Light's better in Oakland

The Employment Policies Institute looked in on Oakland, California's small business sector to see how it's coping with the $12.25 per hour minimum wage just instituted on March 1st of this year. No surprise, the laws of supply and demand function just as the textbooks say.

To the question, Would you say that the $12.25 wage caused a large increase in your labor costs, a small increase in your labor costs or no increase?: Of the 223 business surveyed, 56% said it was large, while another 30% said it was small. Only 8% said there was no increase in their labor costs.

Nearly one in four said the increase was 'more than 20%'. But, some Berkeley economists promised the impact would hardly be noticed. Well? 27% of the surveyed businesses said it very likely or somewhat likely they'd have to close their businesses. Others;

 Half of the surveyed businesses used prices increases to offset the additional labor costs; Thirty percent...reduced their employees' hours or their hours of operation to offset the costs; Seventeen percent...laid off employees or otherwise reduced staffing levels to adapt to the higher costs....

30% delayed or canceled plans to expand their business, and 17% decided to move outside Oakland.

The EPI also did in depth interviews with three affected small businesses. One, a husband and wife sewing company that subcontracts for larger San Francisco apparel companies--in business since 1990--couldn't, for competitive reasons, raise prices to their customers. So, they laid off employees and had to do more of the sewing themselves. They now work from 9 AM to 8 PM to keep their business alive, but will re-evaluate after six to twelve months, and may close altogether.

A second, a seafood restaurant opened in 2010, couldn't absorb the higher labor costs and laid off 2 of its 3 employees. As with the apparel subcontractors above, the owner now does most of the work himself, along with his wife. He also contemplates closing.

The third story is even more poignant. A day-care center, Sterling's Family Childcare, open since 1974 and serving Oakland's low income families, has had to cut back on services offered, reduce employee hours, and notify her customers of higher fees to come soon. Since she now has to do more of the supervision of the children in her home, she no longer offers free pick-up of children.

Muriel Sterling tells EPI that she knows that other small daycare firms face the same challenges as she. EPI didn't survey the parents of the small children to find out how they replace the services now gone thanks to the new law, nor how they are going to come up with the extra money to pay for those that remain.

I.e., how they will cope with what the Berkeley economists promised they'd barely notice.