What it's like to live in a city with a $14 minimum wage

Lito Saldana, chef and owner of Los Moles, a popular Mexican restaurant in Emeryville, Calif., says he has bumped up the price of every menu item by 10% to offset rising food and labor costs.

By Tracey Lien, Rick Anderson, Samantha Masunaga

April 2, 2016 3 AM PT

EMERYVILLE, Calif. — Security guard Kenneth Lofton was among the workers who benefited last year when this East Bay city hiked its hourly minimum wage to nearly $15 for employees at large companies.

The jump was almost 50% more than what he used to make in nearby Oakland when he was paid $10 an hour. But it’s not enough for Lofton, 62, to move closer to work — he still has to commute nearly 20 miles from Hayward and back each day.

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FOR THE RECORD

April 2, 1:42 p.m.: An earlier version of this article misstated the percentage of Kenneth Lofton’s wage increase as almost 70%. It was almost 50%.

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“It’s somewhat better, but not much,” Lofton said Tuesday morning while eating breakfast and manning the security gate at an Emeryville parking lot. “The high cost of living here takes a big bite out of whatever monetary increase you get, so it’s like not getting an increase at all.”

But, he said, “at least they’re trying.”

If, as expected, Gov. Jerry Brown on Monday signs legislation raising California’s hourly minimum wage gradually to $15, the state will become the largest proving ground in the impassioned debate over wage stagnation and wealth inequality.

However, cities such as Emeryville and Seattle, which also enacted a significant wage increase last year, are one step ahead. They could provide hints as to how things play out when pay is sharply increased for the least-compensated workers.

The early takeaway: Many restaurants, which are highly dependent on low-wage labor, are reacting by raising prices.

Otherwise, labor researchers and experts largely agree, it’s too soon to draw any kind of conclusions about ripple effects such as job cuts or higher spending — despite a vast amount of data generated by those claiming to prove otherwise.

“If anyone’s telling you there’s meaningful causal data available, they’re manipulating it or are just premature,” said Viet Shelton, aide to Seattle Mayor Ed Murray.

After all, Seattle boosted its hourly minimum wage only last April, to $11 from $9.47, with gradual increases to $15 over the next few years depending on the size of the business. Currently, the hourly minimum is about $13, depending on the size of the business and the medical benefits it offers to employees.

And Emeryville just passed its minimum wage ordinance last July, bumping the hourly rate to $12.25 for employees of businesses with fewer than 56 employees and $14.44 for larger firms. That rate will gradually increase until all businesses pay a $16 hourly minimum in 2019. Then it will go up each year in accordance with the rising local consumer price index.

“Even if we had an up-to-the-minute picture of what’s going on, what’s happening now is not going to show you what $15 is like because $15 is not now,” said Jacob Vigdor, professor of public policy and governance at the University of Washington. “Basically, the sky has not fallen in Seattle.”

Vigdor is the principal investigator of the university’s minimum wage study, which is analyzing the effects of minimum wage ordinances in Seattle, Chicago and other areas.

The researchers plan to release a report this month that will look at Seattle’s data from the last year. The team has also conducted interviews and surveys of both business owners and workers to hear about their current situations.

What emerged were bits and pieces of the larger puzzle.

“The message that we’ve heard is that businesses are making adjustments,” Vigdor said. “But so far, those adjustments have not involved anything on the order of mass layoffs or mass shutdowns. The most common response is that they’re going to increase prices.”

Restaurants have seen the most effect, with price increases of about 7% to 8% since last April, he said.

Seattle restaurateur Tom Douglas’ high-end establishments and the popular Washington seafood chain Ivar’s each voluntarily hiked employee minimum pay to the full $15. Ivar’s implemented the hike the day the law took effect, offsetting the cost with a menu price increase and telling customers they didn’t need to tip.

It worked out to as much as a 60% increase for some workers — with many customers leaving tips anyway.

