Two years ago, Thumbtack — a startup that connects consumers with local contractors — conducted a survey to see what they thought of proposals to raise the federal minimum wage from $7.25 to $10.10, as per President Obama’s bid “to give America a raise.” The survey found that that a plurality of the small businesses that used Thumbtack thought a wage hike would be good for the economy. Most thought that a minimum-wage increase would have no effect on their hiring or firing decisions. But what happens if Washington passes Democratic presidential hopeful Bernie Sanders’ proposal to more than double the federal minimum wage to $15 per hour — or Californians pass a ballot measure to raise the state minimum wage to $15 from $10?
One piece of news this past weekend suggests a big minimum-wage hike could cost low-skilled workers their jobs.
Wal-Mart closed its Oakland store amid speculation that the city’s $12.25 minimum wage played a role. Oakland City Councilman Larry Reid told The Chronicle the city’s wage law was a factor in the closure. It’s hard to think otherwise when Oakland was one of 269 stores slated to be shuttered across the country, while in nearby San Leandro, where the $10 state wage floor prevails, two stores will remain open for business. The Washington Post reported last week that Wal-Mart was withdrawing plans to build two superstores in the nation’s capital. A city councilman told the Washington Post that behind closed doors Wal-Mart blamed D.C.’s minimum wage rules (currently $11.50 per hour, but the wage could rise to $15 if voters pass a ballot measure).
Thumbtack Chief Economist Jon Lieber finds it amazing how the $10.10 plan blossomed into a $15 floor, which may make sense in high-cost urban areas, but would put a hard squeeze on employers in places like Laramie, Wyoming. The vast majority of the small businesses surveyed by Thumbtack already pay well above the minimum wage, which is not surprising as many provide professional services. There is one group, however, that the survey found was most likely to be hardest hit — employers who paid more than $7.25 but less than $10.10. Wal-Mart falls into that category.
In April, the retail giant raised its nationwide minimum wage to $9. In October, Wal-Mart announced that the increase in labor costs cut into its profit margin. This month came store closures. Lieber expects to see retailers install more automated checkout machines as the cost of labor rises.
Oakland Mayor Libby Schaaf endorsed Oakland’s minimum wage, which 82 percent of voters supported. I haven’t seen a comment from Mayor Schaaf, but her office noted that Oakland’s unemployment fell from 6.1 percent in February 2015, before the wage hike went into effect in March, to 5.3 percent in September. The Wal-Mart closure, however, means 400 fewer jobs and the loss of revenue from one of the city’s top 25 sales-tax producers.
Note to Sanders and state unions: Beware what you promise; it could kill entry-level jobs.