In August 2016, Berkeley City Council voted unanimously to boost the minimum wage to $15 an hour in 2018, giving the city both one of the highest minimum wages in the country. The ordinance first raised the minimum from $12.53 to $13.75 in 2017 before the $15 wage became effective earlier this month, on Oct. 1.
On that day, former Berkeley mayor Tom Bates and six of the City Council members who voted on the ordinance issued an op-ed on Berkeleyside articulating the rationale behind the legislation as well as reaffirming their support. Berkeley restaurant owners, however, are more measured in their response, even as they remain compassionate towards their workers.
Dorothée Mitrani is the owner of La Note at 2377 Shattuck Ave. in downtown Berkeley. The Provençal-style restaurant has been a popular part of the Berkeley brunch scene for 21 years. “It’s a little mom shop,” she said. “It’s not even a mom-and-pop shop because it’s just me.”
Mitrani served on the city’s labor commission for a year and a half prior to August 2016, hoping her input might offer some direction to the Council’s decision. “I believe that government has to keep progressing and do what’s best for its people, and ultimately not have any impact that would destroy a business,” she said.
She is sympathetic to the measure, though apprehensive of its ripple effects. “Look, it’s fair enough considering how expensive it is to live here,” she said. “But once you put a law into effect you can’t go back, and laws have a lot of unintended consequences.”
The intended consequences of this particular measure are rather straightforward — to bolster the income of low-skilled and blue collar workers, particularly within the food service industry. The viability of those intentions are supported by a study released in September by the Center on Wage and Employment Dynamics at UC Berkeley. The study focused on the effects of an increased minimum wage within the food service industry in six cities: Chicago, Washington DC, Oakland, San Francisco, San Jose and Seattle.
Researchers found that a 10% increase in the minimum wage resulted in a pay boost of 1.3 to 2.5% overall for food service workers. The study goes on to note that researchers did “not detect negative significant employment effects in any of the individual cities, or when pooling them together.”
Like many local restaurant owners, Mitrani isn’t so sure on that last part. She employs 40 to 45 staff members at La Note, the majority of whom, she says, are already earning more than $15 an hour. “Everyone in the back of the house was always making more than the minimum wage,” said Mitrani. “You can’t employ people in the back of the house — maybe a dishwasher — at minimum wage.”
The concern among restaurant owners is that giving a mandated $1.25 pay bump to entry level workers means having to give a commensurate raise to the rest of the staff. Easier said than done for a business just barely toeing the line.
“For anyone who understands restaurants, as much cash as you have, it just keeps flowing back out,” said Mitrani. “At most we have a 4% margin of profitability.”
That said, Mitrani is not against higher wages and had previously instated a 20% surcharge on all orders as a way to even out wage disparity between tipped servers and untipped kitchen staff. La Note began the practice in 2017 when federal laws prohibited pooling tips among staff. A change in the 2018 federal budget finally legalized dividing tips between front and back of house staff in April of this year, but Mitrani discontinued the practice in August for other reasons.
For one, La Note customers requested a tipped model. Also, as the surcharge was included as part of revenue, it was subject to payroll taxes. Coupled with the increase in minimum wage, Mitrani felt it was time to end the policy.
“It had been fantastic for morale,” said Mitrani, “but financially it was killing me.”
La Note retains the 20% surcharge for parties of eight or more, but swapped in a 3% living wage surcharge for the remainder of orders. This surcharge is reserved solely for kitchen staff, while appreciative diners can still tip their servers.
“I would have lost the entire kitchen if I went all the way back,” said Mitrani. “This is the best I could come up with and so far so good.”
Mitrani has had to come up with creative solutions to balance wages against prices, prices she admits can already be out of reach for many patrons. But she sees it as part of her commitment to remain open and a part of the Berkeley community. “I want to be there for the students and the professors and the visiting person,” she said. “My style of restaurant is for all, but it’s getting hard to do that.”
