City: $15/hour wage, yes, but how soon?

Palo Alto council debates best way to get to higher minimum wage

After raising the minimum wage to $11 per hour this year, Palo Alto officials are now looking to push it even higher -- an effort that is stirring alarm among local restaurant owners.

And while the city's eventual $15 rate is all but inevitable, one question is generating debate on the council: How soon should Palo Alto get there?

The plan, which the City Council's Policy and Services Committee endorsed this week, would gradually bring the local minimum wage to $15 by 2019. It would also align Palo Alto with other Santa Clara County cities that are pursuing a similar agenda. In June, the Cities Association of Santa Clara County and various local officials co-signed a letter calling for a regional minimum-wage proposal. Among the co-signers was Palo Alto Vice Mayor Greg Scharff, who serves on the Cities Association's Minimum Wage Subcommittee.

On Tuesday, Scharff was joined in his support for $15 an hour by 2019 by his three colleagues on the council's Policy and Services Committee: Chairman Tom DuBois, Liz Kniss and Marc Berman. The only disagreement was over the best way to get to that goal.

The plan endorsed by the Cities Association, and ultimately approved by the committee, would raise minimum wage to $12 in 2017, to $13.50 in 2018 and to $15 in 2019. This timetable is considerably faster than the one used by the state, which is increasing the minimum wage to $15 by 2022 for large businesses and by 2023 for small businesses. It lags, however, behind the timeline established by Mountain View and Sunnyvale, which are aiming to get to $15 by 2018.

During Tuesday's discussion, Councilman Marc Berman strongly favored swifter action. He proposed raising the minimum wage to $13 starting next year and then moving to $15 on July 1, 2018, which would give businesses a year and a half to adjust to the new norm. Though Berman joined his colleagues in the vote, he indicated that he intends to lobby for the "15 by '18" timeline once the issue gets to the full council.

Berman expressed no qualms about following a timeline different from the city's regional partners, noting that while he supports working with partners on the common goal, there are already "two huge cities in the region that are moving at a different pace, that signed on to this letter but are not moving at the letters' schedule."

The committee was more united when it came to a broader question about the wage proposal: Should it include tipped workers? Several local restaurateurs Tuesday made the case that it should not. Wait staff, many noted, get paid up to $40 an hour because of tips, while the kitchen staff makes considerably less. Because California has a law that prohibits the sharing of tips between front- and backroom staff, if the restaurants had to pay more in wages to waiters, it would keep the restaurateurs from fairly compensating dishwashers, cooks and other employees who don't benefit from tips.

Local chef Jesse Cool said half of the staff at her restaurants in Palo Alto and Menlo Park receive the minimum wage but net between $18 and $40 an hour. To pay higher wages, she said, the restaurants are forced to raise prices for food, which brings even more in tips.

"It all goes to the servers, and we cannot pay our kitchen staff any more," Cool said.

Meanwhile, employee costs are rising and profit margins are getting slimmer, she said.

"In general, in the restaurant business, if we can make 5 to 10 cents on a dollar, we're doing really well," Cool said. "I'm down to 2 percent."

Peter Katz, owner of The Counter on California Avenue, also called for an exemption for tipped workers. Like other restaurateurs, he said he fully supports a $15 minimum wage. But he also noted that the benefiting servers "are unconcerned with the daily paychecks because they're getting paid $30 to $40 in tips."

"That wouldn't be a problem either, if it didn't impact our ability to pay the rest of the folks who work in the restaurant," Katz said. "The losers in all of this will probably be the folks who most need it and, frankly, the restaurant owners."

Dan Gordon, founder of the Gordon Biersch (which was recently shuttered and re-opened as Dan Gordon's), suggested that the wage increases -- without an exception for tipped employees -- will severely hurt the city's restaurant industry and trigger a "panic attack" thanks to rising costs.

"The majority of the restaurants in the industry will go to a rapid loss, and you'll go to decimations of all the restaurants you like, except for some power players," Gordon said.

The committee, however, agreed that exempting tipped workers would be a dubious proposition. Other cities -- including Sacramento and Los Angeles -- have considered doing so but ultimately opted not to, in some cases because of heavy lobbying from labor groups and the fear of a lawsuit, said Cara Silver, the city's senior assistant city attorney.

Similarly, Palo Alto council members showed little interest Tuesday in becoming California's test case for such an exemption. While they all expressed sympathy with the restaurant owners, they argued that this is an issue for the state to resolve.

"I really feel that we in the city here have our hands tied on this issue," Scharff said. "We can make a bold statement in favor of the restaurant issue and take on litigation. I don't think it's the right thing to do."

Kniss and Berman both agreed.

"We wouldn't be doing our duty as stewards of the city and its resources if we walked ourselves into a lawsuit where the odds were heavily stacked against us," Berman said.


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12 people like this
Posted by Marie
a resident of Downtown North
on Aug 19, 2016 at 11:20 am

Minimum wage laws are set in place to protect the most vulnerable in any sector. Restaurants should not be exempted from these laws because it would miss the whole reason for its existence. People in the kitchens of the restaurant industry are the most vulnerable, and often with the worst and most difficult work.

It is about time that the restaurant owners restructure the pay system for all in their businesses, that because of the tipping system ends up compensating the serve staff -- which have the simpler jobs. It is obvious that prices cannot be raised infinitely and the business needs to make a profit. The tipping system needs to go.

And if not, it should not be expected that a customer leave up to 25% on top of the bill, which would make prices ridiculous for the customer. The European system allows for minimal tipping, which means a bit of change here and there. But is it not expected because all service is included in the bill. It's not that complicated.

