The state minimum wage rose from $8 to $9 per hour last July, and in 9 months is scheduled to rise again to $10 per hour.
Former Anaheim Mayor Tom Daly, who now represents much of flatland Anaheim and most of Santa Ana in the state Assembly, has introduced legislation to lower the minimum wage for those in the tip-earning professions – keeping it at $9 for workers who earn at least $15 an hour in combined wages and tips. Daly’s sensible bill is implicit recognition that establishing wage levels by government fiat is undermines job creation and economic activity and ultimately hurts those its sponsors purport to help.
Minimum wage hikes kills jobs. Even the lefties who support them will, if they are intellectually honest, concede as much. They just prefer giving bigger pieces of the same pie to fewer people.
They also drive up prices, which – as always — is most hurtful to those the Left claims to champion: the poor and working poor.
The aggressive minimum wage hikes so favored by liberal policy-makers have a particularly baleful impact on those who depend on the tips the earn in their jobs. At a certain point, the wage hikes lead restaurant owners to abolish tipping in favor of a flat service fee. Michael Saltsman, research director at the Employment Policies Institute, recently penned an op-ed in the Wall Street Journal detailing how these left-liberal policies in San Francisco and Oakland are driving restaurants out of business (by 2018, the minimum wage will be $15 an hour in S.F and $12.50 an hour in Oakland):
Given the scope and schedule of these new minimum-wage increases, the impact on prices and employment may be even steeper this time. The current federal minimum wage is $7.25, half of what San Francisco’s wage floor will be set at by 2018 after a series of increases that begin in May. Nationally, Congress phased in the last 40% increase to $7.25 over a three-year period; in Oakland, an almost-identical 36% increase happened overnight on March 1.
Businesses’ first line of defense against these labor-cost increases is an offsetting increase in prices. The magnitude is staggering: In Oakland, local restaurants are raising prices by as much as 20%, with the San Francisco Chronicle reporting that “some of the city’s top restaurateurs fear they will lose customers to higher prices.” Thanks to a quirk in California law that prohibits full-service restaurants from counting tips as income, other operators—who were forced to give their best-paid employees a raise—are rethinking their business model by eliminating tips as they raise prices.
Ironically, this change in compensation practices has reduced the take-home pay for some of the employees it was supposed to help: At the Oakland restaurant Homestead, the East Bay Express reported that servers are taking “a substantial pay cut,” earning a flat wage of $18 to $24 an hour and no tips instead of the $35 to $55 an hour they were accustomed to earning when tips were included.
Though higher prices are a risk that some businesses were able to take, others haven’t had the option. The San Francisco retailer Borderlands Books made national news in February when the owner announced that the city’s $15 minimum wage would put him out of business, in part because the prices of his products were already printed on the covers. (A unique customer fundraiser gave Borderlands a stay of execution until at least March of 2016.)
One block away from Borderlands, a fine-dining establishment called The Abbot’s Cellar—twice selected as one of the city’s top-100 restaurants—wasn’t so lucky. The forthcoming $15 minimum wage, combined with a series of factors like the city’s soaring rents, put the business over the edge and compelled its owners to close. One of the partners told me the restaurant had no ability to absorb the added cost, and neither a miraculous increase in sales volume nor higher prices were viable options.
These aren’t isolated anecdotes. In the city’s popular SoMa neighborhood, a vegetarian diner called The Source closed in January, again citing the higher minimum wage as a factor. Back across the Bay in Oakland, the Chronicle reported that some of the city’s businesses have been similarly affected. According to a board member of the Oakland Chinatown Chamber of Commerce, 10 restaurants or grocery stores opted to permanently close this year alone as a partial consequence of the wage hike. Even the Salvation Army’s child-care facility is “scrambling to find ways to keep the doors open” in response to labor cost increases, according to the organization’s county coordinator.
It’s not that advocates of these policies on the Left don’t care. A number of them are wedded to the belief that government can keep ratcheting up labor costs with no ill effect on business and employment. All those petty capitalists will pay for these wage increases by pulling more money from that magical bottomless well called “profits.” Voila! No reductions in work force, work hours\, flexibility or benefits. No higher prices for customers.
Daly’s bill is pure common sense – which is why it is already being attacked from the Left. The only problem is it does not go far enough – although it is helpful when a Democratic legislator introduces legislation that ultimately refutes the premise of minimum wage hikes.
This is always a timely discussion because left-liberal politicians and activists never cease pushing for “living wage” ordinances. Thanks to the passage last year of Measure L and M (electing an expanded city council from single-member districts), it is much more likely Anaheim employers will face the prospect of councilmembers pushing minimum wage ordinances like those already enacted in San Francisco and Oakland. “Living wage” ordinances have long been championed by the same political coalition – groups like OCCORD, UNITE-HERE, the rich San Fran-based leftists – that funded and organized the Yes on L and M campaigns (with inexplicable help from some on the Right).
In fact, here’s once (and probably future) council candidate Jose F. Moreno promoting Oakland’s destructive minimum wage hike on his Facebook page last week:
Mr. Araby is executive director of the United Food & Commercial Workers Western States Council; the UFCW was also a major funder of the campaign to carve Anaheim into council districts. Perhaps even the willfully blind are beginning to see nexus between the Left’s campaign for council districts in Anaheim and the drive to enact left-wing policies that have gone nowhere under the at-large system.
But probably not.
In the meantime, Assemblyman Daly’s bill deserves to become law, for the sake of those working people who depend on tips, and the Anaheim City Council ought to adopt a resolution of support for it.