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I know a lot of small business owners in SF, and Borderlands' story is one that I've heard before. The minimum wage hike is killing a lot of coffee shops who ha

I know a lot of small business owners in SF, and Borderlands' story is one that I've heard before. The minimum wage hike is killing a lot of coffee shops who had previously been able to offer quality coffee at not much more cost that what you'd find at Starbucks. With the wage hike, Starbucks takes the hit, keeps prices the same, and the smaller shops are forced to hike prices and turn away customers. I'm guessing I'll see a lot of commentary about paying a living wage and how these businesses must be mismanaged and that this is just the way the market "works." I won't necessarily disagree, but what is happening in practice still feels wrong.

stevejohnson 9y ago
Well, assuming the small coffee shops are well-managed, then we still have to ask ourselves which is more important, the cheap good coffee or a living wage for the workers?
- lj3 9y ago
  Losing your job because your employer couldn't afford to stay in business is better?
  - TillE 9y ago
    Low minimum wage = not enough to survive on, so you're typically working multiple jobs, which is insane. A high minimum wage is one key element of a strategy to ensure that nobody has to do that. Anyway, there's extremely little hard evidence of minimum wage raises leading to higher unemployment. Studies generally show no effect. There's no shortage of dubious anecdotes from people with a political ax to grind, though.
    - andrewguenther 9y ago
      I see this cited a lot, my problem is that these studies (from what I've seen, happy to accept more data) are done on a state or nation scale where most every business is then on a somewhat equal playing field. My problem with what SF and Seattle are doing is that it is easy for large companies to compensate in other markets. I'd be really interested to see a study done somewhere comparable to that dynamic. Also, how many people transitioned from a job at a small business to a larger one? Unemployment could remain unchanged, but competition could drop drastically. As I've said elsewhere, I'm in support of paying a living wage, but I don't think it can work on a city scale and these experiments only hurt the cause by producing bad data.
      - tehwebguy 9y ago
        Just do the easy math first: 2000 hours (40 hours x 50 weeks) per year. Multiply by $10.00 per hour. Annual salary of $20k.
  - Declanomous 9y ago
    I think the assumption is that the demand for coffee stays relatively similar, and so the coffee shops that have been displaced by rising costs will be replaced by Starbucks. If that is the theory, total employment would stay the same.
- andrewguenther 9y ago
  The customer cares about good cheap coffee, and regionalized regulation like this ensures that local businesses can never compete. I'm not against a minimum wage increase, but the country is watching places like SF and Seattle to see how a higher minimum wage plays out. The big players can always recoup loses in other markets, but the small businesses are unable to compete. Small businesses close, people lose jobs, and the wage hike is declared a failure. To me, if you really want to support a living wage, then don't support experiments that are doomed to fail.
  - eridius 9y ago
    > The big players can always recoup loses in other markets If it's unprofitable for Starbucks to continue operating in SF, why would they do so? Big businesses can recoup short-term losses, sure, but if a given market is going to be unprofitable for the foreseeable future, there's not much reason to keep operating in that market. That said, companies like Starbucks may see this as an opportunity to reduce competition, by operating at a loss until the smaller businesses close, and then raising prices to make the market profitable again. But if they actually do that, once they raise prices, small businesses can start competing again.
    - aidenn0 9y ago
      I doubt it Starbucks will see any significant loss. They typically have both higher volume and lower material costs than a typical coffee shop, so they can absorb cost increases better. If they are even close to breaking even, then it's probably worth it to stay open in the area for marketing value.
  - nitwit005 9y ago
    Experiment? It's not like this is the first time this sort of thing has happened. There's piles of data and research on this, and it's not hard to make an estimate of the impact yourself. Just make an Excel spreadsheet with past minimum wage increases and the change in unemployment X years later. Or you can just look at news articles from the past. There is long history of people predicting dire employment impacts that never materialize.
SwellJoe 9y ago
Regulation often has the dangerous side effect of making it impossible for smaller players to stay in the game, while, as you note, the big players can weather the storm for a couple of years until they've got no competition left...and then they can raise their prices without competitive pressure from the little guys. That doesn't necessarily mean the regulation is bad, but as someone who has always owned their own (small) businesses, I'm sympathetic. And, of course, there is a tendency for those who support regulations to see the negative side effects and address it with more regulation. Also a potentially dangerous response (though also not always wrong). I tend to prefer regulations be applied more lightly to very small businesses. The dynamic of "faceless evil overlord that doesn't care about their employees vs. powerless peon" doesn't usually apply to a bookstore with a dozen employees. But, that's probably not tenable for a minimum wage; even if smaller businesses weren't required to comply by law, they'd likely have a hard time hiring people if they weren't paying the same as the big chains. Then again, this is not just a story of the minimum wage increasing; all bookstores are facing pressure from online sales, and have been for years. Employees are expensive and it takes more of them per-sale for a brick and mortar than for a shipping warehouse. They're all having to innovate their way out of obsolescence or die trying. I guess we'll see how this plays out in SF. The economic disparity in SF is so high, it's probably a good thing that there's a people-driven attempt to rectify it.
- deleted 9y ago
  [deleted]
jtmcmc 9y ago
The flipside is of course that they were doing so by paying their employees a terrible salary.
- andrewguenther 9y ago
  And that the owners sat in the back drinking expensive whiskey and counting money? These are low margin businesses, small business owners aren't taking home 10X their employees. By hiking the minimum wage, you make these businesses inviable for anyone but the large players. The business closes, employees go work at the big company who can afford to stay afloat, competition all closes, prices go up, small business is viable again. Is that really the cycle we want to encourage?
- deleted 9y ago
  [deleted]
- jmcdiesel 9y ago
  When you can explain to me why you SHOULD be able to make a full living wage putting books on a shelf, or pouring coffee, or putting hamburgers in a bag, you can claim it as a terrible salary.
  - tehwebguy 9y ago
    I don't think anyone needs to defend the idea that working 2,000 hours per year "should" earn someone a living wage. How about this: If your business can't afford to pay a "full living wage" for a full time job you "shouldn't" be in business.
    - khedoros1 9y ago
      Sounds good. Then eliminate welfare of any kind for anyone who's working a full-time job, because, by definition, they're making a "full living wage", and don't need additional assistance. I'm legitimately curious what things would look like when a new equilibrium is established. Which industries were destroyed, which arose, and which pivoted? What happened to the people who worked for the unsustainable businesses?
tehwebguy 9y ago
Does it feel wrong if rent increases to the point that the small coffee shop is priced out of the market?

