Can The City Afford Another Minimum-Wage Increase?

  • Author: Michael Saltsman

  • Publication Date: November 2010

  • Newspaper: San Francisco Examiner

  • Topics: Minimum Wage, Teen Unemployment

In 2009, San Francisco raised its minimum wage by 43 cents. At the time, it was described as a “small dose of good cheer” for those earning the mandated minimum. The coming hike in 2011 to $9.92 is sure to
be depicted in similar terms.

But such a hike is cold comfort if you’re part of the less-educated or less-experienced segment of The City’s population that’s looking for work. For them, it just got even harder to find a job.

San Francisco’s City Council designed a three-part mandate that The City’s employers must contend with: In 2011, that means a $9.92 an hour minimum wage, a $1.37 an hour health care expense (if you’re a mid-size business), and up to nine days of paid sick leave. For a full-time employee, that’s just under $24,000 a year in wages and benefits.

That might sound reasonable for a 27-year-old working a retail job, with a few years of experience under his or her belt. But what about a young adult who has very few job skills? San Francisco has essentially made it illegal to pay an inexperienced employee less than $24,000 a year (full time) to bag groceries or fry fries.

Throughout California, wage floors are set well above the federal level. The state’s higher labor costs put employers like restaurants and grocery stores in a bind.

Their customers are sensitive to price increases, and even modest efforts to cover added costs (such as a health care surcharge on restaurant bills) have been unpopular. Businesses instead find ways to increase labor efficiency, cutting back on customer service — and the number of people they employ.

For instance, California Pizza Kitchen is introducing technology that allows customers a “self service” means to pay at the table. This spares the wait staff from one of its more time-consuming tasks, allowing management to schedule one or two fewer servers per shift.

But you don’t have to go out to eat to witness this phenomenon: Your local Safeway has likely introduced self-checkout lanes.

Instead of charging you more for a gallon of milk or a pound of beef, grocery stores are handling higher labor costs by cutting back on services like grocery bagging and “teaching” customers to do it themselves.
If even one part-time employee loses a job at each of the hundreds of grocery stores, restaurants, and other businesses that rely on minimum wage labor, San Francisco’s well-intentioned policymakers could find themselves in the midst of a full-blown employment crisis.

Need proof?

When Congress raised the federal minimum wage by 40 percent between July 2007 and July 2009, research shows that more than 114,000 teens were priced out of a job — even controlling for the effects of the recession.

The young and unemployed are losing out on more than just the extra spending cash. They’re missing out on valuable life skills that come from early job experience, like managing your time, learning the importance of customer service, and cooperating with coworkers as part of a team.

Studies have shown that spells of unemployment early in life can mean serious consequences later on.

So much for good cheer.

Michael Saltsman is the research fellow at the Employment Policies Institute, a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment.