Jan. 1 brought an increase in California’s minimum wage: employers with 25 or fewer employees are now required to compensate those employees at least $14 hourly and those with 26 or more employees must now pay at least $15 per hour.
San Diego Workforce Partnership Senior Economist Daniel Enemark put those dollar signs in context, said the apparent increase in minimum wage is “really just an adjustment to account for inflation” and in real terms, labor is no more expensive today than it was in January 2021.
“The minimum wage increased from $14 to $15 an hour— a 7% increase. For context, from 2021 to 2022, food prices increased by 7.5%, rent by 15%, home prices by 24%, and energy by 37%. In other words, this year’s minimum wage increase doesn’t actually represent an increase in what economists would call the ‘real’ wage,” Enemark said.
Accessity Chief Executive Officer Elizabeth Schott, who works daily with funding business ventures led by entrepreneurs of color, women and immigrants said consumers and small business owners alike “are feeling the effects of rising costs in many different areas that affect their budget and bottom lines” and the minimum wage increase is just one component that affects small businesses.
Furthermore, she said, the increase in minimum wage was planned for, unlike unexpected impacts like supply chain or inventory issues.
Dream Dinners owner Marsi Haney believes the minimum wage increase will put increased strain on businesses which have not yet recovered from the pandemic.
“We lost nearly half our customers during the pandemic and without the opportunity to host events and participate in events in the community, we were unable to drive in new business the way we used to. We went from an average of fifty to a hundred new guests per month to just seven to twelve per month. We have made adjustments for this by having fewer staff and reducing their hours,” Haney said.
She believes generally rising costs will hurt people in lower income brackets more than others, and could potentially affect which businesses are able to remain open.
“People struggling to make ends meet will have to make difficult decisions between buying food for their children and paying their SDG&E bills. We have decreased our employees’ hours to cover the rising cost and decreasing sales and if this continues across the local businesses then only the biggest businesses will be able to afford to employ people,” Haney said.
While the minimum wage increase won’t change her hiring practices, she said, it has changed her expectations of employee output and whether they can be cross-trained for multiple positions.
Although Enemark does not believe the increase in minimum wage will have a significant effect on the local economy or hiring practices, he too said the real struggle is finding employees.
“Employers around the region are struggling to recruit workers and will likely continue to struggle until the wages they offer are high enough to recruit the workers they want,” Enemark said.
However, while Schott said it is “challenging to attract and retain employees,” she believes there are too many differences between businesses to pinpoint any particular challenge as the primary one or a significant factor business owners are navigating. She sees the increase in minimum wage as just one factor both employees and business owners need to consider and said it is just one reason why employers must be transparent about why someone would want to work with them.
“For example, we recommend employers include information on the culture of their business, benefits they offer, their working environment and the ways they contribute to local causes or communities. It’s a competitive time,” Schott said.
Finding and retaining talent, she said, can be the single most important advantage a small business can create for itself.