Tuesday, February 03, 2015

San Francisco's Borderlands Books Killed Off by Minimum Wage Increase

The Law of Unintended Consequences strikes again, this time in San Francisco.  

Voters there recently passed a city initiative that raises the minimum wage in stages - to the point that it will reach $15 per hour in July 2018.  It is currently $11.05 an hour.  All well and good in theory.  But for small businesses already struggling to survive, the increased labor cost might just be the proverbial straw that breaks their backs.  

Case in point: Borderland Books, the city's popular sci-fi and fantasy bookstore.  According to a news story filed by San Francisco's ABC television affiliate, the bookstore's customers are shocked to learn that they have effectively voted it our of existence.
Borderlands was turning a small profit, about $3,000 last year. Then voters approved a hike in the minimum wage, a gradual rise from $10.75 up to $15 an hour.

"And by 2018 we'll be losing about $25,000 a year," he said.

It's an unexpected plot twist for loyal customers.

"You know, I voted for the measure as well, the minimum wage measure," customer Edward Vallecillo said. "It's not something that I thought would affect certain specific small businesses. I feel sad." 

Though it's caught a lot of people off guard, one group that wasn't completely surprised was the Board of Supervisors. In fact, they say they debated this very topic before sending the minimum wage to the voters.
I don't want this to turn into a political discussion because that generally gets people nowhere.  But I do have a degree in economics, and I have to say that no one should have been blindsided by this kind of thing.  A wage increase of this proportion invariably leads to an uptick in unemployment and prices.  If consumers are unwilling to pay the higher prices needed to cover increased wages, businesses fail and people are out of work.   It's really pretty simple.

No comments:

Post a Comment