The Mother Lode business community weighed in on President Barack Obama’s call to raise minimum wage during his State of the Union address Tuesday night.
Obama urged Congress to increase the federal minimum wage from $7.25 to $9 per hour by 2015 and adjust it automatically with inflation.
“… Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on,” he said.
The increase would be the first change in federal minimum wage since the $2.10 increase six years ago. It would also be the highest in more than three decades, accounting for inflation, according to the New York Times.
The White House estimated it would increase wages for an estimated 15 million U.S. workers.
“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty …” Obama said.
California is one of 19 states, plus the District of Columbia, that has a minimum wage higher than the federal standard, according to the U.S. Department of Labor.
When state and federal minimum wages differ, the higher wage prevails.
California’s current minimum wage is $8 per hour, meaning employers would have to fork over another $1 per hour per employee to comply with federal law.
The Mother Lode business community sympathized with full-time workers living in poverty but expressed concerns about how the change would impact small businesses.
“Business people in this county are struggling to survive as it is and it would, of course, make life harder,” Calaveras County Chamber of Commerce Executive Director Diane Gray said.
Larry Bezaitis, who recently opened the Europa restaurant in downtown Sonora, said an increase in minimum wage combined with higher health care expenses would be a burden on small businesses.
“That would have a serious impact, especially in the food service business and it would amount to … basically making people work less, but harder when they do work,” he said.
According to the latest Economic Development Department data, food service jobs are among the lowest-paying of the approximately 46,000 reported jobs in the Mother Lode.
The average hourly wage is less than $9.50 for about 3,000 food service workers, according to the data.
George Segarini, Sonora restaurant owner and Tuolumne County Chamber of Commerce president, said that while some food service workers compensate for lower wages with tips, they will make less in tips if employers cut back their hours.
“Small businesses have to make a decision,” he said. “Generally, it’s either cut back further hours of current employees or lay people off.”
Another option is to raise prices, which can make it more difficult for businesses to compete, experts say.
“Where markets are pretty tight and there’s high competition, and especially if they’re competing with overseas markets, it can cause a squeeze,” said Larry Cope, director of the Tuolumne County Economic Development Authority. “They have to respond to the market somehow, and you can’t raise your prices too much unless everyone is raising them.”
Bezaitis agreed, saying “raising prices is the last thing any business wants to do.”
Cope anticipates restaurants, tourism-related businesses and small businesses in general to be impacted the most.
He also noted that businesses that spend more on labor than materials will likely feel the effects of a higher minimum wage.
Other businesses were not as concerned about higher minimum wage standards.
Owners of the Peppery Gar & Brill and It’s Yo Good Yogurt, food establishments in Sonora, said the law would probably not affect their businesses significantly because they already pay employees above minimum wage.
Although Cope offered a general idea of which businesses could be hit the hardest, he said a change in minimum wage would have different impacts on, and be addressed differently, by each individual business.
“It’s a balancing act, and some will be winners and some will be losers,” Cope said.