Business & Real Estate

Minimum-wage hikes meet mixed reaction in San Francisco

Kitchen and restaurant helper Muhammad Seikh cooks up an order at Alhamra Restaurant in San Francisco on Friday.
Kitchen and restaurant helper Muhammad Seikh cooks up an order at Alhamra Restaurant in San Francisco on Friday.

In this diverse and densely packed city, known for high living costs and soaring rents, 77 percent of voters last year approved a series of pay hikes that will boost San Francisco’s minimum wage to $15 an hour by 2018.

Yet there are tensions these days on Valencia Street in San Francisco’s multicultural Mission District over the minimum wage hike and what it means for businesses and the ability of residents to keep up with rising costs.

As other cities, including Sacramento, ponder increases to the local minimum wage, the stories told along Valencia illustrate the complexities of the issue.

Amid aromatic kitchens turning out Salvadoran pupusas, Pakistani goat curry and only-in-San Francisco plates of tofu ranchero, low-wage workers are feeling anxious. That’s despite getting a raise to $12.25 an hour on May 1, the first of four annual wage jumps to take place under the city’s voter-approved Proposition J.

Muhammad Seikh, 56, a Pakistani immigrant who works as a kitchen helper at Alhamra Restaurant at Valencia and 16th streets, is happy with the $1.20-an-hour pay hike he received this month. Yet Seikh feels uncertain about his future in a city where the technology boom is gentrifying neighborhoods and driving up the cost of living.

Seikh shares a $1,400-a-month apartment in the city’s Tenderloin district with his son Shaheer, 20, another restaurant worker, and wife, Jabeen, who works part time.

At work, his hands covered in flour from preparing samosas, Seikh said he is proud of his labors. But the restaurant is thinking about raising menu prices to cover the higher worker costs. And at home, he fears his landlord might raise the rent, envious of what other owners are getting from the higher-income residents moving in.

“I just got a raise, and I need more,” Seikh said.

“We love this work,” he added. “We want to do it. It’s hard here, but we love this city. We don’t want to move out. But there’s young people coming in paying $4,000 for one-bedroom apartments. There is all this new construction, high-rises, and it is starting in the Mission (District), too.”

Ana Hernandez, 43, a 14-year resident from Puebla, Mexico, expressed similar concerns. She lives with her husband, Alvaro, and their two youngest children in a one-bedroom unit in the Mission that costs $1,100 a month. She earns the minimum wage as a server at El Toro Taqueria on Valencia Street. Alvaro often gets more than the $12.25 standard in construction work, but his limited hours produce barely $1,000 a month.

Ana Hernandez said she gets a free lunch when she works at El Toro. Otherwise, she said, she can’t afford the sizzling plates served along Valencia, the huevos con chorizo at the Puerto Alegre Bar or the renowned “Mission Style” burritos at Taqueria La Cumbre. She scrimps to pay for rice, beans and spices for the mole poblano chicken she prepares at home. And, like Seikh, she worries about the rising cost of living.

“My pay has gone up, but it’s not making much of a difference,” Hernandez said. “I have a little more, but we’re not able to save anything, and we have a lot of expenses. I think $15-an-hour will be better. But, by then, is everything going to cost more? Am I going to be in a safe place that I can afford?”

‘The tension is real’

Nationally, labor groups and advocates for the poor are pushing cities to set higher local minimum wage standards. The movement has spurred discussion on rising income inequality, the opposition in Congress to raising the federal minimum wage of $7.25, and the failure of state legislatures to address surging costs of living in many regions.

In Sacramento, a task force is set to begin studying raising the city’s minimum wage above the $9 state rate, evidence that “addressing income inequality is a priority issue across California,” said Mayor Kevin Johnson.

San Francisco’s new minimum wage law replaced an earlier cost-of-living standard that had boosted the city’s minimum wage from $10.74 last year to $11.05 in January.

Amy Glasmeier, an economic geographer at the Massachusetts Institute of Technology, said the uncertainty felt in the Mission District is emblematic of economic pressures in many California communities.

“California is a high-cost state, and you have a constrained housing supply and a large low-income population,” Glasmeier said. As higher-earning residents benefit from an economic upswing in places such as San Francisco, she said, many also are “invading the low-income housing stock, and that’s displacing the poor.”

Glasmeier, who earned her doctorate in urban and regional planning at UC Berkeley, created an online “living wage calculator” with MIT that measures residents’ basic needs of shelter and living, including food, child care, rent, transportation, taxes and medical expenses in regions across the country.

Under her formula, a single working adult in San Francisco required an hourly wage of $14.37 to meet basic living costs in 2014. A single parent with one child at home needed $29.37 an hour. Two parents with two children at home – people such as Ana and Alvaro Hernandez – each needed to pull in $17.75 an hour.

Glasmeier is an advocate for higher wage standards. But she said some businesses may encounter significant challenges, particularly if they are operating on a financial edge or “have constructed a cost situation that is long-term not viable.”

“The tension is real for proprietors,” she said.

On Valencia Street, an avenue that includes thrift stores, galleries and eclectic boutiques, some merchants don’t want to talk publicly about the minimum wage, because the arguments have been so divisive.

