Minimum wage is no silver bullet for affordability

San Francisco is facing a problem of affordability. The City’s median home price continues to rise and remains the highest in the Bay Area at $957,000. Average rents now stand at $3,350 per month. The costs of transportation and other necessities are rising.

Our city has led the way when it comes to advancing the minimum wage. San Francisco was one of the first municipalities to boost base wages beyond the federal and state levels. In 2012, our city became the first to raise the minimum wage above $10 per hour. Now, The City is considering another increase to the minimum wage from $10.74 to as much as $15 per hour or more.

Affordability is important for San Francisco residents. But as our city considers new legislation to increase the minimum wage, we must also consider the affordability for the job creators that power the economy.

In San Francisco, minimum wage is just one piece of the puzzle. Businesses operating here must also provide paid sick leave and make mandatory health care expenditures for their employees. These mandates come on top of The City’s business tax and competitive commercial rents.
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Like housing and rents, business costs are rising. Over the past decade, the cost of employing a minimum-wage-earning worker in The City has increased from $7.75 per hour in 2005 to $12.37, including the $1.63-an-hour health care expenditure mandate for small businesses. Taken together, these increases amount to a roughly 60 percent increase in labor costs for many businesses with entry-level workers.

One needs only to look at recent history to see that the cost of hiring greatly impacts local business. After the 2001 recession and collapse of the visitor industry following the 9/11 attacks, The City lost 90,000 jobs. Despite San Francisco’s strong population growth — rising from 777,000 in 2000 to 825,000 today — it took 10 years to recover these jobs in large part due to the rising cost of hiring.

San Francisco is an expensive place both to live and do business. Raising the minimum wage is one possible strategy to address affordability. However, any increase to wages must be economically sensible for all businesses, including those with low margins.

Equally important is the fact that raising the minimum wage alone will be irrelevant if it is not taken in the broader context of the overall cost of living. In addition to wages, City Hall must come to grips with political and bureaucratic delays in producing housing, in transit efficiency and other critical services.

San Francisco lawmakers must carefully consider any change to the minimum wage in order to ensure it does not have negative, unintended consequences on job creators and that it achieves its intended goal of making our city more affordable.