On Wednesday, food workers and other low-wage earners around the country rallied to increase the federal minimum wage to $15, which would more than double the current federal rate of $7.25 for untipped and $2.13 for tipped workers. In the Bay Area, where rents have soared by 44% over the last five years, steps are already underway to make this goal a reality.
Following the passage of Measure FF with 82% of the vote last fall, Oakland raised the city’s minimum wage from $9 to $12.25 this year. At the same time, San Francisco voters passed Proposition J, which will incrementally raise the minimum wage to $15 by 2018.
And while many restaurateurs and food producers agree that living wages are critical to an equitable food system, they are also struggling to figure out how make the finances work in an industry that already operates on tight margins. As food prices increase, the question remains: will Bay Area voters put their money where their mouths are?
Putting the Squeeze on Local Restaurants
In Oakland, where minimum wage increased 36% on March 2, restaurateurs have adjusted their business plans in numerous creative ways: increasing menu prices, adding services charges, doing away with tips, or some combination of the above.
At Juhu Beach Club in Temescal, owner Preeti Mistry is already feeling the pinch of the increase, having raised her menu prices to accommodate the additional overhead. In addition to increasing the wages on the restaurant’s lowest paid workers, Juhu also raised some of the kitchen crew’s wages, and servers are now sharing tips with kitchen staff.
“We’re giving customers a sheet that explains the situation, but people are still shocked by the prices,” says Misty. She wants to pay her employees a living wage, but she also feels for her customers, who are getting hit with bigger restaurant bills. “People see that our restaurant is busy and they think we’re making all this money, but we’re also spending a lot of money. It’s not like we’re getting rich,” she says. “I hope people start to understand that this is the new normal.”
So far, Mistry is reluctant to raise Juhu’s prices at their recently opened Ferry Plaza Farmers Market stand, while it is still establishing a customer base. “We don’t want to create more obstacles for people to give us a try, so for now we’re just eating the costs.”
A Fair Raise for All
In San Francisco, Evan Bloom of Wise Sons Jewish Delicatessen is preparing for the city’s May 1 wage increase, a jump from $11.05 to $12.25. Prices at his two brick-and-mortar restaurants and Ferry Plaza Farmers Market stand will go up across the board, and he anticipates equivalent hikes in the coming years as the city’s minimum wage increase schedule plays out.
“I think there’s a lot of misinformation out there that restaurants are just gouging diners to make a profit,” says Bloom. “The reality is that most food businesses struggle to make a profit at all.”
In addition to recovering from a devastating Mission District fire that destroyed their production kitchen, Wise Sons has also seen increases in the cost of beef and other ingredients due to the drought. All of these costs factor into the restaurant’s bottom line.
Out of fairness to all staff, Wise Sons is not just raising the wages of their lowest paid employees. “I don’t think you can suddenly give a raise to your lowest paid employee, if it means there’s almost parity between the cook and the dishwasher,” he says. “You really have to increase everybody at the same time.” For his 50 employees, he says, the increases will result in hundreds of thousands per year in additional payroll costs.
Bloom says he supports the increase in a city where the cost of living has rapidly outpaced earnings for most workers, but he’s interested to see how the public will react to the new pricing. “This increase was something that the city voted for, and I hope that people can see that it does affect the cost of their food.”
Staying Ahead of the Curve
Back in Oakland at RoliRoti Gourmet Rotisserie, Thomas Odermatt says the increase has not impacted his food truck and catering business. He’s been paying his employees well above minimum wage for years, and the costs are built into the price of his products.
“As an employer, I am responsible for the social well-being of my employees, making sure that they get paid well and are safe and happy on the job,” he says. In 2006, RoliRoti started offering health insurance, 401Ks, and profit sharing for their employees. Their lowest paid employees now earn $14-15 an hour, and tips from catering gigs are shared between front-of-the-house catering workers and kitchen workers.
Paying his employees above the mandate is also a sound business strategy. “I try to keep my business one step ahead, so that I don’t have to think about the next increase,” he says. Turnover at RoliRoti is low, and some of his employees have been with the business for 10 to 12 years.
While Odermatt is a strong proponent of paying his workers the most he can within his business’s means, he does not look favorably upon the minimum wage increases, which he views as the government passing the buck of the Bay Area’s affordable housing crisis on to small businesses. “It should be the responsibility of a good employer to give a fair wage,” he says. “I feel like I have done the right thing, but I’m not rewarded as an employer. The employer is treated like the bad boy.”
Like RoliRoti, Acme Bread Company pays its employees above the minimum, with a starting wage of $12.50 at its bakeries in San Francisco and Berkeley (which also passed a new minimum wage ordinance last year).
Owner Steve Sullivan sees the minimum wage increase as leveling the playing field. “You don’t have to wonder about whether your competitors are paying lower wages or not paying for health care, because everyone has to participate.” Each year, the company adjusts their product prices based on many factors, including the costs of flour, fuel, energy, and labor.
Because turnover is low at Acme, many employees are making close to $15 an hour at this point. At least in the short term, Sullivan does not foresee a large impact from the wage ordinances, though it may mean that newly hired employees’ wages stay static for longer.
“You can never pay people as much as you’d like to, but you want to be able to pay people enough so they can live a reasonable life in the context of what it costs to get by,” he says.
Keeping Local Food Businesses Viable
Oakland-based Hodo Soy Beanery raised all of its workers’ pay by 20% this March, ensuring that longer-term and higher-level employees also benefited from the wage increase. “I am in favor of the new minimum wage,” says founder Minh Tsai. “The fact that it wasn’t phased in was challenging, but we support it.”
Like Juhu Beach Club, Wise Sons, RoliRoti, and Acme, Hodo Soy makes sourcing quality ingredients a priority, using only organic, non-GMO soybeans in their tofu products. So far, Hodo Soy has not had to raise product prices, but as a food manufacturer without a retail storefront, he recognizes that his company can more easily absorb the increase than restaurants, which have high front-of-the-house labor costs.
Whether or not a food business has to raise its prices in this transition, he hopes that Bay Area customers will continue to support businesses that maintain a commitment to sustainability. Like sourcing local and organic produce, paying for worker welfare is an important step.
As he puts it, “Labor is a precious ingredient. You want ingredients to be grown well, and you also want workers to have the freedom to live here and have a meaningful wage. You can’t separate the two.”
“We are all committed to being Bay Area producers,” he continues. “The cost of living is rising for everybody. Some businesses will have to raise prices, and others won’t. Our customers have been supporting us for years, and we hope they will continue to support us as we support our laborers.”
Support all of these businesses at the Ferry Plaza Farmers Market, and join CUESA on Tuesday for a conversation about the how restaurants are adapting to a changing San Francisco.