that everyone wins and no one loses. The Economist might be annoying because it’s highlighting the story you don’t want to hear but let’s acknowledge that SOMEONE pays the price for this and the general economic consensus is that it’s not the 1% (surprise, surprise). High minimum wages have the biggest negative impact on the young, the unskilled, small business, and minorities. They have the biggest positive effect on white middle class union workers. Guess who’s funding Fight for $15?

      • Mike Anderson says:

        It’s a pretty basic rule in journalism that you try to talk to people on both sides of the issue. Surely, there are a lot of workers in Emeryville who have benefited from the wage increase. It’s self-evident that The Economist made zero attempt to talk to one. That’s the tip-off that the article is biased.

      • Anonymous says:

        Mike, not really. There’s no question that people who get a higher salary benefit if they keep their job. No one is questioning that, and we know some people got increases. The law required it.

        This article was about what has largely been ignored: the tradeoff between higher salaries for some and job loss for others. The Economist highlighted the positives including how many people likely got raises, and some research that indicates that job loss might not be so bad.

        Almost every part of this discussion to date has been just about the upside. See The Nation’s coverage of Emeryville as an example. They just tell feel-good stories about people who are earning more. They interview the union reps who wrote the Emeryville law and who are happy to report the sun is shine and flowers are blooming. There is no mention of even a shadow of a downside. The message is literally “more money for everyone”.

        The Economist told both sides: that some workers gained and that others are losing. They told the gain via stats, and the loss via examples.

        They can’t yet tell the lose side using stats yet because no one has ever done anything as crazy as what Emeryville did. No one has ever raised the minimum wage 60% with 30 days notice. It’s unheard of, and, frankly, downright idiotic. No city in the history of the US has been that stupid except us. Even people who strongly advocate in favor of large increases in the minimum wage spread the change over 5-10 years to mitigate the job loss and damage to the poor and small business.

        But, ignore the Economist and just walk around town and talk to the local independent restaurants and shop owners. They’ll tell you what is happening, and it’s not pretty, particularly for the least skilled and those who are barely hanging on.

        People always say they’re happy to pay a little more to help the workers. Then, they head to Target and buy what’s on sale.

      • Mike Anderson says:

        “The Economist told both sides”

        Oh sure. Let me guess, back when The Economist was cheerleading for the Iraq War, you were right there with them, based on their sensible and “balanced” analysis.

        The Economist is nothing more than a credulous person’s concept of what good journalism looks like.

      • Anonymous says:

        So if a publication that has been around since 1843 has one editorial opinion you disagree with, they can’t be trusted? That’s a tough standard.

        We’d all like it to be true that you can just raise the minimum wage to a really high number and poverty goes away. But it doesn’t work that way, whether we like it or not.

        When you raise the minimum wage too high, too fast, people (particularly marginalized communities) lose their jobs and small mom and pop shops go out of business. That’s the way it works.

        The Emeryville minimum wage is hurting the young, the unskilled, the poor, and local small businesses. Sucks, but it’s true. We can either face it or put our heads in the sand.

        You can’t solve a famine by subsidizing the price of bread. You need more bread.

        You can’t solve a housing shortage by forcing small businesses to subsidize the cost of housing for everyone. You need more housing.

      • Mike Anderson says:

        “One editorial opinion”? You can’t be serious! There isn’t enough space on this blog to list all the dead wrong crap they’ve published!

        I just picked the Iraq War because it was the largest, most obviously regrettable geopolitical blunder of the last century. That was just one example of MANY stupid decisions The Economist has supported. If you need more recent evidence, look to their endorsement of David Cameron, who introduced the Brexit referendum and subsequently resigned in disgraced after it won.

        These are the same idiots who think Paul Ryan is the epitome of a smart policy wonk. But go ahead and throw your lot in with the conservatives. See where it gets you. You want President Trump? Well Mr. or Mrs. Anonymous, I’m sure you can have him. He’s the one who said he wouldn’t support raising the minimum wage because wages in America are “too high” already.

      • Anonymous says:

        This game of just ignoring the discussion at hand, the points that have been made, and trying to say people who disagree must support Trump doesn’t seem very productive or persuasive.

        Economics isn’t a popularity contest. The reality of what happens doesn’t change because we want easy answers.

