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What the coming minimum-wage increases will mean for North Bay businesses

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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.

Dawson recently held a training in Petaluma for restaurants affected by the minimum wage increases and encouraged them to face difficult questions including if they will raise prices “and if you do so how are you going to break the news to your customers?”

When thinking of raising prices, Dawson said restaurants are not going to have an opportunity to hike prices like this again, and that if they do it’s important to “Make sure that you raise them accordingly.” She pointed to one restaurant she works with in San Francisco that raised prices by 12% across the board without a revolt in its customer base. San Francisco’s minimum wage currently stands a $15.59 per hour.

Restaurants are not the only businesses that are impacted, however.

Just ask Jeff Coplin, an owner of Matt & Jeff’s Car Wash in Novato. Coplin protested the minimum wage acceleration at Novato City Council meetings but said he was not against the statewide 2023 raises.

Coplin said he has 50 employees and that the change means he could be facing an extra $1,000 per day in labor costs.

“Currently I’m open from 8 in the morning until 6:30 in the evening,” Coplin said. “One way I can address my $1,000 cost, besides raising prices, is maybe we’ll decide we’ll be open instead from 8 to 5:30 and save ourselves $500 or $600 a day in labor costs.”

Coplin said the move by the Novato City Council created unfair advantages for businesses elsewhere in Marin County which are not facing accelerated wage increases. Without having to meet that mandate, they may open up and potentially undercut him and others with their prices. He also said he fears businesses will close, causing jobs to go elsewhere.

Organized labor’s approach has been to go city to city in the North Bay however, according to Mara Ventura, the executive director of North Bay Jobs with Justice, which helped commission the Berkeley study and has pushed for wage increases in many North Bay cities.

“One of the ways a minimum wage increase is done successfully … is when it’s done regionally,” Ventura said. “We think it’s really important to start talking to other cities around Novato.”

Ventura said her group plans to work with the cities of Cotati and Sebastopol in the future to accelerate minimum wage increases ahead of the state’s 2023 goal.

Taking the regional approach “allows workers, particularly in the North Bay who are working multiple jobs in multiple cities, to have consistent wages across the board,” Ventura added. “It does the same thing for businesses in terms of competition: it levels the playing field across the board.”

Coplin of Matt and Jeff’s said the high cost of living in the Bay Area is already driving people out and that an increased minimum wage will force businesses to close and cut hours, further hobbling workers.

Ventura saw a different trend, however, noting that wage stagnation has forced workers to leave and that increasing the minimum wage will ramp up their buying power, which will in turn boost the local economy.

“The likelihood that a low wage worker is going to spend most if not everything of what they make in a wage increase is really high,” she said. Many workers at the low end of the wage scale are often behind on bills as is. “When you increase the wages of the lowest wage workers in the immediate area you’re immediately going to see that spent in local grocery stores” and used to pay other bills like rent and power.

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at chase.d@busjrnl.com or 707-521-4257.

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