Pasadena >> Businesses will be feeling the pinch when the city’s minimum wage rises in July, and some figure they’ll have to boost prices or cut staffing to offset the increase.
The city’s current minimum wage of $10.50 an hour applies to businesses that employ 26 or more workers. That reflects a 50 cent hike that kicked in last year. But come July 1 it will rise by another $1.50 to $12 an hour. Subsequent hikes are scheduled to boost it to $15 an hour by 2020.
That schedule and a similarly tiered schedule of pay hikes for businesses that employ 25 or fewer employees will be reviewed in February 2019 to see how they affect unemployment, poverty, job creation and the city’s overall business climate before additional hikes are approved.
Restaurant owner is about to take a big hit
Few business owners will be hit as hard by this year’s hike as Bob Smith, president and co-owner of Smith Brothers Restaurant Corp. The Pasadena-based business owns four high-end restaurants in the city — Arroyo Chop House, Smitty’s Grill, Parkway Grill and SECO.
“I have several hundred employees and 50 to 60 percent of them are minimum wage,” Smith said wearily. “So we’re talking about an increase that will affect around 20,000 man hours a month. You do the math.”
It means Smith will be paying out an additional $30,000 each month.
“There is no way we can deal with all of that,” he said. “And when you figure in the added burden of workers’ comp costs and employee taxes and benefits you’re talking about a lot of money.”
Smith figures he’ll have to hike prices and also trim staffing.
“It’ll probably be some of both,” he said.
An increase in the cost of living?
Jason Lyman, who manages Samy’s Camera on East Colorado Boulevard, said this year’s pay increase won’t impact his business since his employees are already earning above minimum wage. But he has concerns about the broader impacts.
“My fear is that even though people’s wages will go up and they will have more money it will increase the overall cost of living — especially for products and rent,” he said. “It’s expensive right now to live in Pasadena and costs have been going up exponentially.”
Pasadena Mayor Terry Tornek made his thoughts clear on the wage hikes when the city approved the plan early last year.
“We feel there are a whole series of moral, social equity and economic reasons that made this compelling,” he said. “People who are working full time should not be living in abject poverty.”
Tornek said the wage increases will benefit workers and the city as a whole.
“People will have more disposable income and many will be spending it locally,” he said. “And now that the city of Los Angeles and Los Angeles County have adopted their minimum wage ordinances, this will allow businesses here to remain competitive for the best workers. We want to remain competitive. But frankly, most of us have concluded that there is no way to justify a circumstance where people work 40 hours a week and try to support a family on $20,000 a year.”
Pasadena businesses that employ 25 or fewer employees also will have to shoulder a wage increase this year. On July 1 the pay for their minimum wage workers will rise from $10 an hour to $10.50 an hour. In July 2018 it will rise to $12 an hour.
“As a business you have to be careful, you can’t just suddenly raise prices,” said Angela Noh, who manages the Takumi Sushi and Cafe restaurant on East Colorado Boulevard in Pasadena, which employs seven workers. “But we have customers who understand the circumstances. Sometimes, as a business, you have no choice. This is something we’ll have to decide.”
Negative effect on tipped employees?
Smith said his situation is doubly frustrating because most of the people at his high-end restaurants are tipped workers who typically earn $50,000 or more a year. If he’s forced to boost prices he figures he’ll lose business, and that translates to reduced income for his tipped employees.
“When the city was considering these minimum wage increases some of our servers showed up to speak against it,” Smith said. “They realized that the only response business has is to raise prices. And the more prices go up the less frequently people will come to visit.”
Pasadena Chamber of Commerce President Paul Little has pushed for a more moderate approach in wage hikes that wouldn’t have as much potential impact on business employment and the economy.
“We approached the City Council about conforming to what the state is doing,” he said. “That would be a lot easier to keep track of.”
California’s minimum wage hikes are more gradual. The wage for employers with 26 or more employees rose to $10.50 an hour last month and will hit $11 an hour in January 2018 and $12 an hour in January 2019. It’s set to hit $15 an hour by 2022.
California businesses with 25 or fewer workers will see similar hikes. In January 2018 their minimum wage employees will earn $10.50 an hour — a 50-cent increase — with subsequent hikes boosting that to $15 an hour by 2023.
The California Restaurant Association noted Monday that maintaining a business and providing customers with quality service is becoming increasingly difficult in the current climate.
“As minimum wage increases, so too do other costs, such as health care, cost of rent, workers’ compensation and paid sick leave, which makes it difficult for establishments to stay afloat,” the organization said in a statement. “Unfortunately, Pasadena’s ongoing minimum wage increases have been too much, too soon for many restaurants and small businesses that already struggle on a daily basis to keep their doors open.”
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