        Not one candidate from Sanders down has proposed raising the minimum wage to nearly $15 in 30 days like was done in Emeryville. Why? Because it’s stupid.

        So is Sanders a Trump supporter who has thrown his lot in with the conservatives?

        There is a right way to achieve progressive goals and a wrong way. Emeryville chose the wrong way and they are hurting a lot of people as a result.

      • Mike Anderson says:

        OK Rob, well I’m sure Emeryville will fall into a deep economic depression any day now. I’m sure every time a business fails, you’ll trumpet its failure with barely disguised glee while ignoring the three businesses that spring up in its place.

        Any day now…

      • Rob says:

        Thanks for your comments Mike. I’m sure there are a lot of Right Wing slanted news sources that oppose raising the minimum wage but I certainly wouldn’t share them here. I’ve always found The Economist to be very pragmatic and doesn’t always fall along party lines. Did they (reluctantly) endorse the 2003 Iraq invasion? Yes, but so did 29 of the 50 Democratic Senators at the time. They also support the legalization of drugs, support action to combat global warming, favor Gun control laws and are clearly anti-Trump (not exactly right-wing views). Self described Progressive publication The Nation even described our version of a $15 minimum wage as “an experiment”. To me, this isn’t a matter of opposing a minimum wage increase, it’s how much and how fast we can do this without having unintended consequences. Emeryville has decided to roll the dice or as Mayor Martinez states “take a leap of faith”. Not encouraging words if you’re a small business who has put their life savings into their business.

        https://evilleeye.com/news-commentary/nation-toutes-emeryvilles-15-experiment-governor-brown-urges-caution/

      • Anonymous says:

        Mike, Rob reports both the restaurant and store closings and the openings. All you have to do is look at his blog to see both.

        There is a trend that you don’t want to acknowledge, but it’s real. Small businesses are struggling. There’s a reason they spoke out in huge numbers against the Emeryville minimum wage. There’s a reason many of those who spoke out (including Bucci’s and others) have closed, reduced hours, reduced staff, and are selling out if they can. There’s a reason there is empty retail all over Emeryville despite a growing economy and a massive influx of high income residents into the community.

        You’re not alone. There are a lot of people who want to believe you can have your cake and eat it too.

        If we ignore the job loss, the closing of small businesses, and the marginalized groups that are getting hurt the most, we can all sit back and feel good about ourselves.

        Should we?

      • Mike Anderson says:

        Bucci’s did NOT close because of the wage increase. Rob falsely reported that, and he was forced to retract it after he got called out on it. (Bucci told another news outlet the claim was false — she closed because she was old and wanted to retire.)

        That was just one example of Rob’s agenda with this website.

        And Rob — Sanders is talking about the FEDERAL minimum wage, which would apply across the entire country. The cost of housing in Emeryville is obviously much, much higher than in most locales in the U.S.

      • Anonymous says:

        Bucci’s gave a 10 slide presentation at a meeting of the City Council showing why the Emeryville minimum wage would put them out of business. The MWO happened, and they went out of business 3 months later saying they’d decided to retire. They then put the business on the market.

        When a business is trying to sell, would they ever say “We went out of business because it has become financially impossible to run a profitable restaurant in Emeryville”. Wouldn’t that make it a little hard to sell?

        Everyone can put two and two together. Bucci’s was trying to stay in business when they made the presentation against the MWO. They gave up after the MWO was passed.

        If Rob’s agenda is to prevent the local small businesses from disappearing, making sure that poor people, young people, and minorities still have a chance to work in this city, and ensuring that Emeryville can support businesses that aren’t just geared to the upper class, frankly, I’m with him.

      • Mike Anderson says:

        Rob, the “logic” underlying your claim refutes itself. But hey, next time I see Bucci, I’ll let her know your blog has publicly claimed she’s defrauding potential customers. I’m sure she’ll appreciate that.

        In the meantime, when Emeryville spins into an economic depression, I’m sure you’ll let us know.

      • Anonymous says:

        Mike, there are a lot of people in Emeryville who find what the City Council did with the MWO to be foolish and reprehensible. Not all of them are named Rob.

        Talking to the local small business owners as you suggest is a really good idea. You’ll hear a lot that you don’t want to hear, but you’ll start to get a real understanding of the damage that is being done.

