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Business Owners Weigh In On Proposal To Raise San Diego's Minimum Wage

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Proposal To Increase San Diego's Minimum Wage In Hands Of Committee
Proposal To Increase San Diego's Minimum Wage In Hands Of Committee
GUESTS:Harry Schwartz, Co-Owner, ACE Hardware, downtown San Diego David Gimbel, owner, Voice & Video Rentals

TOM FUDGE: Our top story on Midday Edition, on Wednesday, a committee of the San Diego City Council will start debating a proposal to increase the city's minimum wage to just over thirteen dollars an hour. Moving here is part of a nationwide movement born of growing concerns about income inequality. Within the next couple of years, California will raise minimum wage from $8-$10 an hour. Fairly, not everyone thinks that boosting the San Diego bottom wages even higher than that is a good idea. And business groups have led the campaign against it. Even within that community, there are disagreements. That is what we will explore in the first segment of today's show. My guests in talking about the minimum wage in San Diego are businessmen Harry Schwartz and David Gimbel. Harry Schwartz is the co-owner of Ace Hardware in downtown San Diego. He has sixteen employees, and he is opposed to raising the minimum wage in San Diego. David Gimbel is owner of Voice & Video Rentals. Do I have that right? DAVID GIMBEL: You do. TOM FUDGE: He has nine employees and eight freelancers, he is in favor of the minimum wage proposal has put forward by the City Council President Todd Gloria. Thank you very much for coming in. David, tell us about your business and how you think it might the affected if the minimum wage was raised to thirteen bucks an hour. DAVID GIMBEL: A little bit about my business, we rent audiovisual equipment, sound equipment, drapery, to conventions and meetings of all kinds, events of all kinds. We have been around San Diego for the past forty-one years, and we are a small company that has a loyal following. We also stream all of these events on the internet. But I am very much for the minimum wage raise. It would not affect me because I pay at the low-end double the current minimum wage. I could hire people, train people to work at slightly above minimum wage, or very close to it, I choose not to. I know we do that, we have profit sharing, and we pay full benefits, sick time, which is another thing that we should discuss, and paid vacation. We feel very strongly and I feel very strongly, that we get much more bang for the buck. We get people who stay with us, and make it a career. People who want to come to work, not always, not every day, not even me, but it has served us well to have a happy atmosphere. TOM FUDGE: And obviously you're in a situation where you are doing for your business what you think is best, but why do you feel the minimum wage needs to be increased for other businesses that may be in different financial situations? DAVID GIMBEL: Because the biggest thing, all of the stats and statistics show that cities that have increased minimum wage get much more money going back into the community. Almost 100% of every dollar out of raises in minimum wage goes right back into the community. Businesses that have been struggling are doing better. He goes across the board, San Francisco, San Jose, for example, raised minimum wage is not too long ago. They actually had increases in the amount of money that was spent, and they did not have decreases in the amount of hires. There were more people hired as a result, strangely enough. That works because there was more money in the community, and businesses expanded. TOM FUDGE: David, help me out with one thing, what is the minimum wage in San Francisco? What did they raise it to? DAVID GIMBEL: I'm not sure exactly. TOM FUDGE: Harry, do you know? HARRY SCHWARTZ: It's currently $10.74. TOM FUDGE: Compared to a dollars an hour, nine dollars an hour in the state of Minnesota. Harry, that needs and you. Tell us a little bit about your business and let us know how you think your business would be affected if we raised minimum wage to thirteen dollars an hour. HARRY SCHWARTZ: Thank you. We are downtown Ace Hardware, a downtown hardware store. We have been in business for five years. Ace Hardware is similar to a franchise. The eleven Ace Hardware stores in the County are all independently owned. The impact we see, is a few things. Number one, we don't pay anyone at minimum wage either. We don't have the luxury of being at the level that David's folks are at, but we started ten dollars an hour and go up from there. The challenges we see are that number one, it is not just minimum-wage workers who are impacted by this or benefit from it, it is the entire hourly pay scale. So the minimum wage is a benchmark that hourly workers use. No disrespect intended to McDonald's, but minimum wage, you work at McDonald's if you make minimum wage. If you worked at Ace Hardware, you expect to make a little more than that. As minimum wage goes up, the whole pay scale goes up. So we are not properly measuring what the impact will be on small businesses. That is the concerns me. TOM FUDGE: You said that the entire pay scale will go up, workers who are making ten dollars an hour would be making thirteen dollars an hour, so you have to give everyone else raises? HARRY SCHWARTZ: Right. So if I am an employee making twelve dollars an hour, four dollars more than minimum wage, when he goes up to nine dollars next month and ten dollars in eighteen months, why wouldn't I expect to get at least a four dollars more than the current minimum wage. The whole pay scale goes up, the twelve dollar an hour person becomes fourteen dollars an hour person or sixteen dollars. Not that they are not entitled to it, because they have more experience, but it changes the entire pay structure, and thus becomes a bigger expense than anticipated. TOM FUDGE: Because it affects everyone up the ladder. Could you imagine a situation where they did raise the minimum wage to thirteen dollars an hour, where you might have to lay folks off or reduce hours? HARRY SCHWARTZ: Maybe for some businesses that might be the case. But for us, we are the hopeful place, we cannot be shortstaffed. Really, the solution, when we cut expenses where we can, the solution is price increases. The next concern comes in, this is a city of San Diego issue only, to the city's surrounding San Diego will be at the state-mandated minimum wage. How do we compete, when we had to raise our prices when stores in surrounding areas did not. TOM FUDGE: David, would you think about the fact that if we do what Todd Gloria things we should, then San Diego's minimum-wage would be higher than that of surrounding suburban communities, does that put San Diego somehow at a disadvantage? DAVID GIMBEL: I think all of us have been hearing for the last few months about mandated raises in minimum wage across the country. More national press is being devoted to this, people are recognizing nationwide that we have a problem with underpaid people, and the amount of poverty that we have in this country. As a result, if San Diego goes up and San Jose already has, and Los Angeles is considering it, all the surrounding communities will ultimately say all of the workers will say hey, why can't I have more money. It's inevitable. It is long overdue because minimum wages have not kept pace with inflation. There are about 20% under 1984, as far as buying power. Not only