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When a minimum wage hike hits home: Small San Francisco bookstore forced to close after latest city-mandated wage increase

Image via SFStation.com

Image via SFStation.com

This is not the kind of minimum wage story people in liberal San Francisco are used to hearing.

It’s usually about someone struggling to make ends meet in the city that is now flush with tech money. But now a beloved and iconic bookstore, Borderland Books, is closing its doors due to the city’s recent minimum wage hike.

This is a bookstore that has survived the doubling of rent in San Francisco, the impact of Amazon and other online retailers on book sales, and the recession. But despite all of that, it is the city’s new $15 an hour minimum wage that will finally put them over the edge.

The store’s owners explained in on its website:

“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 principal 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.

Many businesses can make adjustments to allow for increased wages.  The cafe side of Borderlands, for example, should have no difficulty at all.  Viability is simply a matter of increasing prices.  And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards.  But books are a special case because the price is set by the publisher and printed on the book.  Furthermore, for years part of the challenge for brick-and-mortar bookstores is that companies like Amazon.com have made it difficult to get people to pay retail prices.  So it is inconceivable to adjust our prices upwards to cover increased wages.

The change in minimum wage will mean our payroll will increase roughly 39%.  That increase will in turn bring up our total operating expenses by 18%.  To make up for that expense, we would need to increase our sales by a minimum of 20%.  We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.

The other obvious alternative to increasing sales would be to decrease expenses.  The only way to accomplish the amount of savings needed would be to reduce our staff to: the current management (Alan Beatts and Jude Feldman), and one other part-time employee.  Alan would need to take over most of Jude’s administrative responsibilities and Jude would work the counter five to six days per week.  Taking all those steps would allow management to increase their work hours by 50-75% while continuing to make roughly the same modest amount that they make now (by way of example, Alan’s salary was $28,000 last year).  That’s not an option for obvious reasons and for at least one less obvious one — at the planned minimum wage in 2018, either of them would earn more than their current salary working only 40 hours per week at a much less demanding job that paid minimum wage.

Although the major effects of the increasing minimum wage won’t be felt for a while, we’ve chosen to close now instead of waiting for two reasons.  First, the minimum wage has already increased from $10.74 per hour to $11.05 (as of January 1st) and it will increase again on May 1st to $12.25.  Continuing to pay the higher wage without any corresponding increase in income will expend the store’s cash assets.  In essence, the store will have less money (or inventory) six months from now, so closing sooner rather than later makes better business sense.  But more importantly, keeping up our morale and continuing to serve our customers while knowing that we are going to close has been very painful for all of us over the past three months.  Continuing to do so for even longer would be horrible.  Far better to close at a time of our choosing, keep everyone’s sorrow to a minimum, and then get on with our lives.”

Although it’s just one example, it’s always interesting to note when the minimum wage debate actually hits home. It’s easy to find a face for the other side, now here is a small business — the same kind of business that San Francisco claimed would be bolstered by this “sustainable lifestyle” wage increase — that perfect exemplifies the argument against a government-led wage hike.

Wages should be set by the market, not by the government.

(H/t Reason)


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