On April 1, the Associated Press, in an online video which I covered in an April 2 NewsBusters post, interviewed three California business owners about the impact the state's just-passed $15-per-hour minimum wage would have on their businesses.
Though the video was headlined "Small Businesses React to Calif. Wage Increase," the owners interviewed weren't representative of the whole state in any way. All three are based in San Francisco. Two of the three are supporters of the minimum-wage increase; the third, a small bookstore owner, thinks businesses like his should have been exempt, as the increase should only have targeted "multinational corporations that make billions of dollar of profits." It turns out that two of the three owners interviewed by AP were also interviewed by Susan Adams at Forbes on March 31. That can't possibly be a wild coincidence.
At least Adams's headline ("What A $15 Minimum Wage Means For Three Small Businesses In San Francisco") isn't deceptive.
Her writeup revealed more about the two business owners involved than the two-minute AP video could. To no one's surprise, these two are even less representative of the small businesses in California than the AP conveyed.
Let's take Rick Karp, the owner of Cole Hardware. He came across in the AP video as a guy grounded in the realities of business, especially when he said that "many people are legitimately afraid of $15 an hour — I am too, frankly, because our bottom line is real thin — but I hope that we'll be able to innovate to keep our business thriving." But he also observed that "it's so difficult, especially in San Francisco, to live off anything less."
Adams's opening essentially reveals that the guy was posing as a concerned, politically agnostic business owner to mislead AP's viewers:
Rick Karp calls himself a “bleeding heart liberal.” He’s a member of Business for a Fair Minimum Wage, a national non-profit that supports hikes in the minimum wage, including $15 in California, New York and Washington, DC, and a $12 federal minimum.
It's also safe to say that Rick Karp is on the Rolodex or its digital equivalent of all Northern California reporters who need to get a minimum wage-sympathetic comment. Of course, no one feels that they need to expose his political activism in favor of a higher minimum wage.
Continuing with Karp:
At Cole Hardware, the San Francisco-based chain of five stores he took over from his father in 1978, Karp, 64, has long made a point of setting compensation for his lowest-paid hourly workers, including cashiers and stock clerks, above the required minimum. Among his staff of 124, he has 10 full-timers and three part-timers who make $13 an hour, .75 above the current $12.25 minimum in San Francisco and .45 above the $12.55 minimum in Oakland, where he has one store.
... “We’re going to make it work,” says Karp. “We’re going to continue to thrive.” But at the same time, he says, something will have to give. He’s thinking about shrinking his payroll by 10%, through attrition he hopes, and he’s realizing he may not be able to keep paying above the required minimum once it hits $15.
... it’s going to be very tough to continue to be so generous, he says. Last year, profits were 3% to 4% of sales, he says. If he stays ahead of the $15 minimum, he could wind up erasing his profits, unless he has a significant revenue increase. One other option he’s considering: doing away with a newspaper the store publishes, which he sends through direct mail to 25,000 customers a month, at a cost of $240,000 a year. But doing so could cost him sales.
Even so, Karp says he still favors the $15 minimum: “The cost of living is so high here, it’s very hard to live on minimum wage in San Francisco.” He’s especially pleased that the statewide minimum is likely to match the city’s, requiring competitors like Amazon to pay their warehouse staffers as much as he pays his cashiers. “There needs to be a level playing field,” he says. “I think a federal minimum wage of $15 would be great though I don’t think our crazy Congress will do that.” The higher minimum can also have benefits for retailers like him, he believes. “When people make more,” he says, “they spend more.”
Karp has predicted that the minimum wage is going to reduce employment at his store. Is that okay because the reduced employment will come from attrition? What if most businesses also choose to pare their staffs that way? How will those who leave, let alone new arrivals to the job market, ever find work elsewhere? I also noted the following on April 2:
... other people who can better handle $15 an hour include the big-box hardware stores like Home Depot and Lowe's, which typically have higher sales per employee. Additionally, Amazon may decide to serve more of their California customers with next-day and later delivery requests out of locations in Nevada or other nearby states.
Like AP, out of the thousands of business owners in California, Adams also found and interviewed Philip DeAndrade of Goat Hill Pizza:
Philip DeAndrade, 72, runs Goat Hill Pizza, which has three locations, 60 employees and revenue of more than $3 million last year, according to DeAndrade. He has an even thinner profit margin than Karp’s, just 2.7%, which means he has little room to maneuver on profits of around $81,000. He pays himself $40,000 and lives on a houseboat near the AT&T baseball stadium. “I personally do not view wealth as a marker of success in my life,” he says. “It is not my goal.”
That’s a good thing, given his rising wage costs. In addition to the increasing minimum, California is one of six states that require tipped employees to be paid the minimum wage. ... He says his customers don’t make a fuss when he raises prices on his pizzas. The Internet makes it easier. “You can raise the price in your menu online, and nobody notices,” he says. Because all city restaurants contend with the same wage requirements and other costs, like the fluctuating price of cheese, DeAndrade says he knows he can pass on the costs of higher wages, and more expensive ingredients, to his customers. He says he raises prices roughly once a year and his customers have yet to complain.
DeAndrade, who pays himself so little he can't even begin to afford to live in a land-based dwelling in San Francisco, apparently is oblivious to the fact that customers usually don't complain about price increases. They just go elsewhere, or decide to order out less.
As to his feeling that he "knows he can pass on the costs" when they increase, just wait until the tech sector or the financial sector catches a cold.
Back on point — Hasn't anybody at a national news outlet gone out and talked to someone outside of the City by the Bay about California's statewide $15-per-hour minimum? To the extent they haven't, it may be because:
- They're too lazy to venture outside of the liberal Bay Area bubble.
- It's likely quite difficult to find someone outside of high-cost San Francisco who supports the $15 minimum. After all, promoting minimum-wage increases has been the self-evident objective of reporting on this topic during the past several months.
- Those who oppose the law fully realize that expressing opposition makes one a target — and that's the last thing a struggling small business facing a 50 percent increase in labor costs over the next five years needs. So the last thing an owner who opposes the increase is going to do is talk to an agenda-driven reporter.
- As noted earlier, journalists have a go-to list in these circumstances, and the only people who will tell them what they want to hear are in San Francisco. Would it be too much to expect them to ask themselves why that is?
Cross-posted at BizzyBlog.com.