are these people at the bottom, they have less spendable income and they are rebelling. There are more and more groups across the country trying to raise minimum wages. This will not go away, and I do not think that if the hardware store in Escondido might compete, even Ace Hardware that might compete, I don't think that will affect somebody who has to go to a local hardware store in downtown. They will not drive to Escondido because the amount of money that is added, inflationary money, because of minimum wage is tiny. It is in the pennies. They say that on a ten dollar item at Walmart, if they were ever to get their act together, I don't know if that will ever happen, that it would affect about a penny on the dollar, 1.4 cents on the dollar. I don't think that prices will be affected that much, and I think that people will still buy at all of these local places. TOM FUDGE: What you think about the thing that I just heard, from Harry, if you raise minimum wage for people getting minimum wage, you have to raise wages all along the pay scale. DAVID GIMBEL: I don't agree with that. If I have someone at twenty-five dollars an hour, and they share every day, they work with people at the bottom making eight dollars an hour, I think they would be delighted if their coworkers finally got a break. Because they have a lot of respect for these people, they work with them every day, they feel that they are underpaid. They are not going to say these people at the bottom, they went from $8-$13 an hour, I am making twenty-five, therefore I deserved go higher, I don't think that will happen. TOM FUDGE: Harry, you obviously disagree. HARRY SCHWARTZ: I do, but I also believe that is a big jump from the folks who are making eight dollars and those who are making twenty-five dollars. I am more concerned about people currently making $10-$15 an hour, they are the ones that are going to be making the biggest impact. TOM FUDGE: One thing I want to ask you both, maybe a better question for Harry, who are the people who make minimum wage? Are they the kids who are going to move on to something better, by the adults, people who live alone, people who live with other people, what is your experience? HARRY SCHWARTZ: Well, minimum-wage positions, whether the pay is eight dollars or $13.09 is still basically the same. It is an entry-level position whether at the hardware store, McDonald's, or anywhere. It is usually someone just entering the business world, building experience and they do move on to other positions with higher pay. That is what I see out there. TOM FUDGE: What do you want to say about that, David? DAVID GIMBEL: About 4% of minimum wage people are under the age of twenty. It is a smaller majority, adults, and the majority of those are heads of household. This is the working poor. This is not kids, and I don't think it is an entry-level position. These people work for years and get stuck in positions because they are often holding down two jobs, they have no time their lives to be retrained to go to school at night, they are in an endless vicious cycle of poverty. HARRY SCHWARTZ: It is interesting, there was a study released Thursday by the chamber of commerce which might dispute some of those facts as to who the minimum wage worker actually is, it would be interesting to take a look at that. TOM FUDGE: Okay, well, did you take a look at it? HARRY SCHWARTZ: I did. The press release was released at our store. What it shows is that the majority of people making minimum wage are not at the poverty level. It is an interesting contradiction. TOM FUDGE: Not at the poverty level meaning that they live with someone who is making more money? HARRY SCHWARTZ: The household is not at the poverty level. TOM FUDGE: Okay, David, anything on that? DAVID GIMBEL: I don't know how to answer the fact that somebody making minimum wage is not at the poverty level, or that they are in a household where there might be to breadwinners and one of them is at a high enough level that the minimum wage person, that person in the household brings them up. Most of these, many of them are single people, single women, single mothers, and people who are at poverty are at poverty. I don't think that without going any further, that is my answer. TOM FUDGE: What I am trying to get at with these answers, how effective do you think increasing minimum wage will be when it comes to trying to eliminate poverty or at least lessen poverty in San Diego? Is boosting the minimum wage the best way to go, or are there other options? What you think? HARRY SCHWARTZ: Let me first clarify, I am not opposed to minimum wage increase, I am opposed to the proposal. For $13.09 an hour. There is no question that minimum wage in San Diego need to be addressed, because cost of living in San Diego is so high. But minimum wage increases just one tool in the fight against poverty. The proposal from City Council President Todd Gloria is trying to solve the entire poverty issue just by raising the minimum wage. That is what concerns me, that the city of San Francisco, when they decide to address this ten years ago, they took a managed approach. They did 1% to 3% increases in minimum wage over ten years in order to get to $10.74. That included two years of no increase because of the effect it would have had on businesses during the recession. TOM FUDGE: So you think this is too fast, too soon. My original question, David, was how effective do you think raising the minimum wage will be as a tool to address poverty? DAVID GIMBEL: Will be dramatic. These people not only live from hand to mouth, heavily involved in credit card debt and mostly if not all on food stamps, and it is going to make a dramatic increase. Seattle just went to fifteen dollars last week. I think that will be the new Mets Mark. They did it after a lot of debate from people from both sides of the issue. I think here we're talking about people who just work their heads off and make nothing, and they can barely put food on the table. And the food they put on the table is unhealthy food. The affordable health care act has helped, but these people are still at the bottom, there are in the worst circumstances, and they often don't see their children, because they have two jobs. TOM FUDGE: Last question starts with this preamble: it looks like we're probably going to be voting on the thirteen dollars an hour minimum wage in November, because the city Council has a democratic vetoproof majority, so even if the Republican mayor Kevin Faulconer vetoes it, it may pass anyway. It looks like we may be voting on it, what happens then? HARRY SCHWARTZ: I think first of all, hopefully it is on the ballot because there has been some discussion of the City Council of passing a city ordinance in July and not taking it to the ballot. I hope that will come true, that it will go on the ballot. I think that time will tell. As I have said before, my sister and I who own the store, if it passes at $13.09 hopefully we will look back and say that was not so bad. In reality, they will think you will see some businesses close and people lose jobs. TOM FUDGE: David, what about you? DAVID GIMBEL: Henry Ford said it best when he doubled salaries of all of his employees in 1917. He said in order for them to buy my vehicles, I have to pay the more money. I think that is really what will happen, all of that money will come back into San Diego and everybody is going to do better, especially Harry. TOM FUDGE: With that, let me thank Harry Schwartz and David Gimbel.

