As the end of the year approaches, many businesses across California have begun planning finances for next year due to a drastic minimum wage raise that stands to hurt many small businesses struggling in the wake of COVID-19 economic constraints, as well as a struggling economy.
Starting on January 1st, the state minimum wage is due to increase to $14 an hours for businesses with 25 employees or more and $13 an hour for businesses with fewer than 25 workers. California is currently on a plan started in 2017 to increase the minimum wage each year until 2022 when it hits $15 an hour, with small businesses under 25 employees meeting that rate in 2023.
After COVID-19 pandemic lockdowns in March, there was a call by many lawmakers and businesses statewide to delay the raise due to a massive economic shutdown, with many small-businesses struggling to make ends meet and unemployment rates in California skyrocketing to highs of over 16% and jobless claims hitting over the two million mark in less than a month.
However, lawmakers in California, led by Governor Gavin Newsom, refused to delay the increase in July, citing the need by many workers for a larger paycheck during the time of crisis, as well as calls to not delay raises for many essential workers who need the raise.
“The increase represents the raise they deserve,” said Governor Newsom in July. “Many of those workers are on the front lines of the pandemic, providing child care, working in our hospitals and nursing facilities and making sure there’s food on grocery store shelves.”
However, the raises for the hourly workers come January come at a major cost for many employers. For several weeks, business owners across the state have let the California Globe know about what the raise, as well as other new employment changes, such as the enaction of SB 1383, a soon to be law that expands protected family leave in small businesses, will mean for small businesses in California.
Nearly all expressed negatively what the changes will do to their business come January.
“Oh, I know I’m already looking at layoffs,” noted Arthur Hasegawa, a San Francisco auto garage owner. “This is not the time to mess with our businesses, because we are all doing everything we can to remain afloat as well as keep as many people as possible. This minimum wage bill will force us to lose a few people, and that maternity bill [SB 1383] will leave us shorthanded as a result. And it gets even more complicated because if you let people go, they can claim discrimination. I know people dreading letting employees go who are expecting babies go because they know they’re going to fight it on those grounds.
“It’s just putting us between a rock and a hard place.”
Dangers of minimum wage increase during the pandemic
Another, restaurant co-owner Liz Dorna of Orange, also said that the raise will only lead to trouble.
“There’s a pandemic going on that already cut into business,” said Dorna. “We lost so much business with the lockdowns and being restricted to take-out meals. We lost even more by having to upgrade cleaning procedures and buying PPE. Now there is another huge cost coming. And Newsom and everyone could have stopped it. But he didn’t.
“For people who say of businesses that ‘everyone is suffering’ they obviously don’t currently own a restaurant in California.”
Carlita Hernandez, a Los Angeles flower shop owner, also expressed distress: “LA County just had more restrictions up the other day,” explained Hernandez. “I only have a few employees who have worked here each for over ten years. The restrictions causing less customers to come and that $1 an hour raise means I have to give someone their two weeks notice right before Christmas. Tell me, how the hell do I make that decision? The government is putting me in an impossible decision.”
And others are facing worse fates.
“We’re doing everything we can,” expressed Humboldt County furniture store owner Aaron Shaw. “But that extra dollar an hour, with all our employees? We either fire a few or go out of business.
“This is what the state has done. They’re telling us “Do you want to ruin a few people’s lives, or do you want to end your dream?
“We’re just being squeezed now. No matter what we do, we lose.”
The $14 minimum wage is to go into effect on January 1, 2021.