What can Seattle learn from San Jose raising the minimum wage?

by: Essex Porter Updated:

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SEATTLE —

In Seattle, the impacts of a big increase in the minimum wage are just speculation. But in Silicon Valley, south of San Francisco, a real-life experiment is already underway.

In November 2012, voters decided to raise the minimum wage from $8 an hour to $10 an hour. The increase took effect in March 2013.

Rik Jones worked for his grandfather at Cicero’s Pizza in San Jose; now, 36 years later, he owns it. He didn’t lay off anyone when the $10-an-hour wage took effect.

“What we did was we got a little tighter on things. We got stricter on hours,” Jones said.

Cicero’s Pizza is on the edge of the San Jose city limits, next to Cupertino, where the minimum wage is only $8 an hour. That fact creates another challenge for Jones.

“It's unfair in that sense that we have to compete with folks that don't have to pay as much,” he says. But Jones has also found an upside -- the higher wage draws better employees.

“We can be a little more picky, we get more applicants and we can choose the employees that we want,” he said.

The drive to raise the minimum wage in San Jose began two years ago with an initiative campaign launched by the Social Action Class at San Jose State University.

“What's interesting about the minimum-wage issue is that it cuts across political ideology,” said Professor Scott Myers-Lipton, who teaches the social action class. He said business interests raised more than a million dollars to counter the grass-roots campaign.

“Our opponents said it was going to destroy Silicon Valley,” the professor remembered. But on election night the higher minimum wage was in the lead when the first returns came in and never looked back. “When the final number came out, it was 60 percent to 40 percent, and in election terms that's a landslide,” Myers-Lipton said.

The owner of Philz Coffee, Nick Taptelis, faced a decision when the minimum wage went up 25 percent. He decided to keep price increases to a minimum, instead focusing on training his 26 employees to deliver high quality service, and then enticing them to stay with a starting wage of $11 an hour, a dollar more than required.

“If you want everybody happy, satisfied, great customer service, sometimes you have to sacrifice a dollar,” he said.

Taptelis says business growth has more than paid for the additional cost.

As head of the San Jose Downtown Association, Scott Knies has seen the effects of the higher minimum.

“In some cases businesses put folks on part time, they lost benefits,” he said. A solid opponent of the higher minimum wage before the vote, Knies led the business community in making “lemonade out of lemons,” creating a marketing campaign to keep customers in San Jose. He says downtown did not lose any business because of the higher minimum wage.

“Businesses go out of business all the time,” Knies said. “Was this the straw on the proverbial camel’s back that broke it? I really had none of the business closures that we had in the downtown reference this as the reason.”

San Jose City Councilman Pierluigi Oliverio believes the higher minimum wage will have a negative effect on youth employment.

“The employer, when having a choice, would also choose an adult versus a teenager,” Oliverio said.

KIRO 7 asked him the fears of a higher minimum wage were overblown. 

“Well I think the opponents were crying ‘This affects my business, this raises my labor cost by 38 percent.' That is a legitimate concern.”

The California Restaurant Association did a survey it says shows the negative effects of the minimum wage hike. It says 66 percent of restaurants raised their prices, 45 percent reduced employee hours and 42 percent reduced staff.

Some workers will be replaced by machines like the pizza dough baller Rik Jones bought years before the new minimum wage. “For $7,000, it paid off pretty darn quickly.”

“The advantage is we should be able to retain more people with paying them more. The downside is that you may not be hiring as many people,” Jones said. Bottom line, is it worth it? “Well, the jury's out, the jury's still out,” Jones responded.

Everyone KIRO 7 met in San Jose was wary about what might happen if Seattle’s minimum wage jumps to $15 an hour, an increase of 62 percent.

“Just be careful about the big-percentage jumps. It's on the back of the small businesses. Is there a way to mitigate that with some other give-backs to the business community?” Knies asked.

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