BRB Bottomline: With minimum wage in California set to hit a high of $15 by 2023, it begs the question whether the benefits offset the negatives for small businesses in Berkeley, and how big of an impact these higher minimum wages will have on our city’s constituents.
The Debate over $15 Minimum Wage
In April of 2016, California amended its labor code with the provision to raise the statewide minimum wage to $15 by 2023. For Berkeley specifically, it’s set to hit that mark by 2019. Since then, there has been a growing debate over the implications of such minimum wage increases.
Supporters of higher minimum wages claim that it’s a win-win situation: employees make more money and employers gain loyal workers. Additionally, with an increase in consumer spending power, there would be higher demand for products, saving and earning more money for businesses. On the other hand, opponents state that small businesses are struggling to keep up with the consistent minimum wage increases leading to budgeting nightmares and to increases in prices, which leads to reduced sales and potential shut down.
A city with its character deeply rooted in smaller local businesses, Berkeley is bound to feel the impact of such minimum wage changes. Therefore, it is essential that the voices of these business owners are heard. What do these small businesses think of the minimum wage?
Berkeley’s Businesses Speak Up
A non-profit organization, Faces of $15, elucidates the aftermath of minimum wage increases on businesses across the USA. Chronicled are the stories of businesses that may be familiar to U.C. Berkeley students—Troy Greek Cuisine, Mokka, Semifreddi’s Café—all of which have been forced to close down due to the financial burdens mainly caused by the increases in minimum wage.
Samantha Summers and Michael Saltsman, representatives of Faces of $15, claim that “A lot of times, minimum wage debates devolve into a business versus laborers dynamic”, emphasizing that “there is also an emotional component” The organization aims to “move past profit margins” to look at real stories.
Anne Marie Elliot owns a small resale store for children’s clothing, Grove Street Kids, on Shattuck. Her passion for unique clothing and toys led her to open her shop six years ago, but she was soon faced with the challenges of maintaining a small business in Berkeley. Her perspective on the minimum wage is clear. She is not against a fair minimum wage to support employees, but “there isn’t enough data on the impacts of the minimum wage,” specifically on small businesses like Grove Street Kids. For Anne, even hiring a single worker comes with major drawbacks and the onset of an increased wage has forced her to opt out of hiring altogether.
She also pointed out that these increases didn’t serve much benefit to workers either stating, “$15 doesn’t stand in for a living wage in Berkeley.” Research from the Center for Poverty Research at UC Davis found that, if one works full-time (40 hours a week) at a $15 minimum wage, their annual earnings would be $31,200. Real-estate firm Zillow estimates Berkeley’s current median rent to be $3557 per month, $42,684 per year. Even when considering just rent prices, minimum wage does not cover the living costs of Berkeley.
In fact, growing housing costs and financial difficulties due to the minimum wage raise has forced Anne to move outside of Berkeley and commute everyday. In addition, she has had to face the looming prices of her cancer treatment all while keeping up her store, and states that her business “may close down because [she] can no longer compete,” replaced by larger businesses who can handle the minimum wage raise.
Fern’s Garden, a homey gift shop on Solano Avenue, is run by siblings Fern and Jacob Solomon. Fern’s Garden is a medium sized business with several locations in California, and therefore expressed slightly different opinions on the minimum wage. For them, a medium sized low-end business who are at the brink of breaking even on net profits, the wage increase creates additional budgeting challenges. To compensate, Fern started working additional hours throughout the week to offset the cost of hiring a new worker.
However, they conveyed sympathy for the minimum wage saying, “From an ethical and economic view, it’s a step in the right direction.” The real problem they said was finding workers willing to work for the minimum wage in relation to the increasing housing prices. “The minimum wage just isn’t good enough to live in Berkeley,” repeating similar ideas as Anne.
The Overarching Problem
Perhaps there is a broader issue at hand. Since 2000, Berkeley’s housing prices have increased by 157.97%, ranking it one of the most expensive places to live in America. Business owners like Anne and Fern cannot afford to live in Berkeley let alone somebody living off a minimum wage income. Many contribute this stark increase in housing prices to the tech boom in Silicon Valley. “Not everybody has a six figure tech income enough to afford these houses,” says Fern.
Policy makers frame the minimum wage raise as a solution for the housing crisis, but this issue isn’t something that could be resolved with just a few dollars added to the minimum wage. This “solution” also poses an adverse effect on small shops, potentially driving many of them out of business.
Rising Costs Squeeze Businesses on Every Side
The incentives to create a statewide minimum wage increase was pretty clear back in 2016. For those in California relying off a minimum wage job to survive, an increase would be hugely beneficial. However, when contextualizing the effects on the city of Berkeley, it’s evident that this wage increase stands in the desolate shadow of outrageous housing prices. Arguments for and against the wage increase don’t draw a definite conclusion, however, this back and forth discussion does highlight the unfairly high cost-of-living in the Bay Area. The state of housing in Berkeley constructs a paradox around the idea of a “best” minimum wage; it seems that higher wages are necessary to combat the cost of living, but businesses may not be able to cope with the additional cost. As a result they may lay off their workers, which will only exacerbate the issues at hand.
Take Home Points
Many of us students here at UC Berkeley only see the higher minimum wage increase as additional incentive to work during our free time. However, it’s clear that minimum wage increases have effects that most of us don’t notice. Even a raise of a few dollars could break down Berkeley’s favorite local restaurants and shops. As students and residents of this community, it is essential that we educate ourselves about the effect that minimum wage increases will have on our community and its small businesses.
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Samantha Kim is currently a freshman at the University of California, Berkeley. She is undeclared as of now but is intending to pursue a Cognitive Science major. As an international student, she is excited to engage with local businesses and her new environment here at Cal by writing for the Community column within Business Review at Berkeley. If not juggling 200 pages of reading and running around campus for back-to-back classes, Samantha is rewatching Friends and finding 1+1 boba deals (she is really excited about Yi Fang).