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Oakland Businesses Starting To Crack Under Minimum Wage Pressure

The Employment Policies Institute released a report Thursday showing many Oakland businesses have scaled back operations in response to the recent minimum wage hike.

According to the report, “Examining the Costs of the City of Oakland’s $12.25 Minimum Wage,” many local businesses have reported adverse effects as a result of the wage hike which came into effect at the beginning of March. Of the 223 mostly small Oakland businesses asked about the new minimum wage, 56 percent experienced a large increase in labor costs. This has resulted in many businesses having to reduce hours for employees, cut staffing levels, raise prices or delay expanding within the city.

“The surveyed businesses were not all able to estimate the percentage increase in their labor costs,” the report detailed. “However, of the 163 businesses that were able to estimate the percentage increase, roughly half reported a labor cost jump of more than 10 percent. Nearly one in four reported a labor cost increase of more than 20 percent.”

Additionally the report found some businesses expected to close entirely as a result of the increase.

“Of the businesses surveyed here, roughly one in 10 said it was ‘very likely’ to close, with another 18 percent ‘somewhat likely’ to close,” the report noted.

The report also stated that of those businesses not having to close, others methods were utilized to offset the increased cost of labor.

“Thirty percent of the surveyed businesses reduced their employees’ hours or their hours of operation to offset the costs,” the reported stated. “Seventeen percent, or roughly one in six surveyed businesses, laid off employees or otherwise reduced staffing levels to adapt to the higher costs.”

In November 2014, residents of Oakland and the neighboring city of San Francisco voted in favor of minimum wage increases for most businesses. San Francisco raised its minimum wage to $15 an hour by 2018. At the time, proponents argued the wage increase would help the poor.

The University of California, Berkeley paper, “San Francisco’s Proposed City Minimum Wage Law: A Prospective Impact Study,” argued, when it was released back in August, that an increase of the minimum wage could have a vastly positive impact for workers in the city.

“Drawing on a variety of government data sources, we estimate that 140,000 workers would benefit from the proposed minimum wage law, with the average worker earning an additional $2,800 a year (once the law is fully implemented),” the paper noted. “Our analysis of the existing economic research literature suggests that businesses will adjust to modest increases in operating costs mainly through reduced employee turnover costs, improved work performance, and a small, one-time increase in restaurant prices.”

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