KPBS's Priya Sridhar and BottomLine Marketing co-founder and SDSU marketing lecturer Miro Copic discuss some of the week’s top business stories.
Q: I wanted to talk to you first about holiday spending. I see that sales were up 3% over 2018. What's behind that strong turnout?
A: Well this year we had six fewer shopping days because Thanksgiving was so late. So retailers experienced a 3.4% increase in spending by consumers because consumers were confident, there was low unemployment, the stock market was strong. So consumers are a little bit bullish, a little bit below expectations quite frankly. But where consumers really spent this year was on apparel, on jewelry, on electronics, and appliances and home furnishings. That was the big thing that drove spending.
Now the other thing that drove spending was a big increase in online sales. So much more than traditional retail. So 18% growth in online sales, but important to note that online sales still only represented 14.5% of all spending. That means 85% of spending was done in a store, probably in a mall. We're kind of staying tuned for 2020 and seeing what the retail activity's going to bring us.
Q: We just saw the minimum wage increase, that was effective January 1st of this year here in California. I actually got a chance to speak to many local businesses about their reaction to the minimum wage. Some of the restaurants I spoke to said that they're giving their workers a better quality of life by increasing their wage while others said that they might have to cut jobs now. What do you think the impact is going to be on the local economy here in San Diego?
RELATED: San Diego Businesses React To Minimum-Wage Hike
A: I think because we're a high-cost state the dollar increase is not going to impact across the board. What's very important is that the state of California increased that to $13 an hour, same with the city of San Diego. Now what's interesting is that this minimum wage increase is affecting 2.6 million Californians. That's 9% of the adult population. This doesn't include people who work for private companies like Costco or Amazon that have already increased their wages to $15 an hour. This is an important thing in terms of a living wage concept because the federal minimum wage is $7.25 an hour.
And what we've seen in the last couple of years is that there has been real-wage growth. This is the first real-wage growth that we've seen since the beginning of the century, since 2000-2001. So this real-wage growth in San Diego for example, real wages have gone up 30% since 2016 at a gross level. If you factor out inflation that means these people at the minimum wage are actually increasing their real wages by 5%. This helps offset rent increases, this helps offset gas price increases. So it lets families stay ahead of the game as opposed to falling behind, which they did for pretty much the last 15 years. So that's an important movement, and I think businesses are going to be fine. Some restaurants might have a problem because they don't want to increase prices, but they're putting on a surcharge which consumers then can decide they understand and they're willing to help.
Q: It's impossible to talk about the economy and the big stories of this year without talking about home prices and home construction. We saw home construction drop over the last two years despite a strong economy. Why do you think that is?
A: Well I think a large part of it is builders are still somewhat cautious based on the last recession. What they're seeing is the cost of construction materials has gone up considerably because of the high costs living in San Diego. And the median home price has gone up to $594,000. This means that an average family has to earn over $140,000 to qualify for a home loan. They're concerned even with a robust economy that they're not going to be able to sell those houses at those prices.
The state has a mandate that we have to build 108,000 new housing units to meet growth targets alone, and certain local real estate experts say that we have to actually build close to 130,000 units. So what the city has done is they've updated the community plans to really be able to identify over 75,000 new potential housing units. So if builders want to take advantage of that they can. And hopefully there won't be a lot of opposition by neighborhood residents, so these builders can do their job.
