
America’s Highest Minimum Wage Sparks Fight in Small California City - JumpCrisscross
https://www.wsj.com/articles/americas-highest-minimum-wage-sparks-fight-in-small-california-city-11563960603?mod=rsswn
======
vgoh1
Typical WSJ rubbish. Focus on anecdotes, like the guy who sacks over half of
his staff because of a < 15% increase in minimum wage.

Having grown up solidly in the class of the "working poor", I can tell you a
side of the story that is not often told - there is not enough difference in
quality of life between "working poor" and just being on public assistance and
unemployed. When you are unemployed, you get government benefits, and most
people either have a side hustle (odd jobs under the table, or sometimes
something blatantly illegal), or commit some type of fraud like claiming to
live on their own when in fact they split rent between many people. I'm not
judging here, it's just what happens.

So you get these people who make minimum wage, they aren't really living
substantially better than those who don't work, yet they have to work 40 hours
a week for some a __hole with a Nepolean complex, and we wonder why so many
people choose not to work?

The right-wing position is that we should slash benefits because of the lazy
ones taking advantage of the system. The left-wing position is that all the
poor are just misunderstood. My position is that, from experience, yes there
are able-bodied people who are choosing not to work, it is a problem, and the
proper way to deal with it is to make sure there are substantial benefits to
having a job.

Yes, raising minimum wage will make a minor increase in unemployment, and will
make a bit of hardship for a very small number of restaurant owners, those are
valid points, that in my opinion are not terrible enough to keep the minimum
wage low.

~~~
dsfyu404ed
>So you get these people who make minimum wage, they aren't really living
substantially better than those who don't work,

Supporting yourself (by basically selling your labor) instead of relying on
the government is worth something (non-tangible value, obviously) to a lot of
people (though I suspect there are few of those people on HN). It makes you
feel good (less bad) about your situation and frankly having your existence be
dependent on some entity you have nearly zero control over sucks and is
stressful.

Obviously on some level it comes down to personal preference but clearly a
large subset of the population feels that minimum wage or nearly minimum wage
jobs are a good enough deal relative to government benefits that they do them.

The people who I'd personally want to hire are the one's who are gaming the
system by getting benefits and working under the table or having a side gig
because they clearly know how to optimize for a given set of constraints.
Unfortunately those are the ones that aren't in the job market.

~~~
glenneroo
I think you should indicate somehow that you've edited your comment (e.g.
customary "EDIT" following your original comment), granted in your case, you
changed your original comment entirely (after the apparent backlash at your
disagreement with GP's comment), which is IMO somewhat disingenuous.

~~~
dsfyu404ed
I added two paragraphs. I didn't feel saying it was edited was warranted since
it was an expansion rather than a change of meaning.

Also I agree with the GP comment, I was just expanding on the point about the
people who aren't working and don't want to. I thought it was worth noting
that that is not something many people can rationalize.

------
tomasien
I just can't stress this enough: if you're reading an economics article that
relies on anecdotes from owners in the service industry, DO NOT READ IT!

You can find a service industry business owner to shit on literally anything
local government does. If there aren't hard numbers in the piece, into the
trash it goes.

In the city where I grew up, they implemented a Bus Rapid Transit system that
has definitively helped the businesses on its corridor. However, from the
moment it was announced, article after article would come out where business
owners would blame the BRT for their declining business or even failure. The
evidence never backed these claims up.

The case that the minimum wage hurts the service industry, in particular,
makes sense to me. In fact, I'm sure it's somewhat true. However, when the
best an article can do is a 2018 survey saying that the majority of businesses
have increased prices (curiously - no numbers about any negative impact on
their bottom lines) - toss it in the garbage. No thanks.

~~~
jeromegv
In Toronto they did something wonderful. DATA. When they implemented transit
priority on a previously more car-centric road, of course you had some small
business owners screaming murder, saying their sales were down like crazy (we
heard 30-40%) and wanted compensation. Majority of business actually supported
the new project because it was about bringing more people total (more people
fits in transit than would fit on a parking lot).

Turns out that the city had a partnership with the credit card processors to
measure the change in spending before and after the implementation of the
project (on a aggregate level for all the shops on that street). Surprise
surprise, a year later, they were able to prove there was no drop in business.
We never heard again from those business, and surprise, they are still open.

~~~
maaaats
Same in Norway just this year. Removing lots of cars from the city centre,
people complaining, then the data shows it was not really an issue.

