By Laura McCamy and Liza Veale
Polling shows that Oakland voters will likely approve an increase minimum wage to $12.25 per hour as of March 1, 2015, with annual increases pegged to cost of living. The Lift Up Oakland coalition submitted enough signatures to qualify the measure for the November ballot on May 23, 2014. Some stakeholders warn the hike may cause jobs to move out of Oakland and into neighboring cities where the cost of labor will be cheaper. To mitigate this concern, an effort is underway towards a coordinated East Bay minimum wage. See our related coverage here.
According to Shum Preston, spokesperson for Service Employees International Union 1021, the Oakland efforts have been “the most well-developed and broadly-supported” in the region. However, as of June 5, coalitions of labor activists in Richmond and Berkeley have formed and filed petitions to begin the process of qualifying ballot measures similar to Oakland’s. SEIU and ACCE, who have been unifying organizers in all of the cities, are working to qualify a ballot initiative that would raise San Francisco’s minimum wage to $15.00 by 2016 for companies with more than 100 employees and by 2017 for companies with fewer than 100 workers.
“No one wants to be the one to kill Bambi,” said Michael LeBlanc, owner of Pícan at a recent Chamber of Commerce discussion attended by business owners eager to share their concerns and hopes for the upcoming changes. LeBlanc wants to make one thing clear: he is in favor of increasing the minimum wage. His concern is specifically about the impact a big hike will have on Oakland’s restaurant scene. Pícan employs 52 people, with annual payroll of $1.2 million — LeBlanc’s servers report earning between $14 and $29 per hour with tips. The Oakland ballot measure could raise LeBlanc’s payroll by $300,000, a significant bite in a business where margins are as low as five cents on the dollar. LeBlanc told the Chamber he is looking at two location options for his next restaurant: one is in Oakland, the other is in Walnut Creek. “If the cost of labor in Oakland changes too much,” he says, “economically it’s not even a tough decision [which location I choose].”
At a City Council hearing on April 29, Councilmember Libby Schaaf, one of the first to endorse the Lift Up initiative, spoke against this idea. “It’s scary to rely on tips because some nights are good and some nights aren’t,” she said. Instead of restaurant exemptions, Schaaf suggested servers might welcome lower tips in favor of consistently higher wages. “Maybe it’s time we as diners had that larger conversation in Oakland,” she said.
In response to concerns from restaurant owners, Nikki Bas, chief petitioner of the Lift Up initiative, points to data from other cities that suggest the restaurant industry is more resilient than LeBlanc fears. In the year since San Jose raised its minimum wage to $10.00 an hour, 4,000 new jobs have been added to the service sector, according to Bas.
There are multiple factors influencing this kind of economic growth: trends in the larger economy, the amount of money the city spends to promote growth, demographic changes, and the like. There are no studies, however, showing that local economies are hampered by city-wide hikes. As more and more data become available, labor economists have “increasingly recognized that raising the minimum wage does not automatically mean that employment will fall,” according to a meta-study by the same UC Berkeley professors. Increased labor costs can be absorbed through a variety of other channels, including savings from reduced worker turnover and improved efficiency, lower profits and higher prices. The study found that the restaurant industry was the only industry to raise prices (among restaurants, researchers found small, one-time price increases of about 0.7 percent following a 10 percent minimum wage increase).
At the April 29th City Council meeting, Councilmember McElhaney raised concerns about what will happen if Oakland raises the minimum wage unilaterally. “Unlike many other geographically distinct [or insulated] cities, Oakland is bordered on all sides by competing cities,” she said. “We’ve already seen so many of our plants and headquarters siphoned off by our neighbors… I’m worried about our disadvantaged or less qualified workers being able to find jobs here in Oakland.”
“The momentum is growing” for an area-wide hike, said Preston, who noted that regional polling shows support for increasing the minimum wage at around 70 percent. He reports hearing from people who want to organize initiatives in Concord, San Leandro, Sunnyvale, and other East Bay cities.
At the April 29 City Council meeting, Larry Reid presented a competing plan, which would include the same exemptions found in the city’s living wage ordinance and the possibility of staggered implementation for small businesses and restaurants. However, the committee sent his proposal back for more analysis and the plan has not been finalized. Like the Lift Up initiative, Reid’s proposal included annual increases pegged to inflation. The initial increase proposed by Reid was $10.10, or $1.10 higher than it would be by the time of implementation next year.
C.J. Hirschfield, Director of the nonprofit Children’s Fairyland, expressed concern about the blow to already precarious and unpredictable nonprofit budgets. Though only a small portion of her staff — 21 seasonal, primarily youth employees — earn less than the proposed $12.25 minimum, she reports that many others in the nonprofit community would need more time to prepare for such a big hike. Regarding a staggered implementation scheme or carve-outs, Hirschfield said “what scares me the most is not having a discussion about these ideas at all.”
The Lift Up campaign argues that the proposals with the broadest exemptions would disqualify as many as half of Oakland’s workers from wage increases. Ultimately, Bas says, “Oakland has to be a leader on this issue. It’s the only way forward for a more sustainable economy in the long term.”