Emeryville Small Businesses ponder impacts of $14 “Living Wage” that would be highest in the nation
In December, SF workers of Whole Foods picketed the regional office on Horton, last Wednesday workers of Oaks Card Club staged a dramatic walkout and picket along San Pablo Ave with the support from Union Local 2850 who represent The East & North Bay’s Hotel, food service, and gaming industries. Workers and unions sought to draw attention to their plight to increase wages and lower health care costs. Oaks employees, working under an expired contract spoke on record that they had not gotten raises in 6 years. Meanwhile, Emeryville Council debated and ultimately directed staff to explore implementing a hike from the current $9 an hour minimum wage to $14 that would give Emeryville the highest minimum wage in the nation and third highest in the world after Australia & Luxemburg according to this 2011 wikipedia chart.
— UNITE HERE (@unitehere) January 28, 2015
What our neighbors are doing
Economic and Housing division coordinator Michelle DeGuzman presented her report to Council last Tuesday January 20th. Essentially Emeryville (and the State for that matter) has fallen behind, and are looking to play catch up (and then some!). The seed for a regional minimum wage hike was planted last June when Berkeley Mayor Tom Bates proposed an increase to $12.82 by 2017 that would include us, Oakland, Alameda, Albany & El Cerrito. Apparently this is moving too slow for some communities as many have opted to move forward on their own.
State minimum Wage just nudged up from 8 to $9/hr. last July … but this somehow feels like too little, too late in light of spiking rents. Many Cities have been acting on their own passing ordinances to help remedy this. Richmond was one of the first to pass an ordinance that puts minimum wage on a gradual trajectory toward $12.30 by 2017. Last Election, Oakland passed Measure FF spearheaded by Lift Up Oakland with an overwhelming 81.2% of the vote which raises the minimum wage in the city to $12.25/hr. beginning in March. Berkeley unanimously adopted a new minimum wage ordinance last year, setting hourly pay on a course to reach $12.53 by October 2016. The city’s new law raised Berkeley’s minimum wage to $10 per hour last October, then will increase to $11 this October. SF just passed Prop. J that will increase the city’s current hourly wage of $10.74 to $12.25 on May 1, then to $13 in July 2016 and will raise it by $1 each subsequent year until it reaches $15 in 2018. This would bring the annual pay for a full-time minimum-wage worker to $31,000, not including tips.
How Emeryville fell so far behind its neighbors is not clear. My speculation is that the recent Measure U & V ordinances may have been a higher priority with council & staff last election. Trying to lump a living wage increase ordinance along with a transfer tax and Charter City simultaneously might not have been palatable for voters and ended up hurting them all.
Emeryville already has a hotel worker livable wage ordinance that passed in 2006 through measure C. This of course set off a long and messy legal showdown between the City and The Woodfin Hotel that ultimately resulted in Woodfin leaving Emeryville and selling to Hyatt (Now “Hyatt House” on Shellmound).
Emeryville staff proposed the following timetable for implementing this:
February/March: Council holds two community meetings and an online Survey
April/May: Staff provides the draft to council
Summer/Fall: Ordinance Adoption consideration and any administration
Late 2015/Early 2016: Ordinance and related provisions go into effect.
Councilember Jac Asher moved to “Fast Track” the timeline and eliminate a proposed community meeting and the proposed community survey. “The Chamber know about this? Right? The businesses in town should know about this”. “We need a more compressed timeline than the one we’re looking at here”. Staff initially proposed matching the Oakland measure of $12.25/hr. but Mayor Ruth Atkin was persistent about pursuing the $14.03 living wage amount.
City Council has instructed staff to provide a draft of the proposed ordinance to Council for further discussion/direction at the February 17th meeting with the idea of putting this to a council vote by July.
How E’ville currently stacks up with other cities in the state (Note: Measure C wages only apply to hotel service employees):
It’s hard to imaging the Oaks Club garnering a lot of sympathy from the public about any “unfairness”. Oaks is grandfathered into a fairly favorable industry and has a favorable tax rate compared to other newer card clubs in the Bay Area (They are also huge contributors to Emeryville’s tax base I’ve been told). Emeryville probably won’t get a lot of resistance from the corporations that employee the vast amount of formula retail jobs and fast food establishments in our city either, as they have deep pockets to withstand this. But what about Small Business?
Restaurants already operate on a razor-thin margin and are susceptible to the varying costs of goods that undoubtedly this cost will be passed along to the consumer. A consumer that already has an unrealistic perception of the cost of food (Thanks to the Fast Food Industry and disasters like the $1 menu). Now if the cost of my sandwich went up a dollar over night, I think this would be palatable for most. If it went up 40% overnight? If that Burger went from $8 to $12? Hmmm, I might either A). decide to cook at home or B). Eat the cheaper, unhealthy food at a chain.