~~~
tomasien
Yeah there's tons of data on this, it's essentially not controversial if you
care about data/what's real. Cars destroy business in every city in the world
where they're dominant.

------
greedo
When I worked in the restaurant biz in the 80's, our franchise owner hated
bumps in the minimum wage. If minimum wage went up 10%, (like to $3.35/hour)
he'd instruct his managers to cut the amount of hours by 10%. The restaurants
would just have to deal with fewer employees. We were all smart enough to see
that this would have adverse affects on QSC (Quality, Service, Cleanliness),
but he didn't care. He just wanted his costs relatively fixed. It also didn't
help our argument that sales were continually rising, so he was shielded from
the effects of his labor cuts.

The only thing that made him voluntarily raise his wages was when In N Out
opened a location 20 minutes away. The immediate drop in sales at his flagship
restaurant forced him to compete for labor (In N Out was starting employees at
2x minimum wage IIRC).

------
lettergram
The number one cost for businesses are employees, often by far. If you raise
that year over year, it’s bound to be painful.

Say 60% of my business expenses were employees, 10% was rent and 30% was
produce for a restaurant.

A doubling of the minimum wage would likely increase by expenses by 35% -
assuming the minimum wage didn’t impact where my food was purchased.

This is why there a large fields of economic theory that warn against minimum
wage hikes.

The increase in minimum wage is going to mean those whose rent out buildings
will increase prices. Food becomes more expensive, shops have to close, etc.
it’s essentially a race to the bottom and as it’s a zero sum game it’ll often
lead to the economy to slow (long term). This is as there is a shift in
purchasing behavior, or people moving due to employment loss.

~~~
greedo
And it's also important to remember that if the min wage rises, it often
affects all pay structures at a business. If the entry level position gets a
big pay jump, then other employees will expect a corresponding bump in their
hourly rate. Otherwise you'll end up with new hires making more than employees
with experience.

------
formercoder
So input costs rise, some business cut services, some raise prices, causing
inflation. Not sure what the news story is here.

Anyone interested in the truth will tell you that raising the minimum wage
will destroy at least some jobs.

~~~
pytester
>Anyone interested in the truth will tell you that raising the minimum wage
will destroy at least some jobs.

This is the "big lie" used to justify keeping it low. The reality is that
minimum wage hikes hit profit margins first and hardest, inflation next and
jobs get hit _last_ (maybe if it gets hiked $10 / hour).

[http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421...](http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421.7637&rep=rep1&type=pdf)

>"Studying profitability is important because the empirical evidence suggests
that minimum wages do raise the earnings of low wage workers, but do not seem
to have large negative employment consequences."

>"Across both datasets our results show that that profitability was
significantly reduced by the introduction of the minimum wage. "

Minimum waged labor is very, very, very inelastic. For better or worse the
people who clean your toilets and serve you coffee in the mornings are
extremely necessary and very hard to substitute. Much more so than most middle
class jobs, even.

Business lobbies know this to be the truth, but they know that they will get
nothing but by asking the general public to have sympathy for their falling
profit margins.

So, they try to scare the shit out of you by claiming that they will be
_forced_ to fire you instead (e.g. this expensive billboard for the national
restaurant association demonstrating their concern):

[https://pando.com/2014/07/17/new-san-francisco-billboard-
war...](https://pando.com/2014/07/17/new-san-francisco-billboard-warns-
workers-theyll-be-replaced-by-ipads-if-they-demand-a-fair-wage/)

~~~
conanbatt
> Minimum waged labor is very, very, very inelastic. For better or worse the
> people who clean your toilets and serve you coffee in the mornings are
> extremely necessary and very hard to substitute. Much more so than most
> middle class jobs, even.

Literally the opposite. It's so elastic they can't demand any wages for what
they do. Minimum wage is about turning it inelastic with the punishment of
prison.

The best argument I have heard around MW is that businesses can afford to pay
more but have too much market power to let that go. I tend to disagree in a
3.5% unemployment economy, but its possible.

These famous studies of minimum wage always come with caveats, on both side of
the aisles. If you increase minimum wage today you might not see the
unemployment _ever_ in a stat, because you are sacrificing future employment
(businesses that don't open because upstart costs are higher). In the end, MW
is a handout from left leaning people passing the bill to businesses: they
could help the working people they want to target just as well with
suplemental labor income, but that implies reducing other expenditures from
the government, whereas MW looks like a freebie from businesses.

