Feeling burned by a $15 minimum wage
When San Francisco comic book store owner Brian Hibbs heard about another retailer's pending closure because of the city's new $15 minimum wage, he sat down to figure out the impact on his store, Comix Experience.
"I hadn't done the math. I penciled it out and said, 'Oh my god, that's a lot of money,'" he recalled. "'I know other stores haven't done [the math]. You try to get through the day -- you aren't thinking three years ahead."
Hibbs, like other small business owners in cities that have recently passed minimum wage hikes, is getting creative: He hopes his new subscription graphic-novel-of-the-month clubs will generate the $80,000 in additional sales needed to keep Comix Experience in business. Whether the effort will succeed isn't yet clear, and while Hibbs says he supports workers earning a living wage and isn't ideological about the issue, he feels the new law was passed without considering the impact on small businesses like his.
"It was voted by the voters but it wasn't presented in such a way that anyone was paying any attention to small businesses," Hibbs told CBS MoneyWatch. "The voter registration booklet had nothing but pro arguments; there were no cons. This was a case of good intentions, but not really thinking through how it was going to affect small businesses."
For better or worse, Hibbs and other small business owners are getting caught at the center of a new trend spreading across major U.S. cities: Municipalities passing their own higher minimum wage laws.
An "unprecedented number" of cities have moved to adopt higher baseline wages during the past year, according to the National Employment Law Project. On Tuesday, the Los Angeles City Council voted to set a $15 hourly minimum wage by 2020. Other cities that have already passed new higher wage laws include Chicago, Seattle, Oakland, California and Richmond, California.
The municipalities are responding to a national movement to raise the baseline wage, with the Fight for $15 movement pushing major corporations that employ legions of low-paid workers, such as McDonald's (MCD) and Walmart (WMT), to boost wages. The federal minimum wage remains stuck at $7.25 an hour, leaving many workers living on near-poverty wages and forcing them to rely on government aid to make ends meet.
In cities such as San Francisco, where the cost of living is especially high, the push for a higher minimum wage was met with widespread support. An economic study published last year by the city pointed out that median rents in San Francisco have increased at twice the rate of the minimum wage since 2005. The analysis of a $15 wage found that while low-wage workers would see their pay increase by 20 percent, about 15,000 private-sector jobs, or 2 percent of the city's workforce, would be lost.
"I think it is part of a momentum-building exercise," said Michael Saltsman, the research director of conservative think tank Employment Policies Institute, which advocates against a higher minimum wage. "You pass this thing in enough places and it becomes something you can advocate for at the federal level."
A higher minimum wage will help Americans, including business owners, by giving them more money to spend in their communities, said Alysabeth Alexander, the vice president of politics for SEIU 1021, a union branch representing workers in Northern California.
"The research shows minimum wage laws have no net impact on overall employment figures or businesses closing," Alexander wrote in an email. "We estimate that minimum-wage workers will earn about $400 million extra annually from the higher wage, and much of that will become revenue for businesses like Comix Experience."
So far, the impact is just starting to ripple through San Francisco. On May 1, the city's minimum wage rose to $12.25 an hour, with subsequent hikes scheduled for each subsequent year, until it reaches $15 an hour in 2018.
Hibbs was galvanized to think through the impact of that hike by the announcement earlier this year that Borderlands, a science fiction and fantasy bookstore in San Francisco, would close its doors. Yet Borderlands has had its own happy ending, with owner Alan Beatts finding a creative way to keep his doors open -- at least for now.
At a community meeting to address questions about the pending closure, Beatts recalled, "One gentleman suggested the idea to sell a membership card to allow people to pay more for books." He added, "I thought he was nuts. But the thing that struck me was a fair number of people seemed enthusiastic about the idea, so that made me think about what people would be willing to do to keep us open. That was a watershed moment."
Borderlands started selling annual memberships for $100 each, with the goal of selling 300 to meet its higher payroll. So far, Beatts said he's sold more than 800, and continues to sign up two or three new sponsors a week. Supporters will receive invitations to a quarterly bookstore party, as well as other events such as a whisky tasting event with author Mary Robinette Kowal and a writing workshop this summer.
While Beatts has been successful, he cautioned that it's unclear whether customers will be as responsive in the future. If he's unable to sign up 300 sponsors by March 31 of each successive year, he says he'll close Borderlands.
At Comix Experience, Hibbs said he's sold about 180 graphic novel of the month club memberships, with the goal of reaching 344 subscriptions to his adult and kid programs. He said he believes the store will reach the goal, but worries about the ability of other stores to copy the type of crowd-sourcing models that he and Beatts have tapped.
"I don't think this is a scalable solution," Hibbs noted. "The first person will have a great response; the third person will have an okay response. Then it will be, 'We can't support all these stores.'"
Bookstores, both store owners point out, are in a particularly precarious situation given that the publishers print the prices on book covers, giving store owners little flexibility in pricing.
Small business owners feel the impact of local minimum wage increases more than big multinational retailers like Walmart, which has thousands of other stores that aren't subject to the higher wage law, Beatts added.
"The effect of very high and localized minimum wages, like what we have in San Francisco, in essence is beneficial to big businesses while being detrimental to small businesses," he said. "The impact rests completely on my only location. An impact on someone like Walmart is relatively insignificant."