Many small businesses are afraid to speak up about this as any vocal opposition will turn the ire of unions their direction. While this may be a “just cause” we can’t ignore the impacts this will have on small businesses. We’ve heard the opinions of the unions (that are in fact making campaign contributions to council), but what about the small businesses themselves? No one I talked to had been approached about this by council or staff.
Only one business owner, John Nemec who owns The Suspender Factory on 63rd which employees 50 people, spoke up during public comment against this. “We compete with the stuff that’s made in China”. “If you increase the wage on any company by 40%, they are going out of business”. The business owner wasn’t ultimately opposed to a wage increase, he just cautioned that the overnight increase that dramatic could put him out of business.
Emeryville Tattler editor Brian Donahue callously derided the owner as not having a “viable business” despite having his doors open since 1976. The message was essentially “Sorry elder Czech immigrant who came to the U.S. with $20 in his pocket who spent his entire life building his family-run business … you’re no longer viable!” I guess if you can’t compete on a global scale, you should consider moving your manufacturing jobs to Mexico where labor is cheaper. Sadly, perhaps low-skilled manufacturing jobs in Emeryville that have to compete on a global scale may no longer be “viable”. Will this push the jobs over the border to other parts of the bay … or all the way across our state or international borders? It’s worth noting that the only way Mr. Nemec even heard about this discussion was because he is a member of Ken Bukowski’s EPOA group (not through any official city channels).
How a “Living Wage” is calculated
The $14.03 is the same amount the city requires from contractors and vendors to do business with the city. The living wage for Alameda County calculated by the online living wage calculator is “the hourly rate that an individual must earn to support their family.” If they are the sole provider and are working full-time (2080 hours per year). The state minimum wage is the same for all individuals, regardless of how many dependents they may have. The poverty rate is typically quoted as gross annual income. We have converted it to an hourly wage for the sake of comparison. Wages that are less than the living wage are shown below in red.
Small Business Owners Speak Out
The Suspender Factory’s John Nemec
“An Increase from $ 9.00 hourly wage to $ 14.03 is a 55% increase. Additionally, if
I am an immigrant from the Czech Republic. Coming here, I thought the American minimum wage was a huge luxury in contrast to anything I could have made in my original country. I know that 48 of the 52 are also immigrants who came from similarly difficult environments. Some of our employees like Ludy Samiano, from the Philippines, worked for us for over 20 years. Off of our modest wages, she managed to buy herself a house in Vallejo, her son a house in Vallejo, and upon retirement, a villa in the Philippines. Another employee, from India, who has worked under our wages for a long time, purchased a house for herself along with a rental property. Still, another lady, Thelma Flores, from Latin America, also bought living for herself and a rental property. Neal McDonald, an office worker who may lose his job, bought himself a duplex last year.
I think that America is a great country. However, it has to bring back manufacturing. What are the governments across America doing to support small businesses like ours? Abruptly increasing the minimum wage to $ 14.03 is an extremely irresponsible move by the Emeryville City Council. 50 people may lose their jobs.”
Farley’s Cafe’s Chris Hillyard
Chris Hillyard owner of Farley’s Cafe’s in Oakland & Emeryville plans to raise his Emeryville employees to $12.25 when Measure FF kicks in March but struggled with Emeryville’s plans to leapfrog Oakland. “If the City of Emeryville jumps in and says it’s going to be $14.03 overnight, that would be a huge problem to small businesses. That’s a 56% increase overnight. That would be the highest minimum wage in the country. Other cities that have passed the “$15/hr minimum wage” actually plan to phase that in over time and nobody is paying that amount now. It seems that Emeryville should follow its largest neighbor and set the rate the same as Oakland. San Francisco is currently at $11.05 and will go up to $12.25 on May 2. Thus, another reason to wonder why Emeryville would consider going all the way to $14.03. I think that given Emeryville is playing catch-up at this point, there is a good opportunity for the council to position Emeryville as a leader in the minimum wage issue by creating incentives for small businesses. The big box stores in town won’t even flinch when the wage spikes, but it will hurt small businesses like ours that make Emeryville a community.”
Scarlet City Espresso Bar’s Susana Handow & Jen St. Hilaire
Susana: “We support this in theory, but if it went up to $14, We’d really be hurting. We only have one staff person and are considering hiring another but wouldn’t be able to at that rate. We’d like to expand our hours but that would mean We’d have to personally work all the extra shifts.”