Ivar’s server Rochelle Hann, 25, said she’d been living almost paycheck to paycheck. But with an annual pay bump of about $12,000, she recently went on a weekend trip and it was an “easy expense.”

In a letter to customers in January, Douglas said his two restaurants that opened last year were “prospering and have been well reviewed.” He said the feedback helped him decide to start paying the $15 wage immediately and add a 20% service charge in lieu of tips at three of his restaurants. The charge goes to the house and is then redistributed to the team through wages and commissions, and adds to their benefits package.

“For the customer that pays a 20% tip, nothing is going to change,” Douglas told a radio interviewer. “If I have to close some restaurants, so be it. If I have to restructure, so be it. I would rather pay a living wage.”

So far, customer reaction has been 90% favorable, he added.

Basically, the sky has not fallen in Seattle.

— Jacob Vigdor, professor of public policy and governance at the University of Washington

A similar scenario played out in Emeryville, where some restaurants have increased prices to make up for the higher minimum wage.

On a Tuesday morning, hip cafe Farley’s is buzzing with young professionals from nearby companies. Despite its popularity, the eatery is still subject to the “razor thin” profit margins common in the food service industry, said co-owner Chris Hillyard.

After Emeryville’s wage increase, Hillyard said he had to increase the price of menu items by 5% to 20%. A roasted turkey and avocado sandwich that once cost $9 is now priced at $10. A latte went up 50 cents, to $4.

Hillyard also had to eliminate two positions from the cafe and end the cafe’s baking program. Farley’s now outsources its baking to a vendor.

“The council had good intentions when it increased the minimum wage, but that was one of the unintended consequences,” Hillyard said.

He said the additional wage hike this July will be difficult, as he’s still trying to navigate where his business is now. Farley’s has 12 employees.

“It’s going to be a challenge because we just raised prices,” Hillyard said. “At some point, we won’t be able to do that because there’s only so much people are willing to spend on a cup of coffee or a sandwich.”

So far, he said, customers haven’t minded the higher prices since they’re comparable to those in nearby Oakland and Berkeley.

Down the street from Farley’s, prices have also gone up at Los Moles, a popular Mexican restaurant.

Chef and owner Lito Saldana said he bumped up the price of every menu item by 10% to offset rising food and labor costs. Prior to the minimum wage increase, he said, Los Moles’ servers made $9 an hour, while kitchen staff averaged $13.50 to $14 an hour.

As costs have risen across the board, Saldana said the minimum wage increase hasn’t helped his employees.

“Even my employees who live in Oakland are saying it is now too expensive for them,” he said.

Seattle workers interviewed by the minimum wage study researchers said they were happy to get the higher wages. For some, it made a “fundamental difference in their quality of life,” said Vigdor, of the university.

At the same time, many workers said they were nervous about whether price increases would eat up their higher paychecks.

“The minimum wage, when it works well, is really a tool for transformational change in people’s lives,” Vigdor said. “And the worry is that it doesn’t always work well.”

The effect of a wage hike could also vary by region. Emeryville and Seattle are arguably faster-growing and higher-paying areas, and they could be more equipped to handle a pay increase.

Some early analysis in July by the California Legislative Analyst’s Office predicted that a proposed $15 hourly minimum ballot initiative could reduce the number of jobs and increase prices and the cost of living statewide, but also potentially increase sales tax revenue. The report added that the “nature and magnitude” of the effects were “highly uncertain.”

“The lower a region’s wages, the larger the effects of this measure likely would be,” the report said. “We expect this measure to have proportionally larger effects in California’s inland regions than its coastal regions.”

What’s clear is that it will take more time for any municipality to see the implications of the wage hike.

“This is a policy that takes a long time to shake out,” Vigdor said. “The challenge that you face is that ultimately, the things that you do on the first day the minimum wage goes up don’t necessarily tell you what’s going to happen in the long run. It’s not an instantaneous process.”

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Times staff writer Lien reported from Emeryville and Masunaga from Los Angeles. Anderson, a special correspondent, reported from Seattle.

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