An unintended consequence of minimum-wage laws

Borderlands Exterior

Borderlands Books is a privately owned San Francisco bookstore that has been in operation for nearly 20 years.

Concentrating on science fiction, fantasy, mystery and horror works, Borderlands has overcome a number of challenges since opening in 1997: a 100 percent bump in rent in 2000; the trend toward online sales; the increasing popularity of ebooks; and the impact of the Great Recession.

Still, according to store officials, Borderlands managed to overcome each of the trials. In fact, last year was the best the store had enjoyed.

“At the beginning of 2014, the future of the business looked, if not rosy, at least stable and very positive,” Borderlands officials wrote on the store’s website. “We were not in debt, sales were meeting expenses and even allowing a small profit, and, perhaps most importantly, the staff and procedures at both the bookstore and the cafe were well established and working smoothly.”

Despite that, Borderlands recently announced it would be closing, by March 31 at the latest.

The reason? Last November San Francisco voters, out of touch with the realities of running a business, overwhelmingly passed a measure that will increase the minimum wage within the city to $15 an hour by 2018.

Borderlands Books as it exists cannot remain financially viable in light of increased minimum wages, according to the store website.

Unlike some businesses, bookstores are hindered in their ability to adjust for rising costs.

There’s a limit to how much a bookstore can increase book prices because publishers set prices. In addition, companies such as Amazon.com have siphoned off consumers from brick-and-mortar bookstores and made it more difficult to get them to pay retail.

In other words, adjusting prices upward to cover increased wage costs isn’t an option for Borderlands.

The change in the minimum wage will see Borderlands’ payroll jump nearly 40 percent. That will result in total operating expenses being bumped up by 18 percent. For Borderlands to offset that expense, it would need to increase sales by a minimum of 20 percent, which it doesn’t see as realistic.

Decreasing expenses isn’t an option, either. The only way for the bookstore to cut back enough to remain viable would be to reduce its staff to its two managers and one part-time employee.

“Taking all those steps would allow management to increase their work hours by 50-75 percent while continuing to make roughly the same modest amount that they make now … ,” according to bookstore officials. “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 could earn more than their current salary working only 40 hours per week at a much less demanding job that paid minimum wage.”

So, what we have is a feel-good measure passed by San Franciscans that while well-intentioned, will ultimately cost jobs, businesses and, in this case, opportunities for bookstore aficionados.

(HT: Carpe Diem)

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10 thoughts on “An unintended consequence of minimum-wage laws

  1. I am a FAN of minimum wage laws. However: I believe in exceptions: For teen hiring, for example. For apprenticeship programs. In the case of this business, one dear to all our blogging hearts, I am sure, is there no possibility they could get creative with internships? I believe those skirt minimum-wage laws. You can offer paid and unpaid, and pay whatever you wish. Folks are desperate to add work experience to resumes, and certainly happy to get book-purchase discounts.

    Just a possible small bee you might buzz into the ears of the store managers, if not too late…

    • I certainly agree that teens are hurt by minimum-wage laws. The most valuable things teens get from entry-level work is not the money, but the experience. However, I also understand that the individual running a fast-food operation or other small business has to remain viable in order to be able to employ *anyone*. Kids leaving school with little to no actual work experience benefits no one, certainly not the kids themselves.

      I would like to think that city councils and voters who pass such measures might reconsider when given the reality that not every business can absorb what amounts to major increases in overall costs.

      • My goodness. I disagree 100% with your assessment of teens. Many–not most–can learn extremely rapidly OTJ, and be productive employees inside a week, becoming even more so with more time. But let us agree to disagree.

    • Dear Outlier Babe,

      How can you pay a teen less than what someone else is making doing the same job? Sounds like age discrimination in “reverse.” Let the market and skills dictate pay, not some arbitrary minimum amount set by uninformed bureaucrats.

      • Dear Chris,

        I take your point. If you generalize it, perhaps one could say it would be equitable to pay ALL inexperienced workers less, no matter their age, as a probation or apprentice status.

        Interesting.

      • Outlier, I agree with you on this. And I believe this was the point of apprentice programs: to give (usually) younger workers training while understanding that they wouldn’t be as productive as a fully trained employee. It was a trade off; the apprentice learned the trade and the employer got a beginning-stage worker.

      • Chris, BTW, Robert Heinlein’s “The Moon Is Harsh Mistress” described a salary structure which took into account not solely skills and market demand, but social disdain and scutwork factor.

        One might say, today, if one finds a majority of females, or brown-skinned or disabled males (of any color) in a job category, salary should be increased by a factor of “n”.
        Link

  2. I don’t think we disagree on whether a teen can learn on the job and become useful employees. I was referring to learning “how” to work in the sense of showing up on time, dressing correctly, being polite when dealing with superiors, customers, etc. Some of this may come naturally to some teens, but it doesn’t to others. An entry level job is a means by which young adults learn the basics of the working world – the positives and negatives – and that you often get out of your job what you put into it. Sometimes there is no substitute for experience, and I believe that no amount of training and prepping can completely prepare someone for life in the workplace.

  3. Somehow, I missed your response, and caught it tonight only when returning to the actual post to reread the thread with Chris’s comments and mine. I…think I agree, given teens today. Unless from a well-parented family, or a disciplined sports background, work ethic, politeness, and respect for chain of command–right or wrong–is probably lacking. I know that even at the age of 27, I received an education in this last when I worked at one company in Ohio with a sports-heavy crowd–women included.

    But we’ll have to expand this beyond teens: Folks who’ve never or rarely been off welfare and folks who’ve been raised in classes below upper middle or middle (true middle: Near the median). For some of those folk will not speak standard English, which can cause customers to respond prejudicially, or some may dress in what is not considered even business casual, or some may not have the same cultural expectations for what constitutes a polite exchange between two people.

    Leading back to Chris’s remark, perhaps, and my response re: apprenticeship/probation period wages.

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