Jen: “Yeah, this living wage at $14/hr doesn’t really make sense for the tips model and for small food-related businesses which have, in general, much higher expenses than other types of businesses that don’t give employees tips. Most tipped employees who start off at the current minimum wage of $9/hr would already be making at least $14/hr, if tips are good. Small businesses like ours and others we know in the area, who start our employees at a higher rate than the current minimum, already have employees that make at least $14/hr, if not more. These small businesses – who are already paying a livable wage – should not have the added burden of increasing the wage to a point where they cannot afford to pay their current staff and might be forced to cut hours, lay off employees, or make up the difference by working those shifts themselves, which is what a lot of us already do to make ends meet. I think it’s pretty irresponsible of the City of Emeryville not to have solicited the opinions of the small business community that this decision will impact. There has to be another way to ensure that all employees in Emeryville make a livable wage without endangering the survivability of very businesses that employ them.”
East Bay Pilates Studio Co-owner Krisna Hanks
Economic Development Committee member and East Bay Pilates Studio co-owner Krisna Hanks had this to offer: “No Councilmember or any other city personnel have reached out to us concerning this matter. I can imagine for restaurants and other small businesses it could have huge negative impact. New places might choose to go to Oakland or Berkeley instead, or others leave.” While EBP operates under an independent contractor model and would not be specifically impacted by this, Krisna was more concerned with small business representation as a whole. “they make all kinds of ‘business’ decisions without ever putting together a coalition of business owners (small & large) to hear their opinions. We are not organized like resident groups and thus there is no voice at meetings”.
Anonymous Food establishment:
“It would pretty much change our business altogether and price us and the customer out. We have 20 employees and rely on delivery drivers who are not in the building for more than 30% of the time. If they don’t account for tipped wages we could be in for the end of Delivery for our business. All tip related industry should have a sliding scale that would be based on wage and tip to equal a fair wage. But in the end it’s going to hurt as much as it’s going to help. If we don’t raise our prices how could we afford to pay the wage? Would we have to go a different route with delivery and hire a third-party service? Would we have to lay people off to make my numbers? How do you raise the wage $5 and expect a small business to survive? We support a fair wage but it has to be smart for all sides. If you pay the lowest skilled person on the job what the highest skilled person gets, how much more is the higher skilled person going to want? And how do you account for that? We’re scared to see what may come of this.”
Actual Cafe/Victory Burger’s Sal Bednarz
Sal Bednarz, of Actual Cafe & Victory Burger in Oakland wrote a very heartfelt guest piece on Oakland Local on the ramifications Measure FF would have on his business during the last election. Sal was ultimately supportive of Measure FF “despite the fact that it probably will be hard for me and my business to adapt to that new reality.” “I’m in a low-margin business, and have cost pressures from all sides (from customers, landlords, utility providers, staff, vendors: you name the source, and there’s pressure coming from it). I’ve chosen a business in which making a living requires constant adaptation and adjustment, creativity and critical thinking, and dogged persistence. Lucky for me, I’m capable of those things, and I think that I’ll find a way to adapt to a different wage structure.””I’m all for raising the minimum wage to $12.25 since it will better the lives of my employees. I have faith our customer base will remain strong and loyal knowing that they are supporting a local, independent business and helping the entire community by paying slightly higher prices.”
Former Cafe Aquarius Owner Patrick Feehan
“Everything is getting more expensive including food, fuel, housing, education, childcare, etc. therefore a living wage makes sense in this very expensive bay area. At the same time, the restaurant business has very thin profit margins. When we are all ready to pay $15 for a sandwich, a living wage would work. I look at all of this like a shell game. If we keep passing the expense around it ultimately falls back on the consumer/taxpayer.
Another factor here is that a server making that hourly amount plus tips would equal compensation that would have to be relative to production staff’s (cooks, bakers) compensation, meaning that these folks would have to be paid $17 -$20 an hour to keep mutiny at bay. Or you would pool tips like many Berkeley spots do. Not sure how I feel about that.
I think the solution is a split or tiered minimum wage. One for tipped workers and one for non. Not sure how this would be enforced, which is probably why we don’t have such a system.”
Are these businesses “Not Viable” Mr. Donahue? Perhaps the formula retail & fast food establishments that you admonish are the only “viable” businesses according to your guidelines. These aren’t faceless billionaire corporations, these are community-minded businesses that we value and we need to listen to and ultimately protect if we want them to stay in Emeryville. Should we put all the decision-making power in the hands of unions and politicians who have never owned a small business nor can empathize with their daily struggle to run an establishment?
Is Emeryville Doing enough to support Small Business?