California's minimum wage will increase to $9 per hour next month. But some in San Diego think that’s not enough and recently proposed increasing the city’s minimum wage to $13.09. However, not everyone agrees with the hike and the issue has divided the business community.

David Gimbel, owner of a video equipment rental store, said while a minimum wage increase wouldn’t directly affect him because he already pays employees nearly double that, he supports it. He points to the raise's impact on the local economy.

“All the statistics show that cities who have increase their minimum wage get much more money going back into the community — almost 100 percent of every dollar out of those raises goes right back in the community,” he said.

On the other side, there's Harry Schwartz, co-owner of the downtown ACE Hardware store. He said the increase wouldn’t just give a few more bucks to minimum wage workers, but that all hourly workers would expect a raise. Even his employees who already earn $10 an hour.

California's Minimum Wage

The state of California is set to gradually raise its minimum wage from the current $8 to $10 an hour by 2016. But a bill is making its way through the state Legislature that would raise California's minimum wage to $13 an hour by 2017.

“So as the minimum wage goes up — assumedly to 13.09 — the whole pay scale for hourly workers goes up," he said. "So we’re not properly measure what the impact would be on small businesses and that’s a concern to me.”

To accommodate his workers’ expectations, Schwartz said he would have to raise prices, possibly losing business to hardware stores in nearby cities.

Just last week, organizations on either side of the debate held competing news conferences, and pointed to studies that support their respective views on the issue.

At a news conference Thursday, the San Diego County Taxpayers Association and San Diego Regional Chamber of Commerce released a report that showed the increase would hurt small businesses and minimally benefit San Diegans living in poverty.

But Thursday night, proponents of the proposal to increase San Diego's minimum wage hosted a rally in Hillcrest to drum up support. They say the current rate of $8 per hour isn't enough to make ends meet without government assistance, according to a report released earlier this year by Center on Policy Initiatives.

This week, the city's Economic Development and Intergovernmental Relations Committee will be discussing the proposal supported by Council President Todd Gloria. If the committee approves Gloria's proposal Wednesday, it will go to the full City Council. Council members will then decide whether to approve the wage hike or send it to the ballot for a public vote.