Berkeley merchants: New minimum wage proposal would ‘decimate’ businesses

Elmwood by Sharon Hahn Darlin — Merchants in business districts such as the Elmwood are opposed to a new proposal that would see the minimum wage rise to $19/hour. Photo: Sharon Hahn Darlin

By Lisa Tsering

Berkeley business owners say a new proposed minimum wage hike will quite simply drive them out of business and, in the process, destroy the unique flavor of shopping districts such as the Elmwood, Telegraph Avenue, downtown and Fourth Street.

At the same time, given that the city is at the forefront of progressive politics on so many issues, many merchants fear they will appear politically incorrect for opposing a higher minimum wage.

“A living wage is a great and lofty goal, but the business community feels very, very intimidated,” said Ky J. Boyd, proprietor of the Rialto Cinemas Elmwood. “People feel they will be retaliated against. Somebody’s got to stand up and speak out about this.”

The current minimum wage in Berkeley, which took effect Oct. 1, 2015, is $11 per hour. Last year, the Berkeley City Council voted to increase the minimum wage annually to $12.53 by October 2016, but the city’s Labor Commission is calling for a higher wage than that (annual increases up to $19, to take effect in 2020) and has called for local enhancements to California’s new paid sick leave amendment.

Council will hold a special meeting to discuss proposed changes to the minimum wage and sick leave policy Nov. 10 at 7 p.m. at Longfellow Middle School Auditorium, at 1500 Derby St.

A higher minimum wage will “close the Elmwood,” said Boyd. “Is it really serving Berkeley if in pursuit of this noble goal you drive the small businesses out of business?”

The Labor Commission’s proposal suggests bumping up the 2016 increase to $13, followed by an increase to $14.50 in October 2017, $16 in 2018, $17.50 in 2019 and $19 in 2020. In its report to council, the commission argues these adjustments would ensure the city’s minimum wage ordinance “is successful in promoting and protecting the rights and the individual self-reliance of working people in Berkeley by raising the minimum wage to a living wage, adding an annual cost of living adjustment, and granting adequate paid sick leave to all workers.”

But Susan Grant, owner of Senior Helpers, an El Cerrito-based business that hires in-home caregivers to take care of senior citizens and the disabled, believes a higher minimum wage could drive some businesses underground. Many of her 80-odd clients, who range in age from 24 to 102, are located in Berkeley and depend on her staff for non-medical needs like cooking, cleaning, driving to the pharmacy, laundry, bathing and toileting – the kind of “nitty gritty stuff that keeps folks at home,” she said. “They don’t have to move to a facility because they don’t need the medical care. A lot of older adults really want to stay at home,” she said at an interview at her office.

Some of Senior Helpers’ clients require round-the-clock care, and with a new minimum wage in place, a worker who accepts a 24-hour shift is entitled to not only eight hours a day at the regular wage of $11 (plus an hour of unpaid break), but an additional 15 hours of overtime at $16.50 per hour – a total wage of $346.50 per day. Adding in worker’s comp insurance and other costs, Grant is already paying some of her 24-hour workers over $90,000 per year.

Some merchants say crucial business decisions are being made by groups and individuals who don’t know what it is really like to run a business.

Alex Popov, founder of four businesses in Berkeley including Pappy’s Grill and Sports Bar on Telegraph Avenue, has been an outspoken opponent of a minimum wage increase since he crunched the numbers and saw how deep the cuts would have to go.

“Due to Berkeley’s increase of another 13.9% next year, we will be laying off three employees — two kitchen staff and a catering assistant manager,” he wrote in a letter to the City Council and city manager Nov. 3.

“It has never been harder and more expensive to start a small business,” Popov said. “Costs are up across the board — insurance, energy, food costs, rent, etc. Simply put, the economics don’t pencil out anymore. People who have no business experience suggest ‘just raise prices’ to cover a minimum wage increase. They don’t understand the dynamics of small business, or that we are in a price-sensitive market where people will find alternatives (eat out less, eat out in other cities, shop online, etc.).”

Senior Helpers owner Grant adds: “We must make headlines, because we are ever so more progressive than other cities. I’m a democrat, I’m a liberal, I’m a bleeding heart liberal, and I’ve got to tell you they are all voting and they do not know whereof they speak.

