Debate over minimum wage hike rolls on
THE MINIMUM WAGE IN SAN DIEGO IS IN STORE FOR A SERIES OF BOOSTS, AND THEY'RE NOT JUST COMING FROM THE STATE. THE SAN DIEGO CITY COUNCIL VOTED LAST WEEK TO RAISE THE MINIMUM WAGE IN PHASES TO $11.50 BY 20-17, WITH FUTURE BUMPS TIED TO INFLATION. IT
By Jonathan Horn
The minimum wage in San Diego is in store for a series of boosts, and they're not just coming from the state.
The San Diego City Council voted 6-3 last week to raise the minimum hourly rate incrementally to $11.50 by 2017, with future bumps tied to inflation. It also is requiring employers to provide up to five earned sick days.
The vote came despite the state of California raising the minimum wage from $8 to $9 per hour earlier this month, and planning to bump it up again to $10 per hour on Jan. 1, 2016.
The increase has led to charged debate between those who say workers need the extra money to live, and others in the business community who say it will hurt employment and squeeze already thin margins. Here are some questions you might have about the economic impact of the minimum wage increase:
Q. How many work for minimum wage?
A. About 200,000 San Diegans work for the minimum wage, which makes up about 15 percent of workers with payroll jobs. The Bureau of Labor Statistics reports that minimum wage workers tend to be under 25, with about 21 percent of them teenagers. In San Diego, a little more than half of the minimum wage workers are Latino, despite their making up 28 percent of the city's workforce, says a recent study by the National University System Institute for Policy Research. The report also says more than a quarter of minimum wage workers live in households making more than $70,000 per year.
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Q. Who has most of the jobs?
A. Restaurant, hospitality and sales positions are among the most common low-paid jobs, many of which don't require a college degree.
While many minimum wage workers are teens with summer jobs, some economists say demographics have changed. Some older workers are now taking low-wage jobs because they can't find any other work. For instance, construction employment is still down 30,000 from the pre-recession peak, and manufacturing is down 10,000 jobs. Many displaced workers had to find new jobs, but didn't have the skill set to move up into the expanding industries like biotech and technology
"They basically notch down in terms of quality of the job just to survive," said Esmael Adibi, economist at Chapman University. "Some of the people who lost their job at $15 to $20 an hour now work at minimum wage because they can't find anything else."
Q. Why raise the minimum wage?
A. Some economists and policymakers say a pay boost puts more money into the hands of those who need it the most.
Alan Gin, economist at the University of San Diego, said it's getting harder for low-wage workers because pay hasn't kept up with living costs. For example, he said the minimum wage's buying power peaked when it was $1.65 an hour in 1968. Had it kept up, he said it would now be $13.85 per hour. Gin said the extra money could go toward better housing, transportation, health, and could reduce demand for government assistance programs.
Peter Brownell, research director for the Center for Policy Initiatives, a nonprofit thinktank that advocates for working people, said a lot of the people on the low end can only afford to eat two meals a day. If they can afford to eat three meals, that's more money spent in the economy.
"The research on happiness and money basically says that there's a big impact when you don't have enough," he said.
Q. How much will a wage hike get a worker?
A. Many minimum wage jobs are part time, and the local increases will be either 75 cents or $1 until they hit $11.50 in 2017. At 30 a hours week, a 75 cent raise increase is an extra $45 every two weeks, pre-tax, while $1 would be an extra $60. Still, an extra $60 a paycheck adds up to $1,560 throughout the year. For someone going from a minimum wage of $10.50 to $11.50 in 2017, that's a 9.5 percent raise.
Q. Would the extra money really make a difference?
A. Adibi said the only way to truly get a raise that makes a difference in standard of living is through education and acquiring more employable skills.
However, fast-food worker Ivan Jimenez said the extra money would make a difference in his life. Jimenez, 19, commutes 90 minutes a day from Barrio Logan to a Burger King, where he earns $9 per hour four days a week. He hopes the raise will help him get a car and allow him to avoid borrowing money to pay his rent each month.
"It will make a big difference," he said. "I won't feel like I'm in debt all the time."
Q. Won't raising the minimum wage boost costs and cause job cuts?
A. If not jobs, hours could be reduced, or businesses could try to relocate or automate.
Jerry Sanders, CEO of the San Diego Regional Chamber of Commerce, said a lot of small to medium sized businesses are operating on already slim margins, and raising the minimum wage could simply squeeze them out. They might reduce hours, cut staff and raise prices to stay afloat.
Q. What do the studies say?
A. National University's study says given the diversity of the minimum wage worker, raising the wage is not a targeted enough policy for reducing poverty. It says instead policymakers should consider matching the Earned Income Tax Credit to help people at the low end of wages. The study says a relatively large number of workers are enrolled in higher education and therefore are using the jobs as a stepping stone.
A study released in June from Dartmouth College and Michigan State University called "What Does the Minimum Wage Do?" concludes that moderate increases in the minimum wage helped those at the bottom of the income distribution and reduced wage inequality. The increase comes with acceptable costs to businesses. Paul Wolfson, who co-authored the study, has said the wide range of previous research on minimum wage increases have been inconclusive at best.
Q. Didn't some companies already raise their minimum wage?
A. Yes. Some companies, like Ikea and Gap Inc., have raised their minimum wage on their own volition.
Jimbo's Naturally, a grocery store with five locations in the county, earlier this month upped the starting wage from $8 to $10 per hour, and adjusted other employees' pay upward. Jim "Jimbo" Someck, the company's owner, said the grocer would not raise any prices as part of the move.
"Certainly if nothing changes then it will eat a nice chunk of the profit," he said. "But I found in the past that when we make changes like this, that things change within the organization that somehow result in greater volume."
Someck said by the time the city's minimum wage hits $11.50, he hopes Jimbo's starting wages are above that.
Q. But businesses like restaurants say they don't need to boost wages? Why?
A. A large chunk of pay for waiters and waitresses comes from tips, but the city's minimum wage ordinance doesn't exempt those workers. That's going to hit much of the restaurant industry in the mid-level, which operates on slim margins, said Matt Gordon, owner of Urban Solace in North Park.
"Other than tipped employees, we don't pay anybody minimum wage. We never have," Gordon said. Gordon said waiters and waitresses at restaurants with $20-plus entrees like at Urban Solace tend to make more than double the approved minimum wage through tips. Gordon recently bumped prices by a quarter to 50 cents about six weeks ago. He said the increases were too small for people to notice. The state reports that there are about 28,000 waiters and waitresses in the county.
Jonathan Horn
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