Last week the Wall Street Journal Published an opinion piece by Michael Saltsman decrying San Francisco’s minimum wage hike. The article claims that the incremental increases in the city’s minimum wage, which is set to reach $15 at the beginning of next year, has been destructive for the city’s restaurant industry, driving business out and making the cost of labor unsustainable for smaller businesses.
Saltsman notes that San Francisco first introduced a municipal minimum wage in 2004, and then claims that “prices had jumped 52% since 2005, twice the rate of inflation.” It is absurd to pin this purely on increases in the minimum wage. The author blatantly ignores the fact that San Francisco has one of the most inflated real estate markets in the country with the average home price rising a whopping 36% between 2012 and 2014 alone, and a similar trend being true for the price of new rental contracts. Without discussing the impact of other factors, it is hard to believe Saltsman’s claims about the impacts of raising the wage.
Saltsman also claims that the increase in the minimum wage is directly related to restaurant closures, citing an article that relayed that 60 Bay area restaurants have closed since September. He does nothing to contextualize this claim, does not provide the average number of restaurant closings for a comparison, and does not discuss any of the other factors that lead to restaurant closings. The University of Washington conducted a study in Seattle after they began their minimum wage hike to $15 an hour, and found that the change in the wage had no significant impact on the rate of restaurant or business closures.
Beyond that though, Saltsman ignores that the article discussing the 60 restaurant closures cites the difficulty of finding and keeping good employees as one of the major factors in area restaurants shuttering their doors. By doing this, he skirts around the fact that one of the best ways to find and retain good employees is by paying them decent wages, something that is often only possible when mandated to do so in order to keep pace with competition. He also ignores that one of the most costly parts of labor for many in the foodservice industry is employee turnover and the requisite training that comes with it.
Wetzel’s Pretzels is an excellent example of how raising wages can actually work in business owners’ favor. Their CEO recently stated that raising the base wages of their employees in accordance with state minimum wage increases has actually been excellent for business. The pretzel company has seen increases in business and profits at each instance of a wage hike on the road to $15, with some stores seeing as much as a 15% spike in sales after the first one.
There’s more evidence to back this up. A study from UC Berkeley found that over the long term, increases in the minimum wage are likely to result in a net increase in jobs in California because low wage workers are spending most of the money from their increased wages, putting it directly back into the California economy. Although San Francisco has been leading the charge in California in terms of raising the wage, it seems the rest of the state is soon to follow, with good evidence that this will be a boon the state economy.
While some businesses may see minor setbacks from raising wages, most evidence points toward the fact that in the long run, having a minimum wage that does not leave low-wage workers destitute is good for business, good for the economy, and good for workers.