I pondered how many small retail businesses were in Emeryville over the holiday with the intent on writing an “E’ville Small Business Saturday” piece but ended up abandoning it when I realized how few there actually were. By the time I sifted through all non-applicable businesses using the American Express Shop Small Website (The City does not maintain such a directory), here’s the list I arrived at omitting places that just offered gift cards for services:
Kimono My House
9, yes 9 places where you could actually purchase a holiday gift from a retail small business (I’m sure I left someone out so please chime in). Really, this list is actually a bit of a stretch as most of these are manufacturing warehouses that mostly sell their product through distributors and online and have no true retail presence. If you factor in just the places with a true retail presence … the number is essentially one: Arts Africains.
Whatever Emeryville is doing to support small businesses is clearly not working. There are strips of Oakland, Berkeley and Albany that have 9 businesses on one block and we have 9 in our entire city? Then there are the empty storefronts that could be local establishments that sit vacant like Adeline Place (empty since it was built in 2009). I only wish the city was doing as much to “lift up” small businesses in Emeryville as people who work here. Maybe I’m a pessimist, but I somehow doubt raising the wage scale this dramatically will encourage more small business in our city.
Emeryville has simultaneously been formulating a small business strategy to better support and encourage small business in our city. According to Economic Development and Housing Division manager Michelle De Guzman “With respect to the support of small businesses, at its December meeting the EDAC will be considering a new work plan for the Economic Development Strategy that will include several action items to assist small businesses, including proposed programs to reduce costs such as an initial year business tax holiday, support for professional design services, and permit fee waivers for facade improvements. There are other proposed action items as well, such as support for the development of merchants’ associations or business development districts. After review and comment from the EDAC, the work plan will be forwarded to the City Council at their December 16 meeting for their comment and consideration”. The full proposed work plan can be read here.
Should Minimum wage be a “one size fits all”
There’s no question that Californian’s (Especially Bay Area Residents) deserve a raise. But how much, how quickly and for whom is the debate. $12.25/hr translated to roughly $25K a year full-time. Not many people could live off of this in the Bay Area I think this much is clear … but not everyone is trying to “live off” this.
According to this recent study on Forbes, 63 percent of workers who earn less than $9.50 per hour are the second or third earner in their family and 43 percent of these workers live in households that earn over $50,000 per year. Thus, minimum wage earners are not a uniformly poor and struggling group; many are teenagers from middle class families and many more are sharing the burden of providing for their families, not carrying the load all by themselves. Should the teenager manning the fryer on his first fast food job or the college freshman working at Bay Street for extra cash command the same as the parent working in manufacturing or service industries? How do we even make these distinctions?
Will there be exceptions to this ordinance? Perhaps this living wage should just apply to certain industries or ages? Should there be exceptions for industries that rely on tips? Perhaps it is time for a paradigm shift away from the tipping model wage … but this isn’t going to happen overnight. Oakland’s ordinance makes none of these exemptions but Richmond’s does not cover workers under age 18, those who receive tips or those who work in businesses with 10 or fewer employees. How many people who work in Emeryville actually live in Emeryville is another question I have that I think is relevant to this conversation. I know we want to lift up the entire region, but don’t we also want to take care of our own?
Why Emeryville is so aggressively trying to “leapfrog” its neighbors and become the guinea pig in the fight for a “living wage” is unclear. The recent election saw a “progressive” swing in council and the sudden focus on Social Justice issues is apparent. Is the new Union-supportive/RULE affiliated council majority exerting itself into the city’s agenda? Is preserving and promoting small business really not part of the “Social Justice” agenda?
The fact that Council is motoring forward on this without consulting a single small business shows questionable leadership to me. Small businesses are a community asset. They need to be preserved and nurtured. If we implement policies in Emeryville that only corporations can swallow, what are we going to be left with? Is it time for Emeryville small businesses to band together and form a merchant association so their voices aren’t tuned out?
This is an extremely complex issue with many nuances that can’t be fully covered in this blog post, but again, I’m happy to help initiate the conversation. Am I off the mark? What are your thoughts?
Further Reading & Resources:
Read the City’s Proposal →
Emeryville Poised to Leapfrog Oakland with Minimum Wage Hike | East Bay Express →
Calculating a living wage across the United States | PBS Newshour →
Woodfin Suites, Emeryville settle wage suit | SF Gate →
Almost Everything You Have Been Told About The Minimum Wage Is False | Forbes.com →
How America’s Minimum Wage Really Stacks Up Globally | The Atlantic →
Institute for Research on Labor & Employment UC Berkeley Report →
Center on Wage and Employment Dynamics IRLE report →
Trying to Understand the Impact of a Higher Minimum Wage on Small Businesses | NY Times Blogs →
Minimum wage: Credible studies show raising it costs jobs | SJ Mercury
Restaurant owners choke on San Francisco, Oakland minimum wage hikes | SF Business Times →