Sacramento workers want to raise the minimum wage, but will it hurt small businesses?

Imagine you’re a 37-year-old woman, three months pregnant, living in the Arden-Arcade area, taking the bus to your job at Burger King, where every week you work 40 hours but only earn $9.25 for each. The proverbial burger-flipping and hot-oil frying. On more days than you like, the bus is late. You usually run out of money well before the first of the month. This sounds like a brutal reality. But it’s everyday life for Holly Dias.

Yet Dias says she actually likes being in the fast-food industry. “I’m good at working with customers,” she explained. “And if you are, then you can advance.”

But advancing doesn’t always mean earning more when it comes to corporate America. She’s worked at Burger Kings since the day after Christmas in 2008 and still only earns 25 cents more than the state minimum wage. “I’ve been applying for other jobs, but they’re not there,” she explained.

Welcome to post-recession America.

Dias and others are quick to point out that low-wage jobs are growing faster than any other paying gigs in the United States. The Department of Labor agrees with this. And it’s not just fast-food gigs.

Josephine Brown teaches preschool. You’d think that she’d at least earn a decent salary, perhaps like public-school teachers. Not quite: She makes $11.44 an hour.

How can a teacher, even one without a college degree, make that little money? “I don’t know. I ask the same question,” Brown said. “It’s pretty heartbreaking that we don’t make more than we do.” She recently had to get a second job to make ends meet.

But the two women aren’t giving up. They’ve joined thousands of other low-wage workers as part of the “Fight for 15,” a national labor movement demanding a higher minimum wage. This next Tax Day, on April 15, these activists will be going on strike in hopes of raising attention about their bottom-feeder pay.

The movement to up wages has caught fire during the past six months. In November of last year, five U.S. states elected to increase their minimum wages. In San Francisco, voters upped the minimum wage from then-$10.74 an hour to $15, following suit with Seattle.

Here in Sacramento, there’s traction to pass a similar citywide minimum-wage ordinance. Mayor Kevin Johnson has stated raising Sacramento’s minimum wage as a goal this year, and he has some support on city council, including Councilman Jay Schenirer.

But there are legitimate worries that raising the minimum wage could have a negative impact on local businesses.

Sandra Lemos owns three boutique-style fitness studios with nearly 45 employees on payroll. She supports paying people higher than the minimum wage. But she also worries that if Sacramento were to up its lowest pay &#;agrave; la what was done this past year in San Francisco or Seattle, local small businesses would have a hard time surviving.

“I do believe in a minimum wage increase, but no small business has that capability to overnight increase payroll by 30 percent,” she said.

Yet low-wage workers like Dias are getting louder. “I’m here to demand that we get paid $15 an hour, because that’s what we need to survive,” she says. “I make barely over the minimum wage, and that’s not cutting it. As soon as I pay my bills—if I can even pay my bills—I’m broke the very next day.”

Let’s clear up some of the myths about minimum- and low-wage workers.

Most people, for instance, believe that the majority of minimum-wage earners are young kids, summer-job high-schoolers or part-time teens. But according to the Department of Labor, 88 percent of minimum-wage earners are older than 20. About 53 percent of these workers are full time. And 55 percent of these workers are women.

Brown has taught preschoolers for more than 10 years at Childtime, a child-care center in Natomas. She’s not a minimum-wage worker, but a city ordinance that upped Sacramento’s bottom wage would certainly impact her $11.44 hourly rate.

Until this happens, however, she’s had to take up a second job, at WinCo in Elk Grove. She says she’s now working nearly 70 hours a week. Plus, she’s also studying early childhood education at Sacramento City College.

“I live paycheck-to-paycheck. I’m scraping,” she told SN&R. She receives no government assistance and isn’t even eligible for Medi-Cal, she says. She doesn’t have medical insurance now and is trying to figure out how to afford it through the Affordable Care Act, a.k.a. Obamacare.

She says her friends are “shocked” when they learn that she makes $11.44 an hour as a teacher. “I do this for the kids, for the children,” she said. “I’m happy with what I do, even though it doesn’t pay. I love what I do.

“That’s why I’m joining this fight, so that I can earn more and keep doing what I love to do.”

Brown is one of many local child-care workers who’ve joined the Fight for 15. She and her colleagues’ stories resonate with the community, with voters—and they’re a big reason why people are electing to increase wages across the country.

In Alaska, Alabama, Illinois, South Dakota and Nebraska, voters in this past election increased the statewide minimum wage. And this despite big wins for the Republican party in those states and elsewhere. One might think that the GOP and low-income workers are diametrically opposed. But that wasn’t even the case in Wisconsin, where union-busting Gov. Scott Walker was re-elected, but multiple regional minimum wages also were voted up.

