Minimum wage increase not without consequences

On the morning of July 1st, we spent some time with Moe Sadighian, who owns 5-star restaurants, four of them in the city. He employs 120 people, and much of his workforce is paid the minimum wage.

Many workers’ paychecks are more than double the minimum wage to an average of $19 per hour when gratuities are factored in, and employees in many restaurants share those tips. Sadighian will absorb that dollar-an-hour increase, but each of those dollars will actually cost him $1.35.

“Because of the fact of workers compensation, social security, and all the taxes that go along with it,” said Sadighian. “It’s not just a dollar for us, there’s a back end as well. Everything goes up, and those people who are making $10 an hour want a raise, too, so it goes across the board.”

Chris Duggan of the California Restaurant Association says the increase will not lift anybody out of poverty, and the tax bite hits the employee, too.

“It’s gonna be about 40 percent,” said Duggan, “so of that extra dollar, 40 percent is gonna go back to Uncle Sam.”

With 120 employees and five restaurants, the annual cost to Sadighian is substantial.

“Per place, it’s about 36- to 40-thousand dollars,” said Sadighian.

Sadighian and the Restaurant Association can live with the state increasing the wage to $10 per hour, but increasing it to $11.50, as the City Council is proposing, is a job killer.

“There’s a lot of small businesses I talked to that have 6 or 9 employees, and they say they’re gonna have to close their doors.” 

“You’ll see adjustments,” said Duggan. “They’ll be laying off less experienced workers, and/or increasing menu (prices), but when you go too high, too fast, you will see impacts.”

The council also wants five days of paid sick leave, and automatic wage increases every year tied to the Consumer Price Index. There’s no way business can plan for that.

“You’re talking about 20, 25 percent of small businesses closing. You’re talking about a 30 percent layoff. You’re talking about no more youth employment,” Sadighian said. 

While $10 per hour is welcome, going to $11.50 will have adverse consequences.  Former San Diego Mayor and current president and CEO of the San Diego Regional Chamber of Commerce, Jerry Sanders was on Good Morning San Diego Tuesday to talk about the issue.

“A lot of people who will get it in their paychecks may not have jobs because businesses will find a way to become more efficient,” said Sanders, “because of the increase in costs.”

The council can pass the increase with five votes. If that happens, the issue could ultimately end up going to the voters.

Categories: KUSI