Jul 18 2014
There have been talks of a possible $12.34 minimum wage in Richmond, CA. How will this change the debate about the minimum wage? And what are small businesses to do in the face of growing wages?
The problem is that Richmond/San Pablo doesn’t have wiggle room. They don’t have a base clientele that’s not going anywhere, and they don’t have regional anchor malls that people will come to anyway (no offense to Hilltop). There are cities, like Sausalito or Berkeley on either side of Richmond, where consumers would see a 2% sales tax increase as a cost of doing business in that town–as “admission to Disneyland.” Without the Disneyland factor, every person reading this has vetoed a purchase in one town versus another based on a 0.25% difference in sales tax. If things cost 1% more in San Pablo, most Oakland residents, who would never go to San Pablo on purpose anyway, would delete the city from their GPSes. Likewise, Richmond is a city that already struggles to attract business and struggles more to attract people. So it’s the kind of place where doubling the cost of labor will have a substantially negative effect both on their ability to attract and retain businesses and on their ability to attract and retain consumers.
Salaries are already the largest cost of doing business in most shops. Yes, less so in minimum wage level companies, but it’s still not accurate to say this is only a 1% or 10% increase in the cost of doing business. This will dramatically affect every small to medium sized business. Just picture your average corner independent hamburger shop, with 8 employees making $7.25/hr. Now double that number and consider realistically whether “windfall profits,” or “the market balancing itself out” can cover the difference.
Yes, the shops at Point Richmond will be able to survive it, as will Costco. Chain stores in Hilltop will stay open, but their corporation will start ignoring them since their profits have disappeared. Non-chain stores in the mall will close. Places with low profit margins and no regional anchor appeal, like your average downtown boutique or independent grocery store, won’t be able to survive.