Minimum-wage bill has support of some local business owners

jhickey@thetribunenews.comSeptember 13, 2013 

Kyle Wiens, here at the company’s San Luis Obispo offices, launched iFixit in 2003 along with fellow Cal Poly engineering student Luke Soules.

JOE JOHNSTON — jjohnston@thetribunenews.com Buy Photo

Employees earning minimum wage would see their pay increase from the current $8 an hour to $9 in July and $10 in 2016 if a bill passed by the California Legislature on Thursday becomes law.

Though the 25 percent pay raise would become the highest statewide rate in the nation, local business owners queried by The Tribune support the increase, even if it will cut into their profit margins.

Adnan Saleh, owner of the Middle Eastern restaurant Jaffa Café in San Luis Obispo, said he starts new employees at minimum wage until he is sure they are reliable, then he boosts their pay to $10 an hour.

“We don’t want to lose them. You want to share your profit. You can’t be that greedy. The employees also have rent to pay,” Saleh said.

Most of his nine employees have been with the business for several years and already make significantly more than minimum wage, he said.

The same goes for San Luis Obispo’s iFixit, which sells do-it-yourself repair kits for electronic gadgets and has around 50 employees.

“I don’t think we pay anybody less than $10 an hour, even our warehouse workers,” said CEO Kyle Wiens. “We think we should be paying people a living wage.”

But Wiens added that e-commerce organizations with lower profit margins, especially those that must compete on a national level, will be harder hit.

Cambria Bicycle Outfitter, with its online headquarters in Paso Robles, is one such retailer.

The company sells bicycles and accessories, employing both retail clerks and warehouse workers near the bottom of the pay scale.

“Some guys come in at $9 an hour, but we try to raise it to $10 within the first year,” said Clay Akey, the company’s owner and CEO.

However, he offers benefits — such as a 401(k) match and payment for half of medical and dental premiums, that employees wouldn’t normally receive from a bike shop, he said.

“The increased wage is a good thing, but like many government programs, it creates a problem in another area. Now more people will hire more illegals off the books,” he said.

Akey said that the pay increase will have a minimum cost effect on his business but, coupled with pressure from the Affordable Care Act to provide full insurance for his employees when the company grows to 50 employees in the near future, it will create pressure to outsource data entry and telemarketing.

“I will passionately fight against outsourcing until it’s unavoidable from competition,” he said.

The Tribune made several efforts to contact franchise owners of local fast-food chains Friday but was unable to obtain a comment.

A $10 minimum wage would increase earnings for a projected 2 million Californians by $4,000 a year and put $2.6 billion into the economy, Assembly Speaker John Perez, D-Los Angeles, estimated in a statement supporting the increase.

Minimum-wage workers spend a huge portion of their take-home pay, as opposed to higher earners who are investing and saving money, said economist Jordan Levine, director of economic research for Beacon Economics in Los Angeles.

However, that spending may not increase revenues enough to offset the losses to businesses that will see payroll costs increase.

“On purely economic terms, research has shown that increasing wages has a marginally (less than 1 percent) negative effect,” Levine said. However, he added, “that’s purely economic. There are other social implications and non-economic benefits, which are harder to quantify, such as reduction of poverty and increase in quality of life.”

The California Chamber of Commerce has called the bill a “job killer.”

The National Federation of Independent Business has projected a loss of between 46,000 and 68,000 jobs by 2023, depending on other factors including inflation.

“We’ve got to have strong retail sales and a growing economy for this to make sense anyway,” said Akey, the bicycle business owner.

The Associated Press contributed to this report.

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