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San Diego’s new minimum wage hike: Will it help or hurt during a pandemic?

 Mary's Donuts and Coffee in Lakeside
Karli Huntsman picks out fresh donuts for customers during the morning rush at Mary’s Donuts and Coffee in Lakeside where entry-level employees will see an increase in their hourly wages.
(Jarrod Valliere / The San Diego Union-Tribune)

Business owners ravaged by COVID-19 wrestle with how to cope with higher labor costs while low-wage workers welcome anything that will put more money in their pockets

As many of the county’s beaten-down businesses enter the new year still in the grips of a crippling COVID lockdown, they face yet another financial tug on an already precarious future — an 8 percent jump in the minimum wage.

The timing, they say, couldn’t be worse as many struggle to eke out what little revenue they can until vaccines take hold, the pandemic eases and some semblance of a profit returns.

To be sure, employment in sectors like leisure and hospitality is already down by double digits, but for those businesses that are still operating, even at minimal staffing, labor costs will rise this year as the minimum wage jumps a dollar an hour across the county. In the city of San Diego, it will rise from $13 an hour to $14 , while in the rest of the county, the $14 hourly rate will apply to companies with 26 or more employees. For smaller businesses, minimum wage workers will see their hourly pay increase from $12 to $13.

“It’s coming at an awful time. There are so many things we’ve been trying to fight as individual restaurants and as an organization,” said Jeff Rossman, taking a break from the kitchen at his Terra American Bistro where he and his crew were preparing 60 pre-packaged to-go meals for New Year’s Eve. “We even tried to get the minimum wage increase stayed by the governor and he came out and said no.

Minimum wage in San Diego

“I’m not against the hike but with 50 percent of the restaurants closing, come on, seriously?”

As inopportune as the timing may seem for employers, it couldn’t come at a better time for the scores of workers who have been sidelined by the pandemic, seen their hours cut or continue to be employed in essential, low-wage jobs that potentially expose them to COVID-infected customers.

A better-paid minimum wage worker, even at a modest $14 an hour, argues employee advocate Alor Calderon, makes for a more productive, efficient workforce and therefore is a win for both employer and employee.

“The businesses will say it’s too hard for me to pay more, but what we don’t hear from them is how the employees who receive a minimum wage are a problem for management because they have a hard time concentrating on work, they show up late, they have to take care of their children,” said Calderon, director of the San Diego-based Employee Rights Center. “That’s because they don’t have the resources, they’re working three jobs, have to decide between eating and paying for medicine.

“The employers are saying I can barely survive (paying) the $13- or $14-an-hour wage, but if it’s too hard for you, imagine how hard for it is for someone on minimum wage. Yes, it is a burden at this time but it’s a less than 10 percent increase so it’s a small price to pay.”

Even as the national minimum wage remains stuck at $7.25 an hour, California and other states have seen a slow but steady climb in the rate as the union-led “Fight for $15,” an alliance that includes fast-food workers, gained steam in recent years.

In California, Friday’s wage hike will be the seventh since 2014 when the minimum wage rose from $8 to $9 an hour. By 2023, all lower-wage workers in the state will be paid at least $15 an hour, although some jurisdictions have already reached that milestone. By July of this year, the minimum rises to $15 for all employers in the city and county of Los Angeles.

Earlier this year, the California Restaurant Association appealed to Gov. Gavin Newsom to pause the 2021 increase, pointing out that once “the COVID-19 crisis passes, there will be scorched earth on the employment and restaurant landscape.” A temporary hold, it argued, would help “mitigate the damage.” Newsom declined, stating that to delay the wage boost “will only make life harder for those Californians who have already borne a disproportionate share of the economic hardship caused by this pandemic.”

Economist Chris Thornberg, founder of Los Angeles-based Beacon Economics, agrees that it is a bad time to raise the minimum wage given the frequent financial disruptions businesses have had to endure. He faults the state’s leadership for not coming to the rescue.

“The most problematic issue in Sacramento right now is they don’t give a (expletive) about business,” he said.

Among San Diego County’s job sectors, the hospitality industry was by far rocked the most by the pandemic. As of November, 45,100 jobs — nearly half of all lost jobs in San Diego County in the last 12 months — were in leisure and hospitality, according to the state Employment Development Department. Some of the hardest-hit areas include work in amusement and gambling, hotels and foodservice.

