Another post from one of my favorite blogs, Coyote Blog, has a great illustration on the impact to businesses that an increase in the minimum wage results in.
Labor and labor-related costs (costs that are calculated as a percentage of wages, like employment taxes) make up nearly 50% of our costs. The Minnesota minimum wage is set to rise from $7.20 to $9.50 in the next two years, an increase of 31%. Since wages and wage-related costs are half our expenses, the minimum wage increase raises our total costs by 15.5%. This means that all by itself, without any other inflation in any other category of expenses, the minimum wage increases will drive a $3.10 increase in our camping fees (.155 x $20). Note that this is straight math. The moment the state of Minnesota passed their minimum wage increase, this fee increase was going to be required.
This in response to angry customers who saw their costs rise for their favorite camping sites in the parks managed by Mr. Coyote.
Now, fortunately for his sake, he is able to raise the prices for camping in his market, but how about businesses that can’t?
In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018. Although all of us at Borderlands support the concept of a living wage in [principle] and we believe that it’s possible that the new law will be good for San Francisco – Borderlands Books as it exists is not a financially viable business if subject to that minimum wage. Consequently we will be closing our doors no later than March 31st. The cafe will continue to operate until at least the end of this year.
While I absolutely hate the destruction of capital due to the political process when it otherwise could have been avoided, I must admit to a degree of schadenfreude with respect to the bookstore owner.
Since the Coyote story is a bit old I went to check and see what happened to Borderland Books:
Last month it announced its impending closure – until the idea of crowdfunded “sponsorships” was floated. On the bookshop’s website, its owners announced:
Starting immediately we will be offering paid sponsorships of the store. Each sponsorship will cost $100 for the year and will need to be renewed every year. If we get 300 sponsors before March 31st, we will stay open for the remainder of 2015.
Our goal is to gather enough paid sponsors to cover the projected shortfall in income that will be the result of the minimum wage increase in San Francisco. At the beginning of next year we will again solicit sponsors. If next year we again reach our goal by March 31, we will remain open through 2016. This process will continue each year until we close, either because of a lack of sponsorship or for other reasons.
Just two days after launching the initiative, Borderlands’ Jude Feldman announced that they had hit their target – 300 people had offered up sponsorships of $100 apiece, enabling the store to stay open for a further year.
Good on them.