By Michael Saltsman
Berkeley’s minimum wage rose to $12.53 an hour on Oct. 1, a brief stopover on its way to $15. By the fall of 2018, the city’s starter wage will have risen 67% in just five years.
While the city’s council members quibbled over how quickly the wage should rise to $15, the city’s small businesses had a more pressing concern: How to keep their doors open when the minimum wage is set at a level without any historical precedent.
The Bay Area has been ground zero for minimum wage experiments in California. In Alameda County alone, Berkeley, Emeryville and Oakland have each pursued dramatic increases in the minimum wage in recent years. Their actions were subsequently validated by Governor Jerry Brown, who earlier this year signed legislation establishing a statewide $15 minimum wage by 2022. The Governor should have paid closer attention to the consequences in the county he used to call home before embracing the policy.
In Emeryville, an unreasonable increase in the starter wage forced otherwise healthy businesses like Match Analysis to lay off six employees–the first such layoffs in the company’s history. The Oakland increase contributed to the closure of ten restaurants in and around the city’s Chinatown, while childcare providers like Muriel Sterling were also forced to reduce staffing levels. And in Berkeley, businesses like Black Oak Books, Café Clem, and Mokka coffee shop have closed this year, laying off all employees. Each cited the city’s higher minimum wage as a factor in their closure.
It’s too soon to put a definitive number on the damage, but the early data isn’t promising. Census Bureau data show that Alameda County’s restaurant industry was booming in 2013 and 2014, experiencing 6-7% employment growth annually. In 2015, this figure was cut in half, and the growth in the number of establishments also tapered off after rising significantly in 2014.
California legislators might have thought a statewide standard would prevent these county-specific impacts; instead, it appears to have sent large labor-intensive businesses across state borders. “The exodus has begun,” warned one Los Angeles Times headline of the apparel industry consequences from a $15 minimum wage. American Apparel, which employs approximately 4,000 people in Southern California, is reportedly looking to move to either North Carolina or Tennessee. Ashley Furniture is also moving its production from southern California to lower-cost states where the federal minimum wage prevails–leaving over 800 employees without jobs.
The state university that shares a name with City of Berkeley bears some of the blame for this damage.
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