Tuesday, July 29, 2014

California’s small businesses can’t afford an increase in minimum wage

By Alzada Knickerbocker

Recently, the National Federation of Independent Business/California released a study on the impact of Assembly Bill 10, which would increase California’s minimum wage to $9.25 per hour in the next three years. The bill also would provide for future increases in the minimum wage depending on future inflation.

The study, conducted by NFIB’s Research Foundation in Washington, D.C., found that the long-term effect of AB 10 would be the loss of jobs and economic productivity in the state. Depending on the future rate of inflation, the passage of AB 10 could result in more than 68,000 jobs being lost in California over a 10-year period and a reduction in real output of $5.7 billion.

It doesn’t make sense. Jobs are the need. Why is the state leading with a proposal that will kill jobs?

I own an independent bookstore — The Avid Reader, in downtown Davis. I’ve been here 26 years. I have eight employees — four full-time, four part-time. Half are long-term staff and half are recent hires. Because I need staff with knowledge and work experience, my new hires are compensated above the minimum wage.

But that’s not to say that my business isn’t affected by minimum wage levels. Minimum wage is out there and recognized by all as the base line. Candidates for work here know what that rate is and have an idea of what their wages should be relative to that rate. I must choose a rate of pay that comports with their skills above the basic minimum-wage rate.

That’s one pressure. The other is the store’s budget. Payroll is generally suggested within my industry to be 20 percent of the store’s income, the highest percentage in my budget after the cost of books at 60 percent. In that 20 percent figure is not just the employees’ pay but also health care, vacations, payroll tax and workers’ compensation. Add a cost like higher minimum wage, and I’m over that 20 percent figure.

How do I bring what I can pay back into line? Realistically, it comes down to reducing staff hours or store hours, i.e., cutting back on current employee opportunities through my store. That’s the effect on my store as it exists. However, a required higher rate of pay also becomes a deterrent to possible growth or expansion and the addition of more jobs. I expanded my store last year and hired new workers. If the new proposed minimum wage had been in place, I very likely would have passed on risking a new venture.

Minimum-wage jobs are meant as a beginning, not an end. They are intended for the entry-level employee. Minimum-wage earners learn valuable lessons of responsibility that come from doing a job and working with others. They benefit, and so do our state and society.

Raising the minimum wage might accomplish a short-term jolt to the economy, but it ultimately will result in constricting hiring and the raising the cost of products in most industries to pay for fewer workers. The net effect will be fewer filled jobs leading to fewer goods being purchased, and California’s economy deteriorating rather than improving.

All of us should ask that our leaders stay focused on job creation (not job loss) and strengthening (not weakening) the economy. A recent Public Policy Institute of California poll found that 45 percent of those surveyed thought the most important issue facing the state was jobs and the economy. Is Sacramento understanding that?

Let’s start developing policies like lessening regulations and easing tax demands that support rather than burden our job creators. Let’s encourage job hiring, not undermine it. Then California will have a genuine turnaround that will truly benefit our state and all who live here.

— Alzada Knickerbocker, a Davis resident who owns The Avid Reader and Avid Reader Active bookstores in downtown Davis, is a member of the National Federation of Independent Business’ California Leadership Council.



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