Businesses, Workers Adjusting to Oakland’s Higher Minimum Wage

Guadalupe Salazar never needs an extra reason to smile.

The McDonald’s cashier in Oakland greets patrons with her customary grin every morning. She takes pride knowing she’s brightened a sleepy customer’s mood.

“People tell me, ‘You were the first person I saw today, and you were so nice,’ ” Salazar said. “First of all, that’s my job. Second of all, I like people. I consider myself a highly skilled customer-service person, and I love taking care of people. That’s what I do.”

But there’s another reason for Salazar to be happy. As Oakland’s minimum wage was raised from $9 to $12.25 an hour on March 2, Salazar no longer must choose between paying her rent on time and buying food for her family.

She has two adult children and a 7-year-old daughter “who is always asking for something,” Salazar said. A little extra money — about $520 a month, before taxes — will go a long way to improving her daughter’s life, she said.

“I always have to say no to her,” Salazar said. “She understands it. She knows the situation.”

For small businesses that employ minimum-wage workers like Salazar, however, the rapid growth of their payrolls has brought some growing pains, particularly in the restaurant industry.

Carl Chan, a board member for the Oakland Chinatown Chamber of Commerce, said the law is partly responsible for the closure of at least 10 businesses in the last few months — four restaurants and six grocery stores.

Voters overwhelmingly approved the wage hike in November, giving owners just a few short months to prepare for a 36 percent payroll increase.

Owners barely hanging on to their dreams decided it would be simpler to close their doors, he said.

“Businesses without problems can afford many options,” Chan said. “Businesses that are struggling don’t have much choice.”

KC Lam, who owns the New Gold Medal restaurant, is bitter about the wage hike, although he doesn’t plan to close, he said. He had to raise menu prices by 10 percent, he said, and now he worries about competition from restaurants in other cities.

“Fremont and Richmond have restaurants with good parking, less safety concerns,” Lam said about the neighboring cities. “A worker is not really having the full benefit if everybody closed down.”

But academics say workers in Oakland will greatly benefit.

A report from the University of California, Berkeley’s Labor Center last year estimated more than 30,000 workers in Oakland would be directly affected by the minimum-wage increase. Between 9,000 and 14,000 more workers could see their wages indirectly increased because of a “ripple effect” as the floor of the pay scale is raised.

Much of the estimated $120 million in new earnings for low-income workers will be pumped back into the economy, said Ken Jacobs, chairman of the UC Berkeley Labor Center and one of the report’s authors.

And there’s no reason to believe Oakland’s higher prices will drive customers from the city.

San Francisco is set to join Oakland in May with a $12.25 minimum wage, eventually raising its minimum wage to $15 an hour by 2018.

Richmond is set to raise its minimum wage to $13 an hour by 2018, and Emeryville is considering a wage hike, possibly effective this year. Those businesses will raise prices, too, he said.

Jacobs said it’s “much too early” to determine what outcome the wage hike will have for Oakland’s economy, but evidence from previous studies of cities show little negative impact on employment and only mild increases in restaurants’ prices and operating costs.

It will be at least a year before city officials can gauge how many businesses closed or if unemployment was affected, he said. But high turnover is normal, especially in the restaurant industry.

“Some businesses go in; some go out,” he said.

Chan conceded that it’s impossible to say exactly why some businesses in Chinatown closed. Legendary Palace, a longtime banquet hall and one of Chan’s examples of a business reeling from the new law, was facing significant problems even months before the wage hike and may have closed anyway.

Chinatown residents supported the measure, according to Timmy Lu, a civil engagement manager for the Asian Pacific Environmental Network. He said his organization polled about 2,000 of the 6,000 Chinese voters in Oakland, and 75 percent supported the wage hike.

“There was a lot of education about the law there,” said Lu, who lives in Chinatown. “That was my job.”

It’s not just struggling businesses making big changes. Meredith Melville, who owns the popular restaurant Bocanova with her husband, said only her servers were earning minimum wage.

But factoring in their average tips, the servers made between $38 and $70 an hour. She said that raising the servers’ base pay wouldn’t be fair to the kitchen staff, who already earned more than $12.25 an hour and wouldn’t benefit from the new wage.

Melville said management decided to eliminate tipping and raise servers’ wages from minimum wage to between $22 and $28 an hour and instituted a 16 percent surcharge to be split between the kitchen staff and the servers, with an additional 4 percent service fee for the servers.

“It was bold to do what we did, but this was not a new problem. It was an ongoing problem,” Melville said.

But about 60 percent of the restaurant’s wait staff, concerned their income would drop, decided to quit because of the policy, she said.

An overlooked issue from the law that’s still confusing many business owners has nothing to do with wages, but it’s still making them sick.

A few dozen business owners at a recent small-business workshop were confused about the city’s new paid sick leave law, which requires businesses with 10 or more employees to offer up to nine paid sick days per year.

Scott and Emily Goldenberg own Caffe 817 downtown. They had to raise prices slightly in their restaurant — as most comparable businesses did, they said — and were struggling to determine how to factor sick days into their costs.

“We only have 14 employees, but we’re not classified as a small business under the law, which is crazy,” Emily Goldenberg said.

She hopes employees will be honest when using their time off. But she still agreed with the policy, despite the headaches it caused.

“We have an employee who is a mother with three children,” Emily Goldenberg said. “We understand that things happen and people need to take time off. I’ve been an hourly employee more years in my life than not, and I totally get it.”

Goldenberg, along with Chan and other business leaders, said they wished the wage increases would have been implemented gradually, as it’s happening in cities such as San Francisco.

But the wage hike in Oakland was unique because labor groups sponsored the ballot initiative, which went directly to the voters — the city didn’t have any say on the timeline. A more measured, cautious proposal from city officials, backed by business leaders, didn’t make it to the ballot.

Aliza Gallo, the city’s economic-development manager, said city staffers were also scrambling to determine how to apply and enforce the law. Four months wasn’t a long time to prepare, Gallo said.

“We did not have the ability to have a ramp-up, pre-education process,” she said.

Mayor Libby Schaaf, then a councilwoman, was one of the first elected officials to endorse the measure, she said. She still supports it.

“I recognize it’s hard, particularly for small businesses, and we’re doing what we can as a city to support people in transition,” Schaaf said.

The city is focusing on education now, Gallo said, sponsoring workshops in the area’s minority communities, including Chinatown.

Emily Goldenberg said she and other businesses will adjust. Giving low-income workers more money will only be a good thing for the city, she said.

“I’m really glad this change happened, because I feel a lot better writing paychecks.”

This article appeared in print in the April 14th, 2015 edition of Hamodia.