City Debates Minimum Wage Increase

By Ken A. Epstein

While some members of the Oakland City Council are lining up behind the November ballot measure to raise the minimum hourly rate for low-wage workers in Oakland, others are concerned that the way the local ordinance is crafted would

Supporters of the wage increase spoke passionately about their desperate conditions, how they cannot wait any longer for a wage increase. They are people who have to work three jobs to barely survive, have to walk rather than take a bus to their jobs, have to go work when they are too sick to stand up.

On the other side are small businesses and nonprofits, owners who wash dishes, clean floors and do the books to make ends meet. They said they do not oppose wage increase but that a sudden, large jump in salaries cannot be absorbed quickly because their profit margins are slim – they cannot cover the wage increases by raising prices and will be faced with the need to cut hours or lay off workers and perhaps shut down or move out of the city.

ynette McElhaney

Members of the council who share concerns about these negative impacts are considering putting up ballot measure in November that would moderate the impact of the Lift Up proposal.

The alternative proposal, instead of raising the minimum wage to $12.25 an hour less than five months after the election, would raise the minimum to $13 per hour over the next three years. This proposal also provides sick leave and has provisions that would protect small restaurants and exclude youth internship and trainee programs and employees who provide social services for fixed reimbursements.

Both sides cite reports that bolster their arguments. A study by UC Berkeley’s Institute for Research on Labor and Employment, released in June, said the Lift Up measure would raise salaries for 25 to 30 percent of workers by about $2,700 a year. Most of these works are in their twenties or older.

According to this report, operating costs would go up 0.3 percent for retail businesses and 2.8 percent for restaurants. Restaurant prices would go up 2.5 percent, a 25-cent increase on a $10 meal.

Another report, the Hausrath Economic Impact Assessment that was commissioned by the city, is less optimistic about the effects of the Lift Up wage increase on small businesses.

This report projects on increase in labor costs of 2-11 percent of total revenues, while profit margins are estimated as 4 percent of revenues. “Therefore, some businesses will likely charge higher prices or reduce hours or employment in order to offset their higher costs in the short term,” the report said.

The report says that a “longer phase-in period or grace period” for small businesses and non-profits with less ability to pay higher wage costs would allow these businesses time to absorb costs in a “sustainable manner.”

The current minimum wage in California recently went up from $8 to $9 per hour.

Backing the Lift Up measure at Tuesday’s meeting, Councilmember Libby Schaaf said, “The City Council must put the Lift Up proposal on the ballot, and it will pass.”

“To small business and nonprofit people, sometimes doing the right thing is hard. It is going to be hard, but it is the right thing,” Schaaf said, adding that San Jose and San Francisco raised their minimum wage without negative consequences.

Councilmember Lynette McElhaney said she would support a compromise, which would deal with the real pain that workers feel but at the same time does not contribute to gentrification and displacement by driving out small and minority owned businesses from the city.

“In San Francisco the diversity of businesses, including Black-owned businesses, has declined,” she said, adding that part of the reason nonprofits and small businesses are moving to Oakland is that they are being driven out of San Francisco.

“It really feels troubling to me. I’m concerned about unintended consequences, “ she said. “I don’t want to do this at a scale and pace that will have the unintended consequence of shutting businesses down.