East County businessman Joel Scalzitti, while not affected nearly as deeply as some of his foodservice peers who are reporting revenue down by as much as 70 and 80 percent, says he still will see a 25 percent hit for 2020. He doesn’t have many options right now to cut costs, he says, other than to take on more of the workload himself to keep his total number of employees under 26.

“It’s definitely bad timing for me,” said Scalzitti, who owns Mary’s Donuts & Coffee in Lakeside and Main Street Donuts & Deli in El Cajon. His entry-level cashiers will now start at $13 an hour. “It affects my workers’ comp and insurance and then reflects in the price of your products but how do I raise the price of my products when people can’t afford it. People will say, don’t you understand, we’re in a pandemic right now.”

Fortunate enough to be a takeout business at a time when in-person dining is prohibited, Scarzitti said that with the increase in the minimum wage, he plans to also raise the pay of his higher-paid workers in order to maintain parity. But he will keep a hold on new hiring.

“I’m staying at no more than 25 employees so I can keep the minimum wage at $13,” he said. “But that forces me to get my labor down a little bit, so I’m waking up at 4 to do deliveries instead of hiring a delivery driver. That’s just part of the business right now.”

Valerio Pons, who has worked intermittently as a restaurant cook amid the unpredictable cycle of state-regulated business closings and reopenings, has relied heavily on his unemployment checks and the stimulus check he received from the federal government.

In early December, he was furloughed and only returns periodically to the Kensington restaurant where he has worked off and on. The 31-year-old Pons considers the minimum wage increase “excellent,” especially during this uncertain time but acknowledges it is still not enough.

“Of course, you can survive with the minimum wage, but that’s not the point,” he said. “Earning a wage should be to make a living not just make ends meet.” Still, the dollar increase he added, is “better than nothing.”

A hotel housekeeper for the last eight years, Maria Puga currently earns $13.50 an hour and expects no more than a 50-cent raise on her next paycheck. It’s a “tiny bit of help,” she says of the minimum wage increase, but it will not go far, considering the $1,500 a month she contributes in rent for the home she shares with her 14-year-old twins and 28-year-old daughter.

“A lot of times, the children are hungry but I don’t have enough money to buy extra food or go out for any activities,” she said. “For example, if they want a cheeseburger, I can’t even afford to do that because we really have to save and scrounge for the rent. I really think the minimum wage should be way more than $14.”

This year is not the first time a major boost in pay has coincided with a period of extreme economic stress. The Fair Labor Standards Act, which marked the debut of the minimum wage in the late 1930s, was a Depression-era piece of legislation signed into law by President Franklin Roosevelt, points out labor researcher Ken Jacobs.

“Obviously, the Great Depression is a very different situation from COVID but what people understood then is you couldn’t get the economy going again without having a strong consumer base for buying the products you were going to sell, so there’s a positive side of raising the minimum wage in the midst of an economic downturn” said Jacobs, who chairs UC Berkeley’s Center for Labor Research and Education.

“Is the current increase enough of an increase for many families? No. But it does make a tremendous difference and there is a growing body of research that found it does what it’s intended to do and has not had a negative effect on overall employment. You do get a small increase in prices in restaurants where labor is a higher share of their operating costs, but that’s more than counteracted by workers spending money.”

Increases in menu prices aren’t a likely antidote this time around for the higher wages, given the ravages of the pandemic, says Eric Adler, co-founder of the Puesto restaurants in San Diego County and elsewhere in California. Two of his three San Diego locations are currently open for takeout, and his normal workforce of 355 is down to 27.

“It’s going to be harder than in the past because of on top of losing 70 to 80 percent of your revenue for the whole year — and who knows what you can open at in 2021— now there’s a minimum wage increase. But the minimum wage is probably the least of anyone’s worries right now. The major worry is about being able to be back open. There’s no way businesses can survive if they can’t be at full capacity. And we have no idea right now when that will be.”

As difficult as 2020 was for so many businesses, toy store owner Brian Miller is determined to survive 2021, even with higher payroll costs. Raising the prices of merchandise may be a possibility but he is laser-focused on any strategy that will generate more sales at his Geppetto’s Toys and doesn’t want to risk doing anything that would turn people away.

“First of all, I’m resilient and I’m not going to fail,” said Miller, who owns 10 stores. “The minimum wage increase is one more thing I’ll have to manage and I’ll be slightly less profitable but I don’t think it’s the straw that breaks the camel’s back.”

Staff writer Alexandra Mendoza contributed to this report.


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