stevejohnson 9y ago

Well, assuming the small coffee shops are well-managed, then we still have to ask ourselves which is more important, the cheap good coffee or a living wage for the workers?

lj3 9y ago
Losing your job because your employer couldn't afford to stay in business is better?
- TillE 9y ago
  Low minimum wage = not enough to survive on, so you're typically working multiple jobs, which is insane. A high minimum wage is one key element of a strategy to ensure that nobody has to do that. Anyway, there's extremely little hard evidence of minimum wage raises leading to higher unemployment. Studies generally show no effect. There's no shortage of dubious anecdotes from people with a political ax to grind, though.
  - andrewguenther 9y ago
    I see this cited a lot, my problem is that these studies (from what I've seen, happy to accept more data) are done on a state or nation scale where most every business is then on a somewhat equal playing field. My problem with what SF and Seattle are doing is that it is easy for large companies to compensate in other markets. I'd be really interested to see a study done somewhere comparable to that dynamic. Also, how many people transitioned from a job at a small business to a larger one? Unemployment could remain unchanged, but competition could drop drastically. As I've said elsewhere, I'm in support of paying a living wage, but I don't think it can work on a city scale and these experiments only hurt the cause by producing bad data.
    - tehwebguy 9y ago
      Just do the easy math first: 2000 hours (40 hours x 50 weeks) per year. Multiply by $10.00 per hour. Annual salary of $20k.
- Declanomous 9y ago
  I think the assumption is that the demand for coffee stays relatively similar, and so the coffee shops that have been displaced by rising costs will be replaced by Starbucks. If that is the theory, total employment would stay the same.
andrewguenther 9y ago
The customer cares about good cheap coffee, and regionalized regulation like this ensures that local businesses can never compete. I'm not against a minimum wage increase, but the country is watching places like SF and Seattle to see how a higher minimum wage plays out. The big players can always recoup loses in other markets, but the small businesses are unable to compete. Small businesses close, people lose jobs, and the wage hike is declared a failure. To me, if you really want to support a living wage, then don't support experiments that are doomed to fail.
- eridius 9y ago
  > The big players can always recoup loses in other markets If it's unprofitable for Starbucks to continue operating in SF, why would they do so? Big businesses can recoup short-term losses, sure, but if a given market is going to be unprofitable for the foreseeable future, there's not much reason to keep operating in that market. That said, companies like Starbucks may see this as an opportunity to reduce competition, by operating at a loss until the smaller businesses close, and then raising prices to make the market profitable again. But if they actually do that, once they raise prices, small businesses can start competing again.
  - aidenn0 9y ago
    I doubt it Starbucks will see any significant loss. They typically have both higher volume and lower material costs than a typical coffee shop, so they can absorb cost increases better. If they are even close to breaking even, then it's probably worth it to stay open in the area for marketing value.
- nitwit005 9y ago
  Experiment? It's not like this is the first time this sort of thing has happened. There's piles of data and research on this, and it's not hard to make an estimate of the impact yourself. Just make an Excel spreadsheet with past minimum wage increases and the change in unemployment X years later. Or you can just look at news articles from the past. There is long history of people predicting dire employment impacts that never materialize.