7 people like this
Posted by Marie
a resident of Downtown North
on Aug 19, 2016 at 11:27 am

And for further elucidation, consider the following, which is only the beginning of the conversation, which plenty of studies showing how tipping is unfair, wrong, awkward, sexist, racist, antiquated, patronizing...

Web Link
Web Link
Web Link
Web Link

4 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 19, 2016 at 11:32 am

Get ready for more self serve checkouts, less buss staff at restaurants, less staff to help you in any store and longer lines at MacDonalds.

The service industry will just reduce the number of jobs, the number of hours for employees and start using more technology to do their work.

15 people like this
Posted by Chris
a resident of University South
on Aug 19, 2016 at 1:38 pm

The restaurants should eliminate tipping and build the minimum wage into their prices. They can allocate the money however they wish and not be constrained by the no sharing of tips laws.

9 people like this
Posted by NoMoPa
a resident of Duveneck/St. Francis
on Aug 19, 2016 at 1:47 pm

"Some early results from Seattleā€™s radical experiment with a $15 an hour minimum wage: fewer jobs, fewer hours"

Web Link

But hey, as long as we feel good about ourselves, who cares if it hurts the little guy.

3 people like this
Posted by CGPA
a resident of Downtown North
on Aug 19, 2016 at 2:20 pm

CGPA is a registered user.

We have automated 90 percent of our work and we haven't stopped. A full time job with benefits has been replaced with one that requires just 2 hours per week. We paid for the best blue cross plan and a dental plan that paid for dental visits with no deductible.

All gone now. I have a high school girl who handles what we haven't automated. It used to be a college graduate. The higher minimum wage discussions got me thinking that the city councils wouldn't stop, and so we started doing this 5 years ago.

We'll have another 5% of it by the end of next year and it should be down to almost nothing by the next year. So much so that I won't need an employee at all.

If you look at history, a too-high minimum wage has decimated jobs. The minimum wage was raised to it's peak in 1968 (in current dollars, it would be about $11/hour). By 1970, the shipping container was in full use, allowing jobs to be offshored. That decimated the middle class.

Math always wins. If the minimum wage is raised too high, technology rushes in and takes its place. That's what will happen now.

3 people like this
Posted by Marrol
a resident of Downtown North
on Aug 19, 2016 at 6:50 pm

Destined for failure at so many levels. Lower paying jobs, which were never meant to support a family anyway, will be eliminated. Be careful what you ask for minimum wage supporters. Less jobs and leaving you unqualified to fill the positions that require greater skill levels.

1 person likes this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 19, 2016 at 6:56 pm

Pepper the robot is doing customer service in Palo Alto store. He won't expect $15 an hour. Web Link

2 people like this
a resident of College Terrace
on Aug 20, 2016 at 12:56 am

SEA_SEELAM REDDY is a registered user.

How soon?

Not soon enough.
The days of $29.50 for a hamburger are near.
The days for $15/hour minimum wage are here.
The days for 40% increase in home values have happened already 2010-now.
It is time software engineers starting salary be $100,000.

We cant just raise rents and owners gain all the money. More distribution of wealth for hard work need to be met.

Its what Switzerland does. It might work for Palo Alto.


1 person likes this
Posted by Small business owner
a resident of Stanford
on Aug 21, 2016 at 8:31 pm

I have owned a small business in Palo Alto for 27 years. Every time I renew my lease, the rent jumps 30 -50%. The products we use, re-models and up-keep [to keep the business looking decent and a pleasant place for people to frequent and work] cost more and more every year.

We see 1000 clients a week, and the community relies on us to provide our services at an AFFORDABLE cost. We raise our prices cautiously and selectively, but people always notice and complain. My employees have long since moved from this area and commute in to service their clients here in Palo Alto. They make decent money, most of them significantly more than 15.00 and hour, but there are a number of support people, generally young, in school - that make minimum wage. I am down to 2-3 % profit. If my rent increases [which it will next year] and the minimum wage goes up, I'm done. That's 1000 people a week that will have to find someplace else to go for our services, and most certainly they will be paying at least 30 - 60% more than they are now with us.

Think long and hard, Palo Altans. You cannot have great-looking businesses, convenient parking and affordable pricing and dictate to businesses what they must pay employees. I am not alone. There are so, so many small business owners, with very sizable customer bases that are going out, and not by choice.

As Dan Gordon mentioned above, what will be left will be the big operators who give nothing back to our community and couldn't care less about it [just try asking for a donation for your child's school, we give to 50 school auctions every year] and chains who have so many stores that a half percent profit is fine with them.

You are responsible for protecting what is unique in Palo Alto. Why not consider a little pragmatism here, for all of our sakes?

Like this comment
Posted by @Small business owner
a resident of Stanford
on Aug 21, 2016 at 8:57 pm

Why don't you raise your prices?

Like this comment
Posted by NoMoPa
a resident of Duveneck/St. Francis
on Aug 21, 2016 at 9:26 pm

@resident of Stanford - Have you noticed a thriving retail scene in Palo Alto?? Small businesses can't afford to raise prices, but big corporate chains can. Minimum wage creates the world where we have to shop at Walmart, Best Buy, and eat at Cheesecake Factory because they are the last businesses standing. Also note the inflationary cycle you highlight: increased wages lead to higher prices. So the people you are trying to help end up paying more to eat and shop themselves. And you really screw the people who lose their jobs and also have to face higher prices.

Sorry, but further commenting on this topic has been closed.

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