“People, you are not listening. You are not thinking. It will go under the table and it has to, because who can afford it? What happens next is that the older adult is at risk and so is the caregiver. They can be exploited.”

Shum Preston, spokesman for the Service Employees International Union in the East Bay, said: “There will always be some who fear progress but, fortunately, the economic data is very clear about the benefits of raising the minimum wage. Seventy-five years of research show that raising the minimum wage lifts families out of poverty, with little discernible impact on overall job growth or prices.”

Telegraph Avenue. Courtesy of Sundays on Telegraph — Telegraph Avenue, seen here during a Sundays on Telegraph day: merchants there worry that the Labor Commission minimum wage proposal could be damaging to businesses. Photo: courtesy Sundays on Telegraph

Stuart Baker, executive director of the Telegraph Business Improvement District, told Berkeleyside, “It’s such a potentially dire situation that merchants I’ve spoken to [say] it’s a threat to their livelihood. If the proposal by the labor commission goes through, I can tell you the Telegraph Avenue district would be decimated.”

The upper end of Solano Avenue has felt the pinch for several years, said Angela Cadogan, owner of Urbanity, an upscale consignment boutique.

“As it stands, Urbanity neighbors a storefront that has been empty for the past two years,” she said in an email. “Urbanity is also on the same block as the Oaks Theater, which remains empty after four years.

“The top of Solano has not had all its storefronts occupied in the time Urbanity has been in business — there have been three to four empty storefronts at any given time on the Berkeley portion of Solano Avenue throughout the past seven years …

“I fear that with wage hikes tied to nothing but what council members subjectively perceive as living wage, many more storefronts will go dim in Berkeley over the next five years.”

Nina Cooper, owner of jewelry and bead wholesaler and retailer Nina Designs, got her start in the jewelry business with a booth on Telegraph Avenue. “I acknowledge the burden imposed on employees by the high cost of living in the Bay Area, but I sincerely believe that $19 is reckless and risks driving all the non-tech businesses out of the city,” she said. “I don’t think that would solve the problem.

“I would prefer a national minimum wage increase, or at least statewide, so that Berkeley isn’t pitted against Oakland or El Cerrito. When the last dot-com bubble burst, it was companies like mine that kept local economies from collapsing. If we are forced out, what will happen next time?”

Elon Khelif and Gabe Duran, co-owners of the Beta Lounge on Durant Avenue, said in a letter to the City Council: “The jobs we offer are not career jobs … These [minimum wage] jobs are for students and other young adults who need experience and a job while they are figuring out their next move. It’s a shame we live in the most expensive area in the country, but small businesses shouldn’t be held accountable for that, and be expected to pay part time employees what a corporate company is paying its employees. Please don’t force us to close our doors.”

Some merchants suggest staggering the increases out over a longer period of time, and others such as Brand suggest creating exceptions to a higher minimum wage law, such as one for home health care workers who agree to 24-hour shifts, or another for workers under the age of 18. Still others, like the owners of the Beta Lounge, call for “some sort of tiered format where businesses as small as ours aren’t subjected to the same increases as larger corporate businesses here in town (i.e. Staples, Chipotle, Starbucks, Toyota, etc.).”

Members of the Elmwood Business District said it would be wise to wait before making any other changes. They stated in a Sept. 15 group letter to the City Council and mayor, “The increases proposed are astronomical but any increases only a year after enacting the present ordinance should be tabled until the ordinance is given a chance to prove itself reasonable. No person on the council or the commission has the crystal ball to predict the general economic health of the nation, let alone Berkeley. Nor can anyone predict how small businesses will fare under the present increases.”

Many of these small business founders and representatives plan to show up Nov. 10 to weigh in at the City Council special meeting.

“It would be tragic for Berkeley to increase the minimum wage further,” Popov told Berkeleyside in an email. “There is this national trend to redistribute wealth, but let me tell you Berkeley business owners are not wealthy.”

A spokesperson for the Elmwood Business District added: “Berkeley has a chance to become a model for progressive thinking on issues like this but most do so from an informed and intelligent process, and not one that will most certainly result in universal ridicule and lead to financial devastation.”

This story was updated after publication to clarify the rationale behind the Labor Commission’s proposal.

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