You have likely made up your mind on the Living Wage increase, and I refuse to question your good intentions. However, if you have formed your ideas about Living Wage from the Joseph Crumb article in last week's Alibi, please consider that your understanding of the matter is very one-sided.
I have seen the faces of those this proposition claims to help. Mothers and fathers, some single, some married, working two or three jobs just to make ends meet. It is real, and no one with a heart could remain unmoved. Low incomes must be addressed, and the proposed Living Wage ordinance seems to be a quick fix to address this social injustice. But, as with most policy, there are unintended consequences.
A business is nothing but its bottom line, and if it shows a profit, we get to continue the game for another fiscal quarter. Behind each business are people. I am our business. My family is this business. Those who choose to work with me to accomplish our goals are our business. In my case, this means 60 employees get to take home a paycheck. Sixty souls can pay rent, pay a bill, buy some food. And if this law costs me more than I can bring in, then there are 60 families I have failed.
This law picks on my industry: restaurants. It will force all of us to raise our tipped employees' base pay 109 percent, from $2.15 to $4.50. No one can live on $2.15 an hour. It barely pays the taxes, and often not even that. Suddenly, the proponents forgot to leave tips on the table. Tips are a big part of a server's pay. I should know; I have to match taxes and FICA on every penny of them. At my place, they bring in $18-$20 per hour with base wages and tips on a slow night. They earn every red cent. It's hard, demanding work, and my servers do it with a smile. They earn more money than any job in the restaurant. But what's a mere $2.35 raise? Okay, with my tax matches, call it $2.68. Multiply 12 servers by 20 hours a week times 52 weeks. It's only about $232 per month per server, but bottom-line it for me, and it is $33,446.40 for my already highest-paid employees. Perhaps you feel servers deserve a raise over my kitchen crew. Consider that for every price increase I pass along, servers get an automatic wage increase just from their average 15 percent gratuity. Perhaps I don't like having to choose between one group over the other.
Here are some of the economic effects from my edge of the universe:
In 2004, San Francisco raised their minimum wage to $8.50 an hour (it was adjusted to $8.62 this year). According to Kevin Westley, executive director of the Golden Gate Restaurant Association, they generally see about 500 restaurants close every year, and 500 new ones open. In the first 3 months of 2005, they have lost nearly 100 more restaurants than have opened in their places. Said Westley, the biggest problem is the decrease in business due to raising their menu prices—a mere one to two dollars on every entrée. 93 percent of restaurants have lost profits, causing 78 percent to say they wouldn't expand within county limits. Who is expanding? Quick Serve (fast food) restaurants with limited service. Most chains are not hurting as much; it's the local family places with table service that are getting beat up the worst. Living Wage proponents claim there will be no ill effects, and if there were any they would be at the big-box retailers and cheap corporate chains. This shows just the opposite is true.
But we don't need to look as far as San Francisco to see the impact. Last year, Santa Fe imposed a "living wage" law. After just a year, Santa Fe is getting cold feet, as numbers don't jibe with living wage projections and costs are up for the city, gross receipts down, and the City Council is considering dumping next year's automatic increase of $8.50 an hour to $9.50. Minimum wage increases are not the panacea proponents promise. The consensus by a majority of democratic-leaning economists said that the steeper the increase in minimum wage, the harsher the effects on the economy and job loss—specifically teens, who with our 39-percent increase should expect an increase in unemployment of roughly 3.9 percent (from Robert Whaples, Economics Professor, Wake Forest University—google it.) I maintain that 39 percent is steep, and for restaurants, a 109-percent increase is a running dive off a cliff.
What about Albuquerque? No one knows what this will cost in city services and additional costs on our budget, other than some figures based on assumptions and wild speculation that only looked at those making under the proposed $7.50 an hour. Let's say I've worked for five years, finally made the grade to $7.50, and suddenly some newbie is making the same I am. Think I won't be in there demanding more? Think that wouldn't be demeaning? It is a phenomenon called "wage compression," and it has been ignored by most lefty think tanks, and is one big reason budget projections fail. One local economist is projecting $33 million in increased costs, which can only mean higher taxes or lost services.
ACORN, which is pushing the wage here, has shown that it understands the consequences. In 1995, it sued the State of California to exempt itself from paying the minimum wage. It argued that if it had to pay the higher wage, the State of California to exempt itself from paying the minimum wage. It argued that if it had to pay the higher wage, it wouldn't be able to hire as many "activists."
Some people don't make enough money to make ends meet without help. We need a balanced solution without hidden agendas. In a couple of months, the governor and state Legislature will attack this problem. I'm going to ask you to weigh the good intentions of this proposal with taking more time for more honest debate.