What the coming minimum-wage increases will mean for North Bay businesses
How much is enough?
According to the several North Bay city councils, about $15 an hour.
That is after a spate of North Bay cities including Santa Rosa, Novato, Petaluma and Sonoma recently mandated businesses increase the minimum wage paid to employees. Experts on the supply and demand side of the issue said that will increase worker buying power but could trigger cascading effects on businesses, particularly restaurants, and their suppliers.
Earlier this month, the Santa Rosa City Council voted unanimously to raise the city minimum wage to $15 per hour for businesses with more than 25 employees by July 1 and, for smaller employers, $14 by July 1 and $15 by 2021.
Elsewhere in Sonoma County, the Petaluma City Council voted unanimously over the summer to adopt a $15 per hour minimum wage starting Jan. 1 for large businesses with 26 or more employees. The ordinance also mandates the rate be implemented across the city in 2021. Smaller employers with 25 or fewer employees will ramp up starting with a $14 minimum in 2020.
Last month after an impassioned debate, the Novato City Council voted to increase the hourly minimum to $15 starting July 1 for employers with 100 or more workers, on New Year’s Day 2021 for smaller employers with between 26 and 99 employees, and on Jan. 1, 2022, for small businesses, among other restrictions.
Those moves seek to jump ahead of state mandated increases in the minimum hourly wage. Those are scheduled to increase each year until a minimum wage of $15 per hour is reached in 2023 for all employees.
In a location like the North Bay, those raises could have significant impacts on workers and businesses, particularly in the restaurant industry, according to a report commissioned by North Bay Jobs with Justice, the North Bay Central Labor Council, and the Napa-Solano Central Labor Council.
“Our estimation was that the average annual earnings increase of a worker that was effected by 2020 would be about $2,900 dollars a year,” said Ken Jacobs, an author of the study and chairman of the University of California Berkeley Center for Labor Research and Education, which performed the study.
“That is a significant increase for people earning low pay,” Jacobs said, noting the study, which looked at Marin, Napa, Sonoma and Solano counties, estimated that 25%-26% of workers would receive pay increases.
Food service and the retail industries are most affected because a significant portion of their overhead is employee pay, especially in restaurants, Jacobs said.
“About half the retail workers would receive some kind of pay increase,” Jacobs said, estimating that about 60% of food service workers would see a bump from the increases.
He noted that the research shows restaurants can offset the increases by raising prices.
“We have really good evidence from other increases that the costs tend to be passed down to consumers,” Jacobs added, noting that his study, conducted in 2018, estimates payroll costs in the restaurant industry would rise by 6.7% by 2020.
Jacobs noted that his study found benefits to businesses from increasing worker pay that include declines in worker turnover and increased worker productivity.
For restaurant owners, the inevitability of a rising minimum wage at the state and local level can potentially be an opportunity to fundamentally reshape a business according to Louise Dawson, The Restaurant Program manager for the Northern California Small Business Development Center.