By Scott Knies and Matthew Mahood
Rather than allow San Jose voters to decide in November, we hear some San Jose City Council members will push on Tuesday to increase the city’s minimum wage 25 percent, from $8 to $10 an hour, to take effect 90 days after passage.
For a city that moves at a deliberate pace on major decisions, it’s mind-boggling that the council has held next to zero public outreach and has neither analyzed nor debated the serious citywide impacts from such a law before considering it. What’s the hurry?
The proposal is on the table because college students and labor groups have qualified a $10 minimum wage initiative for the fall ballot. But given the lingering effects of the worst recession since the Great Depression, now is not the time for San Jose to dramatically increase the costs of doing business—especially since San Jose shares borders with cities that would continue to pay the $8 minimum.
This will not just affect employers paying the lowest wage. A worker currently making $10.25 an hour will be asking for a similar raise. And so it will go up the line as suppliers raise their costs and pass them along to their customers, making San Jose less competitive.
Moreover, some employee contracts are based on the minimum wage. If it should suddenly increase, it will have a domino effect that employers have had no time to plan for.
Proponents claim higher pay means low-wage workers will have more to spend, thus boosting the economy. But if employers cannot absorb an increase in the cost of labor, they will hire fewer workers, hire more-productive or more-educated workers, lay off workers or pass the costs to consumers.
Government has a patchy record of managing its own wage and benefit structure. Pension and benefit costs have ballooned and become unsustainable. To compensate, the city of San Jose has laid off thousands of workers and reduced essential services. Do the proponents of this wage-inflating measure think these same economic principles don’t apply in the private sector?
In fact, the cost of poor public policy as it relates to employee compensation has gotten so severe, the council has turned to voters for help. In a few weeks, citizens will vote on Measure B to reform pension and benefits. Let’s not repeat the history of making decisions on compensation without thoroughly analyzing the fiscal impacts over the long haul.
Here’s some other alarming provisions of the minimum wage initiative, which have received no airing or study:
• An automatic cost-of-living increase each year.
• Authority for the city to inspect workplaces, interview people and rifle through business payroll records to monitor compliance with the ordinance.
• A possible city-imposed cost-recovery fee on all employers to pay for administering the local minimum wage law.
• Mandatory compliance for any business license holder in the city, including nonprofits and businesses not based here but with facilities in the city.
Ironically, a few days ago, economic development representatives launched a new program to persuade businesses to “Choose San Jose.” Said one city staffer, “We have a lot of competition to the north.” Indeed! But if the minimum wage increase passes, businesses might rather “Eschew San Jose” for Sunnyvale or Santa Clara.
So, with the initiative now qualified for the November ballot, we advise the city council not to pre-empt citizens’ right to determine such a critical matter. We need robust public discussion, not hasty action. Let the voters decide.
Scott Knies is executive director of the San Jose Downtown Association and Matthew Mahood is president and CEO of the San Jose Silicon Valley Chamber of Commerce.