News Column

Some Businesses Warm to Minimum Wage Rise, Others Not So Much

March 11, 2013

John Woolfolk, San Jose Mercury News

Nick Taptelis didn't wait until Monday, when San Jose's voter-approved minimum wage increase from $8 to $10 an hour officially kicks in, to give his two-dozen employees at Philz Coffee a raise. They got it last month.

And Taptelis believes that will be good for his downtown cafe business across from San Jose State.

"I'll have a happier team willing to work harder," Taptelis said. "I think that's going to increase business."

That may seem counterintuitive, given that business groups spent more than a half-million dollars trying to defeat the measure, which passed with nearly 60 percent approval. But since the election, some businesses -- but by no means all -- have embraced the inevitable.

The San Jose Downtown Association, which opposed the wage hike as a job-killer, has since joined with the South Bay AFL-CIO Labor Council, which led the measure's campaign, to promote the city's higher wage requirement as a selling point.

They are encouraging residents and workers in the city to spend their higher wages in San Jose instead of patronizing businesses in neighboring suburban towns, where the higher wage isn't in effect.

"The voters have spoken, and now we must implement the minimum wage," said Scott Knies, executive director of the San Jose Downtown Association. "How can we make the best of it? Consumers have a choice where they spend their hard-earned pennies. Consumers are increasingly making spending decisions based on personal preferences."

South Bay Labor Council Executive Officer Ben Field said, "it's a legitimate selling point for San Jose businesses that they're paying a higher wage."

"It fits into a broader trend of ethical shopping," Field said. "Increasingly, consumers take into account the ethics of the buying decisions they make."

Those working low-wage jobs in San Jose are, of course, thrilled.

"I'm excited!" said Reedy Griffin, a 24-year-old college graduate who works concessions and the projectors at the downtown Camera 12 Cinema theater as she stocked boxes of plastic drink cups behind the counter. "I'm definitely looking forward to being paid more. I get to buy more things."

But to be sure, many businesses aren't buying the line that this will be good for the bottom line. Many say they'll have to cut employee hours or even jobs to stay afloat.

"We're just looking at not being open as many hours," said Jack NyBlom, owner of Camera Cinemas, which has theaters in San Jose and Campbell. "Where we can streamline, we're going to streamline."

At the Pita Pit just up the street, manager and co-owner Yonhee Shon fretted over how the city's 25-percent minimum wage increase will affect her business amid higher payroll taxes, rent and food supply costs.

"I'm going to have to cut their hours," Shon said of her workers as she wiped off tables to prepare for the lunch crowd. "Which means I'm going to have to be here more hours. I'm already here 50 hours a week."

San Jose joined just a handful of other major cities nationwide to set its own minimum wage requirement with a ballot measure last November. The city measure, hatched by San Jose State University sociology students, raises the hourly wage rate from the $8 state minimum to $10 with annual inflation adjustments.

California last raised its minimum wage in 2008 from $7.50 to $8 an hour. It is among 19 states with hourly minimum wages higher than the $7.25 federal requirement in place since July 2009.

There's been growing interest in the nation's Capitol for raising the national minimum wage. President Barack Obama mentioned it in his state-of-the-union speech, and his fellow Democrats in Congress just introduced a bill that would raise the national minimum wage to $10.10 by 2015 with annual inflation adjustments.

Many San Jose businesses say they would be fine with paying a higher wage if all their competitors had to pay it too.

"I don't know why San Jose has to be ahead of the curve," said Chris Kouretas, owner of John's of Willow Glen restaurant. "It makes it difficult to compete. You can go to Los Gatos and they are still paying $8 an hour."

But others like Philz shrugged off concerns about the wage hike. General manager Taptelis noted that his San Francisco-based company is used to having a higher city minimum wage in effect because San Francisco has for years set its minimum wage higher than the state required. He said that he hasn't cut back employee hours to compensate for higher wages, and that although his company has raised prices, it was mostly to cover wholesale coffee cost increases. His main concern was maintaining good service.

"Sometimes it doesn't just come down to the numbers," Taptelis said. "I don't want to risk my customer service."

The MINIMUM WAGE

Starting Monday, the minimum wage in San Jose will be $10. Automatic annual increases will be pegged to inflation. California's minimum wage has been $8 since 2008. A bill in Congress would raise the national minimum wage, which has been $7.25 since 2009, to $10.10 by 2015 with automatic inflation adjustments.

Most states don't allow individual cities to set their own minimum wages, and only a handful of others have done so: Santa Fe and Albuquerque, N.M.; Washington, D.C.; and San Francisco. The San Francisco minimum wage, adopted in 2003 and also indexed to inflation, is now $10.55, the highest in the nation.

San Jose's minimum wage law applies to most employers in the city and to some outside city limits, as well. Employers that maintain a facility in San Jose or are subject to the city's business tax are required to comply with the ordinance. Employees who perform at least two hours or more of work per week in San Jose, even if their employers are based outside city limits, are covered by the minimum wage ordinance. The program will be enforced on a complaint basis, as is the current state minimum wage.



Source: (c)2013 the San Jose Mercury News (San Jose, Calif.) Distributed by MCT Information Services


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