Restaurants have most at stake over $15 minimum wage


California’s restaurants and retail stores would be ground zero for the impact of the proposed statewide $15 minimum wage.

The retail and food industries alone employ nearly a third of all workers who will get a raise if Gov. Jerry Brown’s proposal passes the Legislature, according to an analysis by UC Berkeley’s Center on Labor Research and Education. Of the 5.6 million workers who are expected to earn more under the law, about 1.7 million of them are employed in retail or food services.

For the last five years, restaurants have been a major driver of job growth. And because they spend a relatively large share of their operating expenses on labor, restaurants may feel the effect of rising pay most acutely, said Ken Jacobs, the chair of Berkeley’s labor center.


Profit margins at restaurants are thin, hovering between 4% and 6% on average, according to the National Restaurant Assn., an industry group.

“A drastic increase to labor costs, like what we’re seeing in California, will have dramatic impact on restaurants’ ability to continue to grow,” said Restaurant Assn. spokeswoman Christin Fernandez in an email.

From 2010 to 2015, restaurants created 244,000 jobs in the state, according to Economic Modeling Specialists International, a company that analyzes labor data.

Elderly services was the only sector that created more jobs, and that was because the Bureau of Labor Statistics recently reclassified certain positions into that industry.

Across the state, workers and business owners are engaged in a tense, often deeply personal debate about whether lifting wages to $15 per hour will buoy the state’s economy or stunt it.

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Damian Monroy, who earns $10 per hour making smoothies at Jamba Juice in Lynwood, has a hard time getting worked up about how people up the restaurant food chain will be hurt by higher wages.

Monroy, who has organized with the union-led Fight for 15 campaign, said he sometimes spends parts of his week homeless, sleeping on the Metro. He has had to take a break from college because his $600-per-month income doesn’t cover his living expenses and tuition.

“It looks selfish for [business owners] to say, ‘Oh we can’t afford it,’” Monroy said. “I find it crazy that these major corporations are making millions and billions but they can’t pay their workers a living wage.”

Mark Wheeler, who owns a Ford dealership in Encinitas, said the proposed minimum wage increase likely wouldn’t affect the retail price of the cars he sells. But it could cut into the dealership’s service and operations.

Wheeler pays some of his non-salaried employees a multiple of the minimum wage, so he expects their pay to rise precipitously.

“I think it’s designed to help lower-income wage earners, and I want to help them too,” said Wheeler, 59, who responded to a poll on the Los Angeles Times website. “But the reality is … it doesn’t just appear. It doesn’t just happen.”

Stanley Nguyen, 28, owns an e-cigarette store in Santa Clara, where the minimum wage was increased to $11 an hour starting in January. Nguyen, who also responded to the online poll, said his employees were already close to that level, so the bump didn’t hit him hard.

But he expects the impact of the statewide law would be more severe.

“We’re going to have to budget accordingly,” Nguyen said. “We have to get more creative with ways that we can get better margins but lower the costs of things.”

Samantha Masunaga contributed to this report.


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