Op-ed: Minimum wage plan is raising bar too far, too fast

By the Berkeley Small Business Alliance

Formed in 2014, the Berkeley Small Business Alliance is a group of 100 + small local businesses representing every district in Berkeley.

A poster produced by the Berkeley Small Business Alliance
A poster produced by the Berkeley Small Business Alliance

The Berkeley Small Business Alliance supports the need to raise the minimum wage in Berkeley. There is a longstanding history of support for small business in Berkeley as evidenced by its lack of corporate retailers and big-box stores. Berkeley residents are known for their devotion to sustainable restaurants whose chefs buy seasonally from local farmers and ranchers. It’s the small mom and pop shops that make Berkeley feel like a small town and are the backbone of the local economy.

Well-meaning legislation currently under consideration threatens to undermine the vitality of our small business community. Tonight, the Mayor and city council will vote to raise the minimum wage from $8.00 an hour to $10.00 on Oct. 1, 2014 with incremental increases every year ending at $12.53 per hour Oct. 1, 2016. This proposal will have unknown consequences on Berkeley’s small businesses. It is simply raising the bar too far, too fast.

The State of California has already implemented plans to raise the minimum wage from $8.00 to $9.00 on July 1, 2014. The bill proposed by State Senator Mark Leno just passed the state senate which would effectively raise the minimum wage to $13.00 an hour by 2017. A state minimum wage increase creates an even playing field for all. Berkeley’s proposal, while essentially the same as the State, does not allow time for small business to adapt and adds to the already overwhelming burden traditional small business face with growing competition from online retailers like Amazon.

Berkeley’s proposal will be a burden on the city’s budget as well. According to Berkeley City Manager Christine Daniel’s report, the cost to the city will be approximately $200,000 a year just to oversee the implementation and oversight of this process while adding one full time employee to her staff.

Why is Berkeley so quick to add these costs to its own budget, especially if the state of California has plans to implement the raises on its own dime?

Much of the Berkeley proposal is based upon the recommendations of the Labor Commission. The Labor Commission was comprised mostly of organized labor and was chaired by undergraduate Cal student Angus Teter. There was no actual study of how this would affect small businesses in Berkeley. Most of the evidence in the report is based on the experiences of San Francisco and San Jose. Both are much larger cities and have a vastly different business climates to Berkeley. In both cases the incremental increases were far less than Berkeley’s proposal of a 50% increase in just over two years.

Seattle’s recent minimum wage proposal, based on a thorough impact study, is tiered with a slower ramp-up time for small businesses. It would put small business at $15.00 in 2025. It is heralded as model for large cities around the country. University of Massachusetts economics Professor Arindrajit Dube said in a recent New York Times opinion piece, “The good news is that the somewhat long ramp-up period in Seattle will provide us with an occasion to learn from this experiment and offer opportunities for course corrections.”

Berkeley’s own Robert Reich, Cal professor and former labor secretary, said in a June 4 post on his blog, “I wouldn’t advise any place to raise its minimum wage immediately from the current federal minimum of $7.25 an hour to $15. That would be too big a leap all at once. Employers – especially small ones – need time to adapt.”

Understanding that small business needs time to adapt to the new minimum wage increases, The Berkeley Small Business Alliance is asking the Mayor to postpone a vote to raise Berkeley’s minimum wage until a thorough Minimum Wage Impact Study is completed. This proposal as it stands may have too many unintended consequences. Berkeley’s small businesses may not have time to course correct. Many small businesses whose major competitors are online retailers cannot raise prices and will be forced to move to another city or close entirely. In addition to the needless costs to the city and the local economy, it would be too high a price to pay to lose the small businesses that make Berkeley unique. We may be left with empty store fronts in our neighborhoods with only a few chain stores able to fill them.

Without a thorough Minimum Wage impact study the city loses the opportunity to become a model for medium sized cities around the country. It is imperative that Berkeley create laws based on data and facts otherwise we also may lose the very things we love about Berkeley.

We need to Keep Small Business in Berkeley!

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