The latest installment of annual increases for minimum wage employees took effect Jan. 1, giving each entry-level worker another dollar per hour as part of state law enacted back in 2017.
Currently, minimum wage is at $13 an hour for all businesses with 26 or more employees ($12 for 25 or fewer), with the endgame scheduled to hit $15 an hour by Jan. 1, 2022, and at the beginning of 2023 for smaller businesses.
Most industries are impacted regardless of how many minimum wage employees a business has.
“It affects us all,” said Ron Kelley, president of Sutter’s SWECO, a manufacturing business.
Kelley, who employs mostly higher-skilled laborers at above minimum wage, said he does have three of his approximately 46-member workforce on a minimum wage salary.
“The cost of everything goes up when wages go up,” Kelley said.
In the short-term, Kelley said, wage increases will hamper SWECO, as the Sutter-based agriculture manufacturer has also recently absorbed increased tariffs and costs for imported goods.
He said businesses as a whole respond to wage increases by increasing their prices, which indirectly affects the person receiving the minimum wage raise.
“Government looks at minimum wage increases as a career for people, and at $13 an hour it’s not going to have that effect,” Kelley said.
Jesse Villicana, owner of Cool Hand Luke’s in Yuba City, said 85 percent of his staff is minimum wage employees. The latest increase is about $60,000 in additional payroll.
To combat the increase in labor, he has to make adjustments to the menu, but he must also take into consideration that too large of an increase could result in a huge blow to the business.
“You’re always afraid of pricing yourself out of the industry,” Villicana said.
Right before the legislation in 2016, Villicana said, Cool Hand Luke’s was running with 55-60 employees. Four years later, the popular steakhouse and seafood restaurant is down to 20 people – three of which are full-time.
Villicana said many employees’ hours were cut, dropping them to a part-time role directly because of increased labor costs.
“We have to make sure we take care of the customer and we’re doing it with less bodies because we can’t afford to keep that many people on payroll,” Villicana said. “It’s very tough to do now.”
Marysville Farmer’s Marketplace partner Clint Besson said that when minimum wage reaches $15 an hour in two years, it will equate to a 46 percent wage increase across the board with his 24 employees.
Though Besson said it can be a struggle and has resulted in price increases with his product, he does everything he can to ease the transition both for his minimum wage employees and the ones above entry-level pay.
“In my business I honestly believe in supporting my employees,” he said. “We’re going to make it work.”
With minimum wage mandatory increases, the wage gap decreases between subordinates and managers, which can be problematic, Besson said.
As an example, Besson referenced a manager who currently makes $16 an hour. In a couple years that same manager would only be making a dollar more per hour than her staff under the mandatory increases, which Besson said leaves little incentive to manage.
It’s a similar issue with county government, where all non-minimum wage employees are under three-year labor agreements, said Jill Abel, director of Human Resources and Risk Management at Yuba County.
“As the wage goes up, we anticipate it having a larger impact,” Abel said.
Currently the county has nine minimum wage employees, all categorized as extra help.
Abel did not rule out any of the county’s extra help positions, also known as reserve deputy sheriff jobs, being cut moving forward – it’s something analyzed on an annual basis. She also anticipates minimum-wage related labor negotiations coming forward in a few months.
“One agreement is expiring in June, it’s our largest group,” Abel said. “We’ll begin conversations in the spring. I anticipate minimum wage being a topic of conversation.”
One of the main reasons for the annual minimum wage increases was because the state unions fought for them.
“Not all unions were on board for a blanket minimum wage hike. That was one of the big diverse controversies when this was coming into legislation,” said Mark Mulliner, business manager for the Plumbers and Pipefitters Local Union 228. “However, one of the biggest reasons for the increased minimum wage hike was to help our union brothers and sisters who were working in industries like healthcare and home care that were in bad shape. If the individual entities weren’t going to bring the increases to the table, it had to be done at the state level.”
Mulliner said the building trade unions like his weren’t really impacted by the increases, because they already sit above the minimum wage threshold. However, it has benefited the lower-tiered unionized workers since it went into effect, he said.
Local Assemblyman James Gallagher (R-Yuba City) has been opposed to the state’s “one-size-fits-all” approach since it was first being discussed. Since it was enacted, he said, he’s seen the cost of living go up across the state.
“This blanket policy is not helping anyone,” Gallagher said. “The now $13 per hour minimum wage is only going to increase the cost of living in the North State and further strain local businesses. Meanwhile, individuals working minimum wage jobs in higher cost of living areas will still not be making a living wage despite that being the intent of the bill.”
The price of food, housing, and other basic necessities have all gone up across the board as a result, he said. He’s seen several local businesses go under in recent years simply because they cannot afford the additional expense.
“Falsely raising the price floor is only placing a greater strain on the economy in these areas,” he said. “Also, rather than focusing on arbitrarily raising the lowest of wages, we should work to ensure there is a ‘ladder of jobs’ that people can move up and make higher wages. If the objective is to keep people at minimum wage jobs for their entire life and occasionally raise their wages, that to me is a recipe for failure that won’t really help anyone.”