Alan Beatts, owner of Borderlands Books at Valencia and 19th, managed to infuriate people on both sides of the debate.

Beatts crunched the numbers for his cafe and bookstore that specializes in science fiction and fantasy. He found that San Francisco’s wage increase – to $12.25 this year, $13 in 2016, $14 in 2017 and $15 in 2018 – presented a burden his business couldn’t bear.

With five employees in the bookstore and seven in the cafe, Borderlands stood to lose $25,000 a year by the time the top wage kicked in, Beatts said. So he announced in February that he would close his store at the end of March. That angered local progressives who accused him of selling out on fair wages and taking away a beloved neighborhood institution.

But Beatts also argued that “the tens of thousands of people who are going to benefit from the minimum wage” in the city “are more important than me keeping my bookstore” – sentiments that sparked a backlash from advocates for small businesses.

“I didn’t realize how visceral and emotional the minimum wage is,” he said.

In the end, Borderlands Books stayed open. That’s because neighbors, and the store’s 10,000 Twitter followers, rallied behind it. After Beatts announced his plan to close, supporters in two days raised $30,000 – in 300 annual pledges of $100 – to cover anticipated future operating debt as well as maintenance and repair costs.

Supporters since have raised a total of 800 pledges, or $80,000, for the store’s annual expenses. Beatts said that support will help with his new goal of finding a nonprofit group to buy the building, where he leases, and help run the store “in perpetuity.”

Debating the sweet spot

Despite the popularity of the minimum wage hike among voters, many local merchant associations are seething as the pay increases go into effect.

“I would say, pretty much to a ‘T,’ that we are all opposed to it,” said Henry Karnilowicz, president of the Council of District Merchants, an umbrella group for business districts in the city. “At the end of the day, people are just going to have to increase their prices. That’s the long and short of it.”

Gwyneth Borden, executive director of the Golden Gate Restaurant Association, said the minimum wage law is creating unnecessary challenges for dining establishments whose waiters get tips on top of the hourly wage. Unlike many other states, tipped workers in California cannot be paid less than the minimum wage.

“Our concern is over giving a pay increase to tipped workers who already make well over the minimum wage,” Borden said.

Yet she also said the restaurant industry is having trouble hiring cooks, managers and other workers, “because San Francisco is expensive, and it’s difficult to live here.” She said owners and employees alike worry about “the Manhattanization of San Francisco.”

Similar concerns are stoking the broader wage hike movement. In Oakland, a 2014 measure to increase the local minimum wage to $12.25 passed with 82 percent approval, and went into effect March 2. The Los Angeles City Council voted last month to hike the minimum wage to $15 by 2020. Two dozen major cities have raised base pay standards in recent years, including Seattle, Chicago and Washington, D.C.

“This is driving the nation,” said Shum Preston, a minimum wage advocate for the Service Employees International Union. “The 2014 votes in San Francisco and Oakland were watched very closely. There was a consensus among the population: The economy was not working, and raising the minimum wage was a great way to help people.”

Sacramento Mayor Johnson, in a written statement, said he doesn’t have a figure in mind yet for the minimum wage in the capital city.

“Raising the minimum wage is something that will have a widespread impact on both employers and employees, and we can’t pick a number only because it works in other cities,” he said. “We have to make sure we come up with a solution that is right for Sacramento.”

In the Mission District, arguments persist over the right number.

At the family-owned Pay and Save corner market, two blocks above Valencia Street, manager Zuhdi Khalil said he has no problem giving his two minimum-wage employees a raise to $12.25 and more down the line.

“We’ve got to put this in perspective,” he said. “They’re good workers. And you can pay somebody $10 an hour, and that’s the price of a sandwich in this city.”

Dominique Hall, an employee at the Project Juice smoothie shop, where organic cold-pressed juices sell for $10, said she is happy for any pay increase. “I mean, it’s impossible to live here anyway,” said Hall, 20, a single mother who is studying psychology at San Francisco City College.

But at nearby Cafe Ethiopia, owner Tesfai Makonnen just added 50 cents to the price of his Assa chicken and fish stews to help cover raises for three employees. He said he’s feeling stressed.

“I support the wage increase,” said Makonnen, 65. “But the overhead is just higher, and that is harder for me.”

Livable wages in California

Economic geographer Amy Glasmeier and MIT created an online “living wage calculator” that measures basic shelter and living costs from specific areas and calculates the hourly wage required to meet those needs. Here are the 2014 results for several California counties.

San Francisco County

One adult, no children: $14.37

Single parent, one child: $29.37

Two working parents, two children: $17.75 each

Alameda County

One adult, no children: $13.35

Single parent, one child: $26.90

Two working parents, two children, $16.61 each

Los Angeles County

One adult, no children: $12.44

Single parent, one child: $25.72

Two working parents, two children: $16.02 each

Sacramento County

One adult, no children: $11.27

Single parent, one child: $23.58

Two working parents, two children: $14.95, each

Fresno County

One adult, no children: $10.70

Single parent, one child: $21.98

Two working parents, one child: $14.15 each