Minimum wage goes up in South Bay — with mixed reaction

In 2017, Kirk Vartan turned his award-winning A Slice of New York pizza into a co-op, cutting his workers into equal partnership.

Part of the deal includes being paid at least $21 an hour to start, attributed in part to the San Jose business’s unique structure. The pay rate is much higher than city’s minimum wage of $15.25 an hour, and closer to Vartan’s goal of a living wage for his workers.

So it might not matter in the short term that San Jose, where one of Vartan’s two restaurants is located, raised its minimum wage Jan. 1. But to Vartan, the bare minimum isn’t enough.

The minimum wage goes to $15.45 an hour from $15.25 an hour. San Jose is one of several cities in the region to implement a minimum wage hike.

Cupertino will increase its minimum wage to $15.65 per hour from $15.35 per hour. Los Altos, Palo Alto and Santa Clara will increase their minimums to $15.65 from $15.40 per hour. Mountain View and Sunnyvale — both tied for the highest minimum wages in the region — will increase to $16.30 from $16.05 per hour.

That leaves the most populous city in the region — once a national leader in raising wages — almost $1 per hour behind the highest minimum wages in the South Bay, and far short of the living wage of $20 an hour for a single person with no children for Santa Clara County as calculated by the Massachusetts Institute of Technology.

Scott Myers-Lipton, a sociology professor at San Jose State University, agrees.

“San Jose, which was a leader in the minimum wage debate, now is at the bottom of the heap,” said Myers-Lipton, who in 2012 led a group of students to campaign successfully for a $2 minimum wage increase in San Jose. “We’re in last place.”

A 2016 study, conducted by economists at the University of California, Berkeley, found raising the minimum wage to a then-high of $15 in San Jose would result in a wage increase for 31.1% of the city’s workforce and an annual pay increase of 17.8% for those getting raises.

It would disproportionately benefit Latino workers who are more likely to hold low-wage jobs and would show “improved health outcomes for both workers and their children,” the study said.

The study also found businesses could absorb most of the payroll increases by raising prices an average of 0.3%, which was below the annual inflation of 2.5% from 2014 to 2019. Restaurants would have to increase their prices by an average of 3.1%.

The issue of price increases is where Myers-Lipton and Vartan disagree.

While Myers-Lipton sees a guaranteed increase in both wages and happiness across the board for workers and business owners, Vartan sees misguided policy.

“I saw senior elected officials speak about how minimal an increase to wages would be to a business, cities with ivory-tower analysis or theory,” Vartan said. “But how does that theory hold up in a business where labor makes up 45% of your expenses? Saying there is a minor impact to profits is a joke.”

That increase for restaurant operators, Vartan said, is just simple math.

“I am all for raising wages,” Vartan said. “My problem is being told how to do it. The reality is, customers pay for everything. If expenses go up, so do prices.”

Myers-Lipton said, however, that is what is expected. A 2% to 3% increase was something both Myers-Lipton and the UC Berkeley study predicted.

“The numbers are clear about the positive impact of the minimum wage (increase),” Myers-Lipton said.

The pandemic has crippled much of the service industry, which employs a disproportionate number of low-wage and minimum-wage workers, many of whom are Black and Latino.

Some business owners say lost revenue due to the pandemic is an even greater reason they should fear a wage increase.

According to a new Public Policy Industry Report, the unemployment rate for workers earning less than $30,000 from August to October was just over 25% and has likely “stripped away” many wage gains made by the lowest income earners.

All the more reason, Myers-Lipton said, that communities should be increasing minimum wage.

“Why in San Jose are we at the bottom of the heap — almost $1 behind Mountain View and Sunnyvale?” he said. “A dollar an hour increase would be incredibly helpful.”

He said the warnings against wage increases from business advocacy groups have proven false. And with a pandemic to deal with, that false information might be even more devastating for businesses than wage increases.

Eddie Truong, the director of government and community relations for the Silicon Valley Organization, said the city should hold off on an increase because of the pandemic.

“Restaurants are particularly affected because the inability to have dining indoors or outdoors and to have minimum wage increases on top of that. Plus, restaurants, in general, are a thin-profit industry,” he said.

Also Jan. 1, the statewide minimum wage bumps up to $13 per hour for businesses with 25 employees or fewer and $14 for all other businesses. In 2022, those amounts will increase by $1, respectively. Businesses with 25 employees or fewer have an extra year to comply with the state’s goal of reaching $15 an hour by 2023.

Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.