On July 1, California’s minimum wage went from $8 an hour to $9. Just days later, the San Diego City Council voted to raise the city’s minimum wage and mandated that companies give employees five sick days each year. It isn’t just San Diego–San Francisco, Oakland, Berkeley, and Richmond are pondering similar hikes. With so many wage increases going into effect, and so much debate going on around the minimum wage, Bay Area businesses can’t afford to ignore the issue. Some labor activists laud the pay hikes; some business leaders bemoan them. Business owners and leaders should be careful to consider both sides of the issue before taking a stance.
What the Proponents are Saying
- With higher wages, workers can stay in their communities. It’s expensive to live in cities like San Diego and San Francisco. So expensive, in fact, that some workers are being forced out of the cities they work in, leaving businesses understaffed. Proponents hope that higher pay will keep workers in local economies, and thus keep local businesses fully supported.
- A higher minimum wage stimulates local economies. Some anticipate that, with a higher wage, workers will spend their extra money within their community. Thus, though some employers may initially be forced to lay off workers, the influx of extra cash from other low-wage laborers will bolster the market and lead to long-term growth.
- Higher wages mean a higher standard of living. Almost 25% of Californians live in poverty, many going without basic necessities like adequate food, shelter, or clothing. An increase in the minimum wage could help some of these people get out of poverty.
What the Opponents are Saying
- Businesses won’t be able to hire as many employees. The increased cost of one worker’s salary obviously means less money going back into a business. An increase in many workers’ salaries will have an even larger impact. Companies with many employees or a thin profit margin may have to cut other costs in order to pay higher wages. Part of those cuts may mean reducing the number of employees on the payroll.
- The employer will be forced to pass on the expense. When one element of production becomes more expensive, companies commonly pass the cost onto customers by raising prices. So while some employees might have extra cash to spend because of the wage increase, the cost of goods will rise as well, and there will be no net boon to the economy.
- Higher wages in some locales (but not others) puts businesses at an economic disadvantage. It’s an oft-noted problem: if the cost of production goes up in one place, there’s nothing to stop clients from taking their business to another location where they can get the same product for a lower price. Many now worry that, with some California cities raising the minimum wage and others not, neighboring cities will be in direct competition with each other, and the higher-wage cities will lose clients as a result.
Talk to a Bay Area Business Attorney
The minimum-wage debate is a sensitive area that elicits a wide range of emotions from employers and employees. If you are concerned about the effect that a pay hike could have on your business, contact the attorneys at Garcia & Gurney. Gain a better understanding of the law, and get help planning for your business’s future.
Photo Credit: Geralt on Pixabay