Don Gosney: Regional Increase in Minimum Wage Will Hurt Richmond

Don Gosney

blogimage.jpgOn Tuesday the 18th of March the Richmond City Council is considering a regional increase in the minimum wage to be paid some employees working in Richmond.  For the record, I believe this to be a bad idea.

Before anyone tries to again challenge my credentials as a proponent of worker’s rights, let me make it clear that I am not against increasing the minimum wage. What I am against is increasing the minimum wage only in Richmond as if this will not affect our businesses and even the workers because surrounding communities will be able to pay their workers at a substantially lower wage.

Arguments will be made that cities like San Francisco and Oakland have regional minimum wages but the geography of those cities denies the ability to accurately compare them to Richmond.

In San Francisco, for example, residents have little choice but to conduct their shopping in San Francisco. It’s unlikely that residents will cross the Bay Bridge to shop in the East Bay to avoid paying the higher cost associated with their regionally higher minimum wage. Likewise, it’s even less likely that they will cross the Golden Gate Bridge to shop in Marin County. And even if they don’t have to pay the exorbitant bridge tolls by heading south the Peninsula, it’s unlikely that they would spend a half hour and several dollars worth of gas to head south to shop.

In the other hand, for a great many Richmond residents, it’s just as easy—or easier—to head to El Cerrito, San Pablo or Pinole to shop.

When we mandate that the cost of some labor will increase from 22% to 67%, there will be consequences.

It makes common sense that we should expect employers to pass along the higher labor costs to their clients. And when that quarter pounder costs more than it’s worth or that bucket of KFC becomes too expensive, why should we expect shoppers to shop in Richmond when they can get a substantial discount by shopping a few blocks away?

Even at a store like Wal-Mart, notorious for topping out most employees at minimum wage, they would be expected to suffer when it would be just as easy for shoppers to head to the other side of I-80 to shop in Pinole—where most of the Hilltop business has moved.

Aside from the ease of shopping in local communities, this would make it even more advantageous to go online and shop using the Internet. Local businesses are already suffering because of this option so why are we making it even more attractive to forgo the local shopping experience?

The original Council proposal called for a staff report where staff would check with local businesses about how this might affect them. This is coming back before the Council—and will likely pass unanimously in one format or another—without this staff report. Once again, this Council will act on an issue that resounds with the electorate and will do so without the

Some areas of concern and questions that I have are:

  • If this is such an issue, why doesn’t this increase take effect immediately? In all three scenarios the increase won’t go into effect until next year. And with all three options, the transition doesn’t take full effect until 2016, 2017 and 2018. Why the delay? If the people are deserving of the increased wage now, why make them wait four years?
  • Even the lowest increase won’t take effect until after the election. Is the Council trying to have their cake and eat it, too? Are they trying to win the support of the electorate without stepping on the toes of the business people?
  • Another concern is the exclusion for companies with fewer than 10 employees. This would have a stifling effect on small businesses that want to expand but won’t for fear of crossing the threshold of 9 employees where the cost for ALL of their labor will increase anywhere from 22% to 67%.
  • How are businesses supposed to stay competitive when they’re battling their elected leaders who are enacting laws giving smaller businesses built in cost breaks?
  • If I have 10 employees and my competitor down the street only has 9, then he can undercut my costs and put me out of business?
  • Why offer such an incentive to stay small? There are members of the Council who advocate for small mom and pop shops over larger businesses and they often push for workers’ cooperatives where these new rules will empower them over small but still larger businesses.
  • Most minimum wage businesses use mostly part time workers. There are numerous advantages for them to do this but if these new minimum wage laws go into affect it should be expected that they might fire many of their workers and turn the rest into full time workers. As a matter of fact, I could easily envision that they would require many of these full time workers to work overtime well above the normal 40 hour work week. There would be numerous advantages for the employers to do this. For those workers still employed, this would mean substantially more money for them but at what cost? How many jobs might be lost?
  • There’s no guarantee that this would even be of much benefit for residents of Richmond. Absent that staff report, we don’t even know how many minimum wage workers in Richmond actually live in Richmond. And, of course, why would we expect them to spend their newfound wealth here in Richmond where everything costs more than it does in San Pablo, El Cerrito and Pinole?

It’s very easy to price yourself out of the market. This is something I know a lot about. We see this in Organized Labor quite a bit. Just because we can negotiate great wage and benefit increases, if there’s no work where our people can earn those wages we quickly become the highest paid people in the poor house. Unlike government workers, civilian workers have to worry about what the market will bear. As an auto mechanic, an attorney or an architect, unless your work is so far superior that there’s no question that what you charge is worth every penny, most of the time the client is going to look for someone who can provide similar services for less money.

This may be the scenario if we price our workers so high that it’s not worth the businesses staying here in Richmond or for the shoppers to flock to Richmond to pay more for the same product that they can purchase for less just a few minutes farther away.

This Council needs to invigorate the people to advocate for a state-wide increase in the minimum wage that will level the playing field. This approach will increase the lowest wages for most of the low paid people without putting an undue strain on local businesses.

Don Gosney, Richmond Resident

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  • Don Gosney
    commented 2014-04-02 20:14:44 -0700
    This likely will return on the agenda as a consent calendar item on April 15th. Since this is a second reading, unless the public heavily lobbies the Councilmembers it will be passed unanimously without comment.

    This is an election year and no politician wants to go on record as being against raising the wages of the downtrodden. It won;t matter abut the details—it’s the broad strokes that will be talked about.
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