        The local economy won’t go under because of Emeryville’s minimum wage. Very few people earn minimum wage and most are under the age of 25 so you could cost every single one of them their job, and the economy won’t skip a beat.

        The poor, unskilled, and young lose their chance to get started in the job market. The high margin chains and big businesses replace the small local businesses. Small local businesses abandon low and middle income clients to serve higher margin fare. Emeryville gentrifies even faster. No big deal.

        Your life will continue on largely the same, so nothing to worry about. Do go out and talk to small restaurants around town. See what they think about the current City Council. You may learn some words you didn’t know.

        Ask them if all the marketing from the Fight for $15 is accurate. Maybe Fight for $15 is right that no one loses, everyone gains, and there is more money for everyone.

        Just ask around and find out.

        Nice chatting with you.

    • Rob says:

      Mike, I understand that neither I nor The Economist have any credibility with you. That’s fine, there are other news sources that will tell you exactly what you want to hear. Ones that will tell you everyone including small businesses and minimum wage workers are going to win together. I’ve derived my opinions from talking directly to small businesses and I implore you to do the same. Ask them how they feel about the viability of their business when our untethered minimum wage hits $17 in 2022. Ask them how they feel about their patrons being willing to fork over $40 for a pizza, $15 on a sandwich and over $5 for a latte. Ask them if they’re worried more people will turn to Subway, McDonalds and Little Caesars who are able to maintain their prices.

      Unlike Oakland’s measure FF where they were able to recruit small businesses owners like Sal Bednarz from Actual Cafe and Chris Hillyard from Farley’s to support their measure, both of these owners said they could NOT support Emeryville’s measure:
      https://evilleeye.com/in-the-neighborhood/restaurants/small-business-voices-actual-cafevictory-burgers-sal-bednarz/

      The ONLY business owner who supported Emeryville’s version of a minimum wage ordinance was Arizmeni and they received nearly half a million in city subsidies to come here. One of our councilmembers Jac Asher actually argued against a youth exemption noting that teenagers who have never worked a job in their lives were still entitled to earn a so-called “living wage”. Businesses I’ve spoken with have noted they would be less likely to hire unskilled youth (The ones that arguably need these jobs the most I hope you’ll agree).

      Do I think that Emeryville will crumble into Economic ruin? No. Never said that. Will this decrease the likelihood of a small business owner choosing Emeryville and increase the likelihood that chains will thrive? Yes, but time will tell. The game is rigged against the little guy.

  2. Anonymous says:

    Dianne Martinez, next time you decide to take a leap of faith, please do it with your own job, not mine. Thanks.

  3. Mike Anderson says:

    As to bias: That’s incredibly easy to prove. The Economist endorsed the Conservative Party in 13 out of the last 16 British general elections. On the rare occasion when they endorse the Labour candidate it’s because, “There is no alternative (alas).”

    http://www.economist.com/node/3910189

  4. Anonymous says:

    In Emeryville, if you hire a 16 year old, they have to get $1100 per month for an apartment for themselves, ya know cause that’s what a “Living Wage” requires (along with a $170 per month personal health insurance policy, $300 per month for transportation and $300 per month for food).

    When I was a teen, I don’t know how but I managed to eke out survival with less than $2500 a month in my pocket. I must have been one hell of a negotiator because I somehow managed to get my parents to rent me a room in their house for free.

    The current city council’s happy detachment from reality is awe inspiring. Thank god they’ll soon get us a local marijuana dispensary. I want a piece of that action.

  5. S.A. says:

    How can a public official state “taking a leap of faith” as a basis for a decision on an item that can be analysed with data? She along with the other “leaders” of this ill-conceived decision never took a basic economics course. The regional approach and better yet, what Governor Brown has approved, is a good start.

    • Anonymous says:

      The City Council actually rejected a petition from the local small businesses to perform an economic impact study. God forbid we look before we leap.

      The council was doing whatever the SEIU told them to do. Same thing this year with the Fair Scheduling ordinance. The SEIU finances the campaigns and chooses who gets the democratic endorsement so what the SEIU wants, the SEIU gets, Emeryville be damned.

      Hoping we have some better options running this year.

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