Katherine Schiele is the owner of farm-to-table restaurant Nico’s 1508 (1508 Walnut St.) in Berkeley, and also owns American-style burger joint The Hideaway (5634 College Ave.) in Oakland’s Rockridge neighborhood. Schiele has many of the same concerns as Mitrani, as well as the same sympathies.
For Schiele, the mandated $15 an hour minimum wage penalizes small and independent businesses while privileging chains, which have the much greater finances of a larger parent company to brace them against the Bay Area’s high real estate prices.
“Berkeley wants to pride itself on no chain restaurants,” she said. “We want to be local local local, but then do everything politically opposite that inhibits our ability to function as local businesses,” she said.
Schiele estimates her profit margin at less than 5%. She believes that raising the minimum wage was the wrong answer to the larger problem of making Berkeley more affordable for those who live and work here.
“The reason why it’s so hard for people to work in Berkeley and make a living wage is because it’s so hard to find housing,” she said. “That’s the piece that needs to be addressed.”
Garbis Baghdassarian agrees with Schiele’s assessment. “I’m not against an increase of the minimum wage, my only concern was that this is too fast and too high,” he said. “Of course I would like to see workers get more income, but this whole thing started with housing.”
Baghdassarian owns Café La Méditerranée (2936 College Ave.) in the Elmwood, but after 36 years in business he has decided to put the restaurant up for sale. Baghdassarian is 72 years old and ready to retire, but still attributes rising wages as part of the reason he put Café La Med on the market.
“This first quarter has been the worst we ever had in all these years.” Baghdassarian attributes the decline to construction, unclear and inconsistent parking regulations and a decline in the overall number of businesses in the Elmwood. Although the increase in minimum wage was not the deciding factor in putting Café La Méd on the market, “it’s just kind of salt and pepper added to it,” he said.
“What are you going to do? Are you going to kill yourself to stay there? Or say, ‘it’s time to get out?’”
In a different model, Baghdassarian would have preferred to tie the minimum wage to a financial index, thereby increasing minimum wage annually by a few fractions of a dollar, rather than a single jump of $1.25.
“If it goes gradually, everyone can absorb it,” he said. “When it’s done suddenly, too fast and too high, it puts a lot of pressure on small businesses.”
“In eight years it’s almost doubled,” he said. “We cannot double our prices.”
Baghdassarian employs approximately 50 people at Café La Méd, many of whom have worked there for more than 20 years. Like Mitrani, Baghdassarian is concerned that the mandated increase could lead to further division between front and back of house staff, as he is unable to offer a commensurate $1.25 raise to all his employees, even those who have been there for decades.
“It’s creating discrepancy between newcomers and longtime staff,” he said.
Because the mandate makes no distinction between tipped and untipped workers, the $15 minimum wage could increase wage disparity between front and back of house staff by giving servers a pay raise in addition to gratuities. According to Schiele, during busy nights and weekends at Nico’s, “none of the servers are making less than $40-$50 an hour,” she said, while back of the house continues at the same wage.
To ensure she can afford to both pay her staff and keep the ovens lit, Schiele has had to cut hours for her staff.
“I have to look at every single day of the week and trim an hour here, an hour there,” she said. “I have to literally trim every single hour that I can just to make payroll. Even just a half an hour and I can save thousands of dollars a month.”
Schiele is aware that cutting staff hours seems a harsh solution, but for her, it’s a necessary one to stand firm against changes she feels unfairly punish the many small and independent businesses that give Berkeley character.
“We’re small business owners and we’re members of this community and we care, deeply and passionately,” she said. “We’re not the 1%.” She also sees the measure as moving server positions one degree further out of reach for people just entering or re-entering the job market.
“When I had a friend with a high school kid who needed a summer job for car insurance, or a college kid who was trying to save a little money, I used to be able to hire that kid, whether or not I needed him” she said. “Nobody was taking into account that some of these entry level jobs, people aren’t getting them to live on. We’re talking about kids trying to earn some sense of responsibility.” Now, these are individuals she is unlikely to hire at the current minimum wage.
“If I’m hiring a $15 an hour guy, I’m expecting not to have to train somebody for two weeks,” she said. “I’m expecting someone who can just walk in and do the job.”