North Bay employers mostly pay above minimum wage, but tough choices are ahead
North Bay employers are by and large ahead of the game as the statewide minimum-wage increase took effect Jan. 1.
Most industries already pay their workers above that level. However, down the road, employers are going to face some choices.
The Fair Wage Act of 2016 raises the minimum wage statewide from $10 to $10.50 per hour this year, and raises it incrementally to $15 per hour by 2022.
The new increase affects employers with 26 or more workers, and businesses with 25 workers or less beginning in 2018.
California's largest group of minimum-wage workers are in retail (16 percent), followed closely by the hospitality industry at 15 percent. The University of California, Berkeley, Labor Center report lists 18 industries that pay minimum wage, including construction, educational services and manufacturing.
Businesses facing the immediate increase include big chain stores like Target and Sears, which make labor decisions at the corporate level, and fast-food restaurants like McDonald's, which are 90 percent individually franchise-owned, and keep a tight rein on employees' hours.
'Target in Coddingtown [in Santa Rosa] is struggling [to find and retain employees] but is not offering anything extra to their employees. There is no decision-making locally, so they can't be as flexible as much as a local business, that can offer incentives and other benefits,' said Heather LoBue, business services program manager at the Sonoma County Economic Development Board.
Other industries in the North Bay, like the wine industry, pay entry level workers 20 percent above minimum wage, and are offered a lot of perks, LoBue said. The same goes for food-preparation- and serving-related jobs in Sonoma County, where the mean per-hour wage was $11.89 in 2016.
'Very few North Bay employers pay minimum wage because the cost of living here is higher,' said Kelley Hartman, senior vice president at Nelson staffing agency. 'As in other areas, industries such as retail and hospitality are more likely to pay closer to minimum wage than some others — but here in the North Bay, most pay above that level.'
Once employers must pay beyond the $11 an hour level, however, some decisions will need to be made about whether to cut labor costs and/or increase costs of their products and services. Employers may pass the increase on to their customers, move out of state, or invest in labor-saving technology.
'It's just a matter of time before it affects retail and hospitality industries,' said Robert Eyler, chief economist at the Marin Economic Forum. 'It sort of delays the changes, to allow an employer to make a decision on how many workers to hire.'
Employers will need to be more precise about seasonal hires, and look to mechanizing certain jobs, such as a grocery store investing in a robot to stock shelves, he added.
Marin Country Club has paid employees above-minimum wages for some time, to stay competitive and retain workers.
'It has not been an issue for us, but as the schedule continues to escalate it will not be without a lot of review and debate,' said Ryan Wilson, general manager. 'Job capping is not off the table.'
In the long term, along with raising prices, an option for larger companies will be to move certain business functions out of state, said Joanne Sanders, founder and president of Bolt Staffing. Knowing what the increases are and when they will go into effect will be of help, however.
'I really like the fact it's a published schedule and we know what we're dealing with,' Sanders said. 'The standardization across the state makes everyone know what the rate is versus a patchwork of rates which can be confusing for companies It's good for companies that have multiple locations who will be able to see five years out what their costs will be.'
Short term, companies may seek to stay under the 26-or-less cutoff, encouraging them to hire fewer employees,
Or by 2022, if an employee is already making $15 an hour when the minimum wage reaches that level, it could be a game-changer.
'As the minimum wages rises and brings those levels in line with those making slightly more, employers will need to make sure their salaries at all levels are adjusted appropriately to remain competitive,' Hartman said. 'If they don't, they will face continued recruiting and retention challenges, which can significantly impact business performance.'
Reach employment writer Cynthia Sweeney at Cynthia.Sweeney@busjrnl.com or call 707-521-4259.