Perhaps this new Fight for 15 movement is less about progressives versus the right and more about widespread disappointment with the economy’s sluggish recovery and the downward trending of wages in general?

Purchasing power has declined since the late 1960s, according to the Department of Labor. The issue of wages not keeping up with inflation is only exacerbated by exorbitant CEO salaries, as noted by new billboards promoting wage equality, paid for by The California Endowment, throughout the city.

Mayor Johnson clearly recognized this national trend to want to increase low wages and, during his State of the City speech in January, said that upping the city’s minimum wage would be a priority.

The mayor’s press secretary, Ben Sosenko, told SN&R that his office would be rolling out a minimum-wage task force “over the next few months” to meet with interested groups and see what makes sense for Sacramento. “The Mayor believes all working adults should be able to earn enough to support their families and make their way into the middle class,” Sosenko wrote.

He noted also that, last year, Mayor Johnson oversaw a unanimous vote at the U.S. Conference of Mayors to call for a raise in the federal minimum wage to $10.10 an hour.

Meanwhile, labor’s new focus on increasing minimum wages has even caught the attention of companies like McDonald’s and Wal-Mart, who both employ millions of low-wage earners.

The nation’s largest employer, Wal-Mart, announced earlier this year that it would raise the wages of its poorest workers to $10 an hour by next February. McDonald’s also apparently felt the pressure and, last month, announced that it would be upping its wages to at least $1 over the federal minimum ($7.25 an hour).

But critics and even The New York Times were quick to point out that McDonald’s move amounted to little more than a publicity stunt. The Times editorial board wrote that a fair wage would be one that paid McDonald’s workers enough so as to not rely on government aid. “Research indicates that half of fast-food workers rely on public aid, with an estimated $1.2 billion a year in taxpayer dollars going to supplement low wages at McDonald’s.” Many argue that this money should come from corporate profits, not taxpayers.

The increase at McDonald’s is only good for about 10 percent of the work force, who are employed by corporate stores and not franchises, and nearly all of the company’s employees will earn less than $10 an hour. Many will only earn $8.25 an hour.

And this is why, on April 15, Dias and hundreds of other workers throughout the country will be walking out on their gigs at fast-food restaurants in hopes of getting a raise to $15 an hour.

Will they be willing to compromise on that number? “The fight clearly states $15 an hour,” Dias pointed out.

“And I will not take any less.”

While most of the low-wage debate here in Sacramento and nationally is on fast-food powerhouses and corporate retailers, an increase in the local minimum wage would certainly have an impact on small businesses here in our backyard.

Dimple Records, for instance, is one of those prototypical local small businesses that would be impacted by wage increases. There are seven Dimple locations regionally, three of them in the city of Sacramento, and the company has more than 150 employees on its payroll. Business at these stores—the sale of CDs, records, books, DVDs and more—is very dependent on changes in the economy, according to owner Dilyn Radakovitz.

“As gas prices went down recently, our sales went up,” she explained. “Our customer is in tune with the economy.” To that end, wages presumably impact Dimple’s bottom line in a big way.

So, what if Sacramento ups its minimum wage?

“If the minimum wage increases [and wages go up], we’ll have to make price adjustments,” she said. Because of this, there will be things that customers “won’t buy any more, or maybe they won’t buy as much”—perhaps because they can purchase the items cheaper at Best Buy or on Amazon.com.

But will a minimum-wage increase hurt her business—especially because she employs many low-wage college kids?

“I don’t think so,” she answered. “If it’s done across the board, everybody’s involved, everybody’s going to have to change their pricing structure to pay their bills.

Not everyone in the business community agrees. Especially in the restaurant industry, where owners worry that they’ll no longer be able to make ends meet if they have to give more money to bartenders and servers, many of of whom already take home generous pay via tips.

Other restaurateurs point out that they’ll need to raise prices if the minimum wage goes up—even if it doesn’t rise all the way to $15 an hour, but especially if it does. Higher prices, they argue, put them at a competitive disadvantage regionally. Who’s going to drive in from Elk Grove to Midtown for a newly minted $18 cheeseburger when they can get one for $10 or less in the suburbs?

There have also been recent reports that the minimum-wage increases in cities such as Seattle and Oakland have had an adverse impact on minority communities. The Seattle Times reported on April 5 that customers at Vietnamese restaurants have rebuffed attempts to raise prices of pho soup. Same for the costs of dishes at restaurants in Oakland’s Chinatown neighborhood.

