Measure FF: Employers divided on minimum wage hike proposal

As campaigns to raise minimum wages across California—and the country—press on, Oakland’s initiative is proving to be a divisive issue among nonprofits and private businesses. If approved by voters on Tuesday, Measure FF will lift Oakland’s wage floor from $9 to $12.25 an hour starting next March. While economists say the increase will have economic benefits, some employers argue otherwise, saying small businesses and nonprofits could be adversely affected. Although there is no formal opposition to the measure, staffers at some businesses and nonprofits are torn by the proposal.

Measure FF was created and championed by the organization Lift Up Oakland, which gathered over 33,000 signatures to place the measure on the ballot. If passed, it will be the city’s first minimum wage statute independent of state and federal law. “It will be a historic measure for Oakland,” said Shum Preston, spokesperson for Lift Up Oakland. Preston said approval of higher wages in Oakland, as well as in San Francisco where voters are being asked to raise the minimum wage to $15 by 2018, will have a ripple effect across the region. “We have a strong belief that with this passing, and San Francisco’s minimum wage passing, it will encourage other cities to follow along,” said Preston.

In Oakland, Measure FF proposes implementing the $12.25 wage starting March 2, 2015, then pegging its rise to inflation. Workers would receive five or nine paid sick days a year, depending on the size of the business, and annual wage increases every subsequent January 1 based on the Consumer Price Index. Lift Up Oakland’s website says the measure will have broad positive effects for the rest of the city: “The additional spending will create jobs and generate tax revenue for schools, public safety and infrastructure. Everyone will benefit.”

But some business owners in Oakland are wary of a relatively large wage increase in a short period of time. “It doesn’t take into account small businesses, nonprofits and youth training programs,” said Mark Everton, general manager for the Waterfront Hotel at Jack London Square. While he supports higher wages for workers, Everton said smaller companies and nonprofit organizations need more time to raise wages for workers, because many will take a heavier financial hit from raising salaries. “I wish it had provisions allowing a phase-in increase for these programs, giving them a ramp-up period where they could adjust their business models over time,” he said. Everton said his business, which employs fewer than 100 workers, will see a minimal effect from a wage increase; only a few valets and bellmen would be affected.

Another critique of Measure FF made by some small business owners is that it does not consider wages for workers with varied experience. “We need to be able to have a scale that adjusts itself where, if you’re brand-new, you have a lower starting wage, and as you gain experience, your rate of pay goes up,” said Scott Whidden, owner of Fenton’s Creamery and Restaurant, a historic, family-owned business operating in Oakland since 1894. Whidden said he has a certain budget for workers’ wages, and if Measure FF passes, employees with more experience will have to wait for raises while increases go to those just starting out. “So we’re penalizing the veterans so we can pay the trainee,” said Whidden. “We’d like to have a two- or three-tier system, where we can start someone at, say, $10, and work them up. Then we’re not discriminating against experienced workers.”

But Whidden said Measure FF would fit the corporate business model well because large chains, which often pay low wages, have the financial means to take on that cost. “For a mom and pop, we know what’s in our register. We know what we can pay,” he said. “There’s only so much on payroll, and $12 dollars is basically a 33 percent increase, factoring in taxes and workers comp.”

Some charitable organizations serving groups in Oakland argue that the very people they are trying to help may end up losing out if Measure FF is approved. “We’d serve less youth,” said Elder Matthew Graves, the executive director of Oakland Youth First (OYF) in the Acorn neighborhood of West Oakland. The organization hires low-income young people for $10 an hour for summer internships and work experience programs at places such as the Port of Oakland and BART.

At OYF, training programs for young people are funded by the Workforce InvestmentAct of 1998, which provides federal funds for employment programs. Graves says that the annual funding for these programs has been decreasing, and it is not clear if funding from the federal government will increase to keep up with a new minimum wage. If Measure FF passes, that could create a funding gap for the organization—OYF may have to fundraise to compensate for the difference, Graves said, or be forced to cut hours or hire fewer young people.

A higher wage floor, however, may lead to an increase in the number of young people in the workforce. “We deal with kids who are in the system with welfare support,” Graves said. “They are better off receiving welfare rather than working a minimum wage job,” he continued, referring to the current minimum wage.

Staffers at nonprofits such as the Ella Baker Center, People United for a Better Oakland (PUEBLO) and Destiny Arts Center said they would not be affected by the increase because they already pay their employees more than the proposed wage. “With great pride, we pay all of our workers above the minimum wage, so this proposal would not affect Destiny Arts Center,” said Cristy Johnston Limón, executive director of the center.

Economists from UC Berkeley’s Institute for Research on Labor and Economics (IRLE) have conducted extensive research on the effects of minimum wage increases at the federal, state and local level. A study released by the institute this summer called “The Impact of Oakland’s Proposed City Minimum Wage Law: A Prospective Study” found that raising the minimum wage would have minor repercussions on businesses and their operating costs. According to the study, in a situation where the minimum wage would jump from $9 to $12.25 per hour, “operating costs would increase by 0.3 percent for retail businesses and 2.8 percent for restaurants.”

A common argument against a minimum wage increase is that the policy would stunt a business’s growth and earnings potential, but the IRLE’s study suggests otherwise. The study found that wage increases are beneficial to employers because they reduce turnover rates, a common occurrence in low-wage job markets. The study argues that “when workers are paid more, their productivity can improve, as can their attitude about their job, how hard they work, and their ability to make it to work on time.”

If the proposed increase is approved by voters, it will still be far below what some economists say it should be. A 2012 study by the Center for Economic and Policy Research, a research and public education firm based in Washington D.C., asserts that the minimum wage’s value peaked in 1968 before falling behind inflation. Had it kept up with the cost of goods and productivity, the federal wage floor would be above $20 an hour, the study found.

Midterm elections generally don’t receive the kind of voter turnout that general elections do. Shum Preston said that this year it’s partly because many Americans are disheartened by election campaigns and less involved in the political process. Despite this, he believes the minimum wage is a major economic concern that will drive voters to the polls. “We think this is the issue that’s getting people excited,” he said.

What’s more, many Americans doubt Congress’ ability to implement meaningful policy changes at the federal level; a Gallup Poll taken in mid-October found that just 14 percent of Americans approved the way Congress is handling its job. Preston said if minimum wage policy needs to change, it must be done at the local level. “Washington is broken and dysfunctional and nothing is going to pass in there, so it’s a tactic of necessity,” he said.

Preston said having such low wages and high costs, particularly in highly-populated regions like the Bay Area, is why the issue has gained national traction. He believes Oakland can be a leader when it comes to paying workers fair compensation. “I think it’s the right issue, in the right place, at the right time,” he said.