After the state minimum wage was raised to $10 in January, California employees, business owners and government officials are opposing one another more than ever. While many workers happily accept the pay raise, the increase in labor costs are already affecting businesses.
“I think it’s going to put me out of business to be perfectly honest,” B-Man’s Teriyaki and Burgers owner Byron Takeuchi said. “I’m just looking to survive right now.”
In light of the wage increase, Takeuchi said he had to raise menu prices and cut employees’ hours at all three of his locations. Due to the decrease in employees, he said customer service has been negatively affected. The restaurants in Azusa and Duarte have seen a noticeable decrease in customers, but the original location in Pasadena has maintained steady business.
“Pasadena is my only busy store,” Takeuchi said. “My customer loyalty in Pasadena is insane.”
Takeuchi said he has far less employees working at his Pasadena store than at his other locations, but has maintained the most clients there since it opened in 1999.
Tom Scott, California State Executive Director of the National Federation of Independent Business (NFIB), said wage increases directly impact consumers of small businesses.
“It is still very early in the implementation of the new $10 minimum wage in California, but we are already seeing costs passed on to consumers.”
“It is still very early in the implementation of the new $10 minimum wage in California, but we are already seeing costs passed on to consumers,” Scott said. “Of course, businesses more reliant on minimum wage workers will necessarily pass on greater price increases than businesses with fewer minimum wage workers.”
Scott said the legislature and ballot proposed increases suggest the business community will not see the full extent of its impact from the wage changes until 2017. According to the NFIB, for every $1 per hour increase to the minimum wage, employers face almost $5,000 in added costs per employee.
“It is important to keep in mind that a one dollar increase to the minimum wage, for example, does not equal merely one dollar to employers,” Scott said.
Scott said he believes the wage increases often harms those it seeks to help. When pay is raised, labor becomes too expensive for employers, forcing less experienced and less skilled workers to lose employment.
Democratic presidential candidate Bernie Sanders‘ campaign is focused on raising wages for minimum wage-earning Americans. Among his plans, he has proposed a national $15 minimum wage and seeks to increase the minimum wage for federal contract workers to $10.10.
“According to the non-partisan Congressional Budget Office, a $10.10 national minimum wage would result in an estimated 500,000 lost jobs,” Scott said.
Riverside County Senator Jeff Stone believes the increase will be detrimental to California businesses.
“I believe in the end, it’s going to cost jobs rather than create jobs,” Stone said.
Stone said he believes the term “minimum wage” is a misnomer and said entry level jobs should be for young workers to learn skills and grasp an idea of what type of job they would like to have in the future. He said the minimum wage should be determined by the private sector, not by the government.
“These companies are going to cut back and force more people to do more work with less money and that’s a challenge,” Stone said. “It’s definitely going to hurt the service industry.”
Stone said he is concerned minimum wage jobs will be “priced out of the marketplace” and the middle class will be pushed out of existence. Due to increased labor costs, he believes companies will begin to shift their focus to in-store technology and online retail options, replacing the need for employees.
“These companies are finding that it’s easier and cheaper and more efficient to use technology today than to put people to work at these entry level jobs,” Stone said.
The senator said as the minimum wage rises in the next five years, Californians should expect many companies to move out of state.
“I think if the minimum wage increase continues, more employers are going to go to online distribution centers outside of California to avoid the minimum wage and to avoid the state income tax in California, which is the highest in the union,” Stone said. “Businesses are going to take the path for the least resistance to make a profit.”
Minimum wage employee and Dollar Tree assistant manager Virginia Gonzales believes consumers will turn to low-cost options more often in light of the increased retail prices associated with a higher minimum wage.
“People come to our store before they come to Stater Bros. to look for grocery and party items,” Gonzales said.
Gonzales said that while prices will not increase at Dollar Tree, she is concerned about increased gas and food costs in California. She said she believes consumers will begin to default to dollar stores more often than companies like Walmart and Target.
While Gonzales said her hours remained the same, she said the other employees’ hours were all cut in half at the new year. She said the store branch is not hiring many new employees, but when new people are hired they do not receive more than four hours a week.
McDonald’s cashier and minimum wage employee Amelia Miranda said she is grateful for the increase in her pay and believes it is a suitable amount.
“It’s helped a little bit in bringing in more money,” Miranda said. “I think for minimum [wage], that’s enough.”
Miranda said business has been steady since the increase and she has not seen a change in the amount of customers.
In light of the predicted five-year increase to $15, Miranda said she believes it is enough time for businesses to sort out their finances to raise wages.
Kraphty’s Italian Eatery chef Andrew Flores Sr. said the restaurant has maintained business since January and is currently working to promote more. He said he does not think the $10 minimum wage nor the future $15 increase is enough to sustain a living.
“I think [the wage increase is] a lot better. I think it should be more because the cost of living is a lot more, but we work with what we’ve got,” Flores said.
Flores said his biggest concern in regards to the increase is that it will not to support single parent households. He said he has been working at Kraphty’s for over 10 years and has experienced many minimum wage increases, but has never been satisfied with the amount.
A 2010 research study by University of California Berkeley Institute for Research on Labor and Employment suggests the increase in wages are not enough to make a significant difference to employees.
“This implies that an increase in the minimum wage has a very small impact on the total income earned by affected workers. In other words, these estimates suggest that the policy is not useful for raising the earnings of low-wage workers, as the disemployment effect annuls the wage effect for those who are still working,” the study reads.
Ben Ebbink, the chief consultant for the Assembly Committee on Labor and Employment for Assembly Member Roger Hernandez, said he has received largely positive feedback from employees because of the increase.
“Traditionally, there is a lot of support among workers. When we hear minimum wage bills in our committee, there’s a lot of support from working people and from labor groups and labor advocates supporting the minimum wage. I think it’s pretty consistent that the business community has opposed to the minimum wage.”
“Traditionally, there is a lot of support among workers. When we hear minimum wage bills in our committee, there’s a lot of support from working people and from labor groups and labor advocates supporting the minimum wage. I think it’s pretty consistent that the business community has opposed to the minimum wage,” Ebbink said.
Ebbink said minimum wage proposals are widely approved among voters and most increases have occurred during elections. However, the last two minimum wage increases were enforced legislatively by governors Arnold Schwarzenegger and Jerry Brown.
The chief consultant said he has witnessed minimum wage increases help small businesses because the more money people make, the more likely they are to spend.
“We’ve always long argued that minimum wage increases actually help local economies because most minimum wage workers spend their earnings. Any increased money they earn in their paycheck they spend right back in the local community,” Ebbink said.
According to Ebbink, more jobs are created when wages are increased because of the subsequent demand for businesses. While he recognizes there is a likelihood jobs will be lost, he said the benefit of new jobs outweigh these concerns.
“It’s kind of a fundamental issue. At the core of it, I think it’s differing opinions of what role the government should play in mandating minimum wages or not,” he said.
While he said large businesses will likely be able to absorb the added costs of wage increases, most small businesses will struggle more because their profit margins are smaller, they are less adaptable and it is harder for them to afford mandated changes.