~~~
pytester
>Literally the opposite.

In which case we should see toilets going uncleaned, coffee not being made in
response to minimum wage hikes and a clear spike in unemployment that couldn't
be attributed to anything else. Doesn't happen (c.f. Dube, Lester, Reich (Nov
2010)).

>These famous studies of minimum wage always come with caveats, on both side
of the aisles.

Dube, Lester, Reich is the only one I'm aware of which comes without caveats.

~~~
conanbatt
> In which case we should see toilets going uncleaned, coffee not being made
> in response to minimum wage hikes and a clear spike in unemployment that
> couldn't be attributed to anything else. Doesn't happen (c.f. Dube, Lester,
> Reich (Nov 2010)).

This effect could be explained by capital consumption. If you already have a
business you can't switch your entire capital to adjust to the new costs. But
new businesses will invest more in less-labor-intensive coffee machines,
smaller/worse bathrooms, and wouldn't fire the staff immediately and take the
profit hit now and not invest later. Human systems tend to hide away
consequences by playing with future expectations, because they are easy and
invisible.

This topic is actually academically difficult as it is, I'm not an academic or
professional economist, and I simply distrust all parties. Thus, in case of
doubt, do no harm. Do nothing.

------
reallydontask
Take the first guy, he sacks six employees out of ten and closes the dinner
shift. Given that on an 8 hour shift the extra cost is just over $60 this just
does seem to make sense, in other words, the sacking of people it's unrelated
to the minimum wage increase.

He clearly has reasons for doing what he is doing but I find it hard to
believe that increase in minimum wage is the issue, specially when the way
it's due to increase yearly, preceeds he starting his business (unless the
reporting is wrong and is not 2017)

Is there anything I'm missing here?

~~~
JumpCrisscross
> _Given that on an 8 hour shift the extra cost is just over $60_

Don’t other labor costs ( _e.g._ payroll taxes) scale with pay? So the daily
savings are more than $60.

And $60/day conserves $1,800 a month, which is a decent amount of cash for a
restaurant. If it’s a lunch-rush shop with marginal dinner business,
$2,000/month could be the break point for that shift and those jobs.

Absent zoning reform, however, these wages are more likely to flow into higher
rents versus consumption or savings.

~~~
ChrisBland
Correct - the fully baked cost of these employees is much higher than the
extra $/hr increase. The bigger kicker is this location is fixed, they HAVE to
pay their employees this amount. The consumer is NOT fixed and given an
increase in prices, has the ability to conduct commerce in an area near
Emeryville that was not impacted by the higher wages. So all things being
equal, the same sandwich made a few miles away may be a few $ cheaper and for
people on a limited budget, the consumer may make that choice. It is similar
to when a city/county raise taxes within their limits on certain items, lets
say cigarettes, then are surprised when instead of raising revenue, the amount
of revenue overall collected falls after this increase. Consumers have the
ability to purchase outside of the city's taxing authority when the marginal
increase is more than the perceived cost to the consumer to travel to purchase
them. This is basic econ 101, maybe 201. While these attempts are great, they
fail to factor that in and should be coordinated at the state level to have
any impact. Even with that, states deal with this all the time when people go
across state lines to purchase booze, or leave high sales tax states when
making large ticket purchases. It is no coincidence that just across the
border from Illinois in Wisc/Indiana there are best buys / appliance stores
that do huge volumes of business.

------
corodra
Okay, so I have a question. A lot of folks are saying this is anecdotal. Which
is true. A hand full of hearsay. Probably just a bunch of jackasses talking
crap.

But, how many stories like this are needed until it's no longer anecdotal? I
keep seeing people on HN say "Anecdotal! Doesn't matter!". I mean, so is the
story of someone getting hit by a car and breaking bones. If they say "high
speed vehicles hitting someone can break bones", it's easy to say "Anecdotal!
Many people are around high speed vehicles and don't break bones!" Which is
true too.

So... just saying. I've been doing data science on and off the last 2 years
and the number 1 task is cleaning data. Which, in itself leads to problems.
All data is anecdotal, except its collected in one place. Maybe the whole
unbiased collection plays in, but no one is truly ever unbiased towards
anything.

