The effects of Oakland’s 36% minimum wage increase on March 2 provide a forecast of what Seattle can expect

From Mark Perry.

"My recent CD post on Seattle’s pending 58% increase in its minimum wage from $9.47 per hour currently to $15 generated a lot of discussion (129 comments as of today) and controversy about whether and how much the minimum wage increase is contributing to restaurant closings and jobs losses in the Emerald City. Part of there’s controversy about the impact of Seattle’s minimum wage on restaurant closings is that the first increase, from $9.47 to $11 per hour (a 16% jump), won’t take effect until April 1. Further, the full 58% minimum wage increase to $15 per hour take effect until 2018 for large businesses (more than 500 employees) and 2022 for small businesses (fewer than 500 employees). So we’ll need a few years before we can assess the full impact of Seattle’s (eventual) 58% increase in the city’s $15 per hour minimum wage on employment at the city’s restaurants and other small businesses.

(For background, see Washington Policy Center VP for Research Paul Guppy’s March 11 blog post (“Seattle’s $15 wage law a factor in restaurant closings“) that inspired my blog post and his follow-up post from a few days ago “How The Seattle Times got it wrong on our $15 minimum wage blog.”)

Even though it might take several years to assess the full impact of Seattle’s 58% increase in its minimum wage on restaurants and small businesses, we now have evidence of some pretty devastating effects on small businesses in Oakland, California following a recent 36% increase in the city’s minimum wage from $9 per hour to $12.25 (highest in the country), which took effect on March 2. Here’s a sample of some recent news reports.

1. NBC Bay Area:

Some businesses in Oakland’s Chinatown neighborhood are feeling the effects from the city’s new voter-approved minimum wage. The new $12.25, up from $9, went into effect on March 2 and was approved by 82 percent of voters.

“With this minimum wage kicking in, it’s the final nail to the coffin,” said Carl Chan, a board member for the Chinatown Chamber of Commerce. The new minimum wage forced owner of the Legendary Palace restaurant to close its doors on Feb. 26. Officials said four restaurants and six grocery stores have closed since January.

Many business owners are blaming the 36 percent wage hike, while some said the businesses were already in financial distress. “Business owners are angry,” said KC Lam, a business owner. “They can’t cope too much.” Lam said he will keep the New Gold Medal restaurant open by being creative — possibly opening an hour later and closing an hour earlier.

2. San Francisco Chronicle:

For 27 years, Sandy Vuong has supplied towering cakes and fluffy Vietnamese pastries to residents of Oakland Chinatown. Now she might shut her doors.

Vuong’s Delicieuse Princesse Bakery isn’t the only business that’s foundering after a new law raised the hourly minimum wage in Oakland from $9 to $12.25 — pushing the bakery’s payroll costs up by 36 percent overnight. According to Carl Chan, a board member of Oakland Chinatown Chamber of Commerce, four restaurants and six grocery stores in and around Chinatown have already shuttered since January, at least partly for fear that the wage increase was going to put them over budget.

Chinatown restaurateurs are in a more perilous position than many of their counterparts in Oakland. Most of the establishments, with the exception of large banquet halls like Legendary Palace and Peony Seafood Restaurant, operate on high volume and low profit margins. Customers expect to pay very little per entree, and it’s very difficult for the owners to raise prices.

“I want to, but I can’t,” Vuong said, adding that her only big-ticket item is wedding cake, and she only sells that on weekends. “I’m dying,” she lamented to other small-business owners at a forum on Thursday, clutching her chest for emphasis… “You are putting people on the chopping block,” an import business owner named Taylor Chow told city officials….Chow…runs his business in East Oakland, said he felt as though his hands were tied. “The next thing, they ask for $100 an hour,” he griped. “And what can we do?”

Vuong, who lives in Hayward, faces the same predicament. If she doesn’t close the Delicieuse Princesse Bakery, she might cope by cutting her workforce in half: two immigrant employees might be enriched by the minimum wage hike, while two would lose their jobs.

3. CBS San Francisco:

Some shop owners in Oakland’s Chinatown say business is down, and they are struggling to stay afloat after the city’s minimum wage increased to over $12-an-hour, making it the highest in the country.

Chinatown restaurant Vien Huong owner Daniel Tran has been trying to look at the glass as half-full, but has had to raise his prices and slash hours for his workers. “As you can see I’m the only one working,” Huong told KPIX 5.

According to leaders at the Oakland Chamber of Commerce, nearly a dozen restaurants and grocery shops that were already closed won’t reopen because of the minimum wage hike that went into effect this month. “This is very saddened to the entire community,” Carl Chan of the Oakland Chinatown Chamber of Commerce.

4. San Francisco Chronicle:

Workers who benefit from Oakland’s minimum wage hike might soon lose a service that enables them to work in the first place. It turns out the well-intentioned law is putting a financial squeeze on Oakland’s child care industry, leading some providers to panic.

“We’re scrambling to find ways to keep the doors open,” said Capt. Dan Williams, Alameda County coordinator of the Salvation Army. He says the added payroll costs of providing workers with a $12.25-an-hour wage have put his organization’s Booth Memorial Child Development Center and family shelter $146,000 over budget, which is “quite a bit for a facility that was barely making it as it was.” If the Salvation Army can’t scrounge up that money by writing grants and finding donors, it might have to cut some of its 63 child care slots. A number of other day care centers face the same predicament.

Child care centers operate on razor-thin margins — thinner, even, than those of the restaurant industry — and many are lucky to wind up in the black at the end of the year. A restaurant can raise prices to meet the new cost of doing business, but child care operations have limited flexibility.

Organizations like the Salvation Army depend on fixed subsidies from the state, which won’t adjust in response to changes in city law. Both the state-funded programs and their private counterparts are bound by strict state ratio requirements, which mandate that a certain number of employees be present with the children each day. For every four infants, for example, the law requires that centers provide one child care worker.
So traditional staff-cutting isn’t an option for day care centers.

“That’s one of the unintended consequences” of Oakland’s Measure FF, the November ballot measure that raised the city’s minimum wage from $9 an hour, said Richard Winefield, executive director of the nonprofit child care referral service Bananas. “A lot of (centers) are run on very narrow margins, and when they increase the hourly rate on their employees, they need to pass that on in tuition costs, so families need to fork over more money.”

But many families don’t have the wherewithal to pay more, Winefield said. And as a result, they’re getting priced out.

Bottom Line: To help understand what restaurants and small businesses in Seattle can expect following its pending 58% increase in the minimum wage, the devastating effects in Oakland following its recent 36% minimum wage hike provide a forecast of what small businesses in the Emerald City can expect going forward."