Here in Sacramento, small-business owners like boutique-fitness-studio owner Sandra Lemos worry that raising the minimum wage too quickly, and too steeply, would be a bad move. She owns three boutique yoga and pilates locations called The Daily Method, including one location in downtown Sacramento, and her employees, who are mostly part-time women looking for supplemental income, earn more than minimum wage. She competes with national chains like 24 Hour Fitness and California Family Fitness.

“I’m an advocate of a higher minimum wage,” she said—but the city needs to be careful about how it implements a wage bump.

For instance: If Sacramento were to raise its minimum in one fell swoop, like what’s happening in San Francisco, staying afloat would be hard. “If you think about increasing anybody’s expenses 30 to 40 percent,” she said, “it really worries me.”

Lemos pointed out that she can’t pass along payroll costs to her customers, too, because they will only pay so much for yoga or fitness before they defect to companies like 24 Hour, who are better suited to absorb payroll hikes.

Raising the minimum wage in the city also might put Sacramento at a competitive disadvantage with regional businesses. Lemos operates studios in Folsom and Roseville, too. “For me, it would be ’Well, I’m just not going to do business here’ if things got too tough,” she said.

UC Davis economics professor and director of the Center for Poverty Research Ann Huff Stevens says that when people are “talking about moving $9 an hour to $15 an hour, we know virtually nothing” about how that will impact employment or small businesses. “We really don’t know, and so there’s a risk.”

She agrees these new local, municipal low-wage ordinances could spur negative impacts, such as motivating companies to move across city-limit lines, as has been threatened in Los Angeles, where there are discussions to raise the county minimum wage to $15 an hour. This is “worrisome,” she says.

There are, of course, benefits to wage increases. For instance, “by raising the minimum wage, we can dramatically improve dependence on the safety net,” she explained. This means less people on food stamps and the federal Supplemental Nutritional Assistance Program.

Her advice for Sacramento would be to carefully raise wages at the bottom, make small adjustments to the minimum wage, and also think about using the tax system to benefit low-income workers (such as lobbying for a statewide earned income tax credit, which would “effectively be a subsidy for low-income workers.”)

George Jouganatos, a lecturer in economics at Sacramento State, says he’s not too concerned about a minimum-wage increase harming local businesses.

For instance, some suggest that raising wages will lead to less jobs and inflation. “The reality is that unemployment hasn’t risen” where the minimum wage has gone up, he explained. He also said an increase in prices may not sustain if the costs are passed on to consumers, many of whom will have more to spend because of wage increases.

“The folks making more money, what do they do with it? They’re going to spend it. A higher minimum wage would be spent quite a bit in Sacramento,” he said.

Jouganatos argued that a higher minimum wage could have positive economic impacts, such as higher productivity, happier workers, less employee turnover and, ultimately, lower costs to companies.

“If we raise folks above poverty, then maybe we’ll get rid of some of the misery,” he explained, suggesting that the city and business interests would save money on anything from social services costs to crime enforcement to graffiti abatement.

He agreed with the business community, however, that there might need to be “exemptions to minimum-wage laws,” such as in the restaurant industry.

It seems most small-business owners support some kind of increase. A Department of Labor survey from last June found that “more than three out of five small business owners support increasing the [federal] minimum wage to $10.10.”

What would Holly Dias do with a raise? If her paycheck went from $1,100 a month to $2,400? How would she spend that extra money? A vacation? Disneyland? Maybe spoil herself a bit?

“I would get my bills caught up,” she said, point-blank.

Dias is at least a couple of months behind on the electric bill. On top of that, it’s $400 a month, at least, just to rent a room today. A Regional Transit bus pass is $100 a month. And, since she has a baby coming in October, she should probably be thinking about getting her own place, she says, which will more than double her rent and utilities.

“I’ve got to take care of the baby now, and it’s not going to be easy. I have to think about him. Or her.”

A lot of people say that low-wage jobs such as fast-food are supposed to be stepping stones to something else. Temporary. Beginner work. “I would like to ask these people, these business people and politicians who condemn what we’re fighting for, how many low-income jobs have they ever worked,” Dias said. “Are they aware of what’s even happening? I don’t feel like they care.”

She wonders if they know that, for instance, she is on Medi-Cal for the baby, because Burger King does not offer affordable medical care. This essentially means that the public is subsidizing Burger King, since it can’t offer competitive health care for its full-time workers. “I work for a company that doesn’t even care about their employees.”

Josephine Brown says she would definitely enroll at Sacramento State if she was earning $15 an hour. “I can’t afford to attend now,” the 32-year-old explained.

But she’s not hopeless. And neither is Dias. They’re confident that this Fight for 15 will pay off in the end. Dias hopes she’ll be able to save up not just for her kid, but to move on to another job someday.

What would be her dream job? “To be a lawyer,” she said, “fighting for children’s rights.”