~~~
Spooky23
The hint that it’s bullshit is when other obvious levers “cannot” get pulled.
“My labor costs went up 8%, but I cannot raise the price of a sandwich!” If
that we’re true, restaurants wouldn’t be able to charge $3 for a 12oz fountain
coke in a glass cup that costs $0.10.

Guess what... you can. If you can’t, usually there’s another, self-inflicted
reason. If you look back a few years ago, there was a significant tomato price
increase and you had similar stories where expensive tomatoes were prompting
price increases on the menu.

~~~
corodra
See, you fell into the problem I'm talking about. I'm not saying the people in
the article are correct. I already thought they were short sighted and just
bitching about problems they put their heads in the sand about.

I'm arguing that this being anecdotal isn't enough to invalidate their claims.
Their claims are invalid because of other factors that anyone with their own
business can see through. But not for being anecdotal. I have an issue with
the HN community using anecdotal as enough justifiable cause to say someone is
wrong. Data is just a lot of recorded anecdotes in one place.

~~~
knightofmars
"Data is just a lot of recorded anecdotes in one place."

I don't agree with this interpretation. Data is the use of quantitative
measures to provide sound evidence for a compelling argument. Anecdotes rely
on a "shoot from the hip" approach to describing a position. For example,
blaming rising minimum wage as the sole factor in the success or failure of a
business ignores a whole spectrum of factors (business rent, business
insurance, prevailing local population wages, pricing, quality of food,
quality of service, etc).

Even if we took all of the anecdotes of these business owners into account and
they all said "We had to eliminate staff and hours because of rising minimum
wage." it isn't enough to actually support the claim that rising minimum wage
causes the problems described. It informs a theory of the effects of rising
minimum wage but without all of the supporting evidence and data collection
that eliminates possible other influencing factors it is purely anecdotal and
should in no way be considered supportive of their claims and therefore does
in fact invalidate them.

As an example, suppose that along with the city increasing minimum wage they
also increased property taxes gradually over time. The property owners decided
to then pass the increase in property taxes onto their renters. Because of the
increase in both minimum wage and property taxes occurring at the same time it
squeezed the owner's profit margins. The owner unable to do anything about the
change in rent focuses entirely on the fact that they had to increase what
they pay their employees due to the increase in minimum wage. When interviewed
about the situation they only talk about the increase in minimum wage as the
problem, which is anecdotal and ignores the other influencing factor, increase
in rent due to the increase in property taxes.

------
otikik
The question I think is missing from the article is:

"How much do _you_ earn, mr business owner?"

Hey, if your employees earning a minimal wage aren't entitled to some privacy,
neither are you.

~~~
ransom1538
"How much do you earn, mr business owner?"

Answer: "I make -50k per year".

Small business owners aren't the winner. Raising minimum wages don't hurt
Walmart or Amazon - they do though, destroy the small guy. Amazon doesn't
raise their pay to be nice.

"20% of small businesses fail in their first year, 30% of small business fail
in their second year, and 50% of small businesses fail after five years in
business. "

[https://www.fundera.com/blog/what-percentage-of-small-
busine...](https://www.fundera.com/blog/what-percentage-of-small-businesses-
fail)

------
coldtea
> _The economy is booming in the Bay Area, but at Patatas Neighborhood
> Kitchen, located in this small city just north of Oakland, owner Marcos
> Quezada recently eliminated the dinner shift and laid off six of his 10
> workers. He struggled with the decision but felt he had no choice after
> Emeryville increased its hourly minimum wage on July 1 from $15 to $16.30,
> the highest in the U.S. “I just didn’t see how I was going to survive it,”_

Then perhaps he shouldn't be having a business in the first place? What was
his scheme, get his profits (or barely even) by paying people a pittance?

~~~
AimForTheBushes
This is a terrible sentiment. He's free to make that business decision.