SwellJoe 9y ago

Regulation often has the dangerous side effect of making it impossible for smaller players to stay in the game, while, as you note, the big players can weather the storm for a couple of years until they've got no competition left...and then they can raise their prices without competitive pressure from the little guys. That doesn't necessarily mean the regulation is bad, but as someone who has always owned their own (small) businesses, I'm sympathetic. And, of course, there is a tendency for those who support regulations to see the negative side effects and address it with more regulation. Also a potentially dangerous response (though also not always wrong). I tend to prefer regulations be applied more lightly to very small businesses. The dynamic of "faceless evil overlord that doesn't care about their employees vs. powerless peon" doesn't usually apply to a bookstore with a dozen employees. But, that's probably not tenable for a minimum wage; even if smaller businesses weren't required to comply by law, they'd likely have a hard time hiring people if they weren't paying the same as the big chains. Then again, this is not just a story of the minimum wage increasing; all bookstores are facing pressure from online sales, and have been for years. Employees are expensive and it takes more of them per-sale for a brick and mortar than for a shipping warehouse. They're all having to innovate their way out of obsolescence or die trying. I guess we'll see how this plays out in SF. The economic disparity in SF is so high, it's probably a good thing that there's a people-driven attempt to rectify it.

deleted 9y ago
[deleted]

jtmcmc 9y ago

The flipside is of course that they were doing so by paying their employees a terrible salary.

andrewguenther 9y ago
And that the owners sat in the back drinking expensive whiskey and counting money? These are low margin businesses, small business owners aren't taking home 10X their employees. By hiking the minimum wage, you make these businesses inviable for anyone but the large players. The business closes, employees go work at the big company who can afford to stay afloat, competition all closes, prices go up, small business is viable again. Is that really the cycle we want to encourage?
deleted 9y ago
[deleted]
jmcdiesel 9y ago
When you can explain to me why you SHOULD be able to make a full living wage putting books on a shelf, or pouring coffee, or putting hamburgers in a bag, you can claim it as a terrible salary.
- tehwebguy 9y ago
  I don't think anyone needs to defend the idea that working 2,000 hours per year "should" earn someone a living wage. How about this: If your business can't afford to pay a "full living wage" for a full time job you "shouldn't" be in business.
  - khedoros1 9y ago
    Sounds good. Then eliminate welfare of any kind for anyone who's working a full-time job, because, by definition, they're making a "full living wage", and don't need additional assistance. I'm legitimately curious what things would look like when a new equilibrium is established. Which industries were destroyed, which arose, and which pivoted? What happened to the people who worked for the unsustainable businesses?

tehwebguy 9y ago

Does it feel wrong if rent increases to the point that the small coffee shop is priced out of the market?