You don't know his use case. It sounds like his money maker was the brunch and
lunch crowd while dinner was just something extra. Increasing wages decreases
business opportunity.

~~~
coldtea
> _This is a terrible sentiment. He 's free to make that business decision._

Sure, and I'd rather he was not.

~~~
AimForTheBushes
Thank god I don't live in a planned economy where you can't axe the dinner
shift and a bus boy.

------
knightofmars
If I open a business and my business is successful because I have labor that's
expected to make less than what's required to provide basic subsistence living
then my business model is broken. Why? Because the government will end up
picking up the tab by providing healthcare, rent assistance, and food
assistance to my employees. Which means that my business model is being
subsidized by the government and is effectively a welfare business by the
transitive property. We can either say, "That's fine the government should
subsidize these businesses." or we can say, "The market should handle this,
local government should push minimum wage to the point where government
subsidies aren't required and then allow businesses that can't make it fail."
In the first case if we want the government to subsidize business of this
nature then we should raise taxes on businesses because they're the ones who
want subsidized labor. In the latter, the ones that will get hit first are
restaurants that have low prices and serve food to people in the price tier of
the bottom half of the middle class. Which also highlights a cultural shift
that may need to occur, the reality that the amount we eat out at restaurants
and have others providing food preparation for us is economically broken and
that a large portion of the population that currently enjoys this benefit by
eating at these restaurants in reality can't actually afford it, at its non-
subsidized price, as frequently as it's currently enjoyed.

~~~
rightbyte
"others providing food preparation for us is economically broken".

Shouldn't it be more efficient with mass production of meals? If economic
efficiency is the goal, people would eat in neighbourhood rotating menu
restaurants. Like a Soviet kolkhoz or any army camp.

~~~
knightofmars
> Shouldn't it be more efficient with mass production of meals?

It already is: McDonald's, Burger King, Taco Bell, etc.

The difference being that in the examples given the means of production are
also controlled by the business. With fast food, and McDonald's as the
example, they control their own supply chain[1]. It's the reason that
everything tastes the same no matter which McDonald's you go to. Many fast
food businesses emulate this process because it has been so successful for
McDonald's.

With your example of a Soviet kolkhoz, the state owned the agriculture and
determined the prices because they had control over the whole supply chain.[2]

I would also argue that this is what people are buying when they buy pre-
packaged frozen meals. People seem to forget that home refrigeration wasn't a
thing until it became really accessible starting in the 1930s. Then with the
invention of the frozen dinner in 1950s changed how a large set of people
looked at meals. You suddenly didn't have to cook and didn't have to pay
someone else to cook you a meal on demand. For a price comparison, a frozen
dinner in the 60s was around a dollar[3] or less [4]. Whereas a restaurant
would have cost approximately an extra 100%, 200%, or more[5] "1964 A one-
plate turkey dinner at Howard Johnson’s $1.49" (specifically the standard
fare, not fine dining).

[1] [https://boxaroundtheworld.com/mcdonalds-supply-chain-
managem...](https://boxaroundtheworld.com/mcdonalds-supply-chain-management/)

[2]
[https://en.wikipedia.org/wiki/Kolkhoz](https://en.wikipedia.org/wiki/Kolkhoz)

[3] [https://www.encyclopedia.com/sports-and-everyday-
life/food-a...](https://www.encyclopedia.com/sports-and-everyday-life/food-
and-drink/food-and-cooking/frozen-foods-industry)

[4]
[http://www.thepeoplehistory.com/60sfood.html](http://www.thepeoplehistory.com/60sfood.html)

[5] [https://restaurant-ingthroughhistory.com/restaurant-
prices/](https://restaurant-ingthroughhistory.com/restaurant-prices/)

------
qaq
"restaurants have thin profit margins" too many restaurants ? The unit margin
is fairly high.

~~~
greedo
Most restaurants aren't competing with other restaurants really, they're
competing with you staying home and eating a frozen pizza.

------
sbrady12345
I'd pay an extra 1.50 for a sandwich

~~~
psim1
But $14.50 for a plate of eggs and pancakes? I don't care where you live.
That's crazy.

~~~
SauciestGNU
It could be that's the true cost of a basic breakfast provided to you by
someone else when you take into consideration the value added through labor,
facilities costs, food costs, food transportation, etc. There's really no
axiom stating a meal out must not be substantially more costly than preparing
your own food.

