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Chamber says business mood shift linked to wage hike

Fears over raising the minimum wage in San Diego have put a noticeable dent in the economic outlook and hiring plans among some local businesses – especially those who feel they will be hurt most by the wage hike, according to recent polls surveying the local business community.

A poll conducted on behalf of the San Diego Regional Chamber of Commerce earlier this month said that the percentage of businesses planning to cut back workers' hours nearly doubled last month, rising from 5 percent in its July report to 9 percent in August.

Twenty-three percent of businesses said they plan to increase hours in the next three months, although that number has dipped sharply from 36 percent in July.

At the same time, the business outlook dropped to its lowest point in more than a year of polling, with 30 percent of respondents fearing the city was headed in the wrong direction, although 56 percent feel it is moving forward.

The report, which surveyed random members of the San Diego Regional and East County Chambers of Commerce, said the pessimism seems to be tied to rising concern about the minimum wage.

"We're hearing from a lot of small businesses about how they're panicked about the potential costs [of the wage hike]" said Jason Cabel Roe, a business consultant who is coordinating a chamber-backed campaign to halt the increase through a public referendum.

On the other hand, only 5 percent of respondents to the August poll listed the minimum wage hike as a "new challenge" to their business, which ranked it in 15th place among their concerns.

The mood shift contrasts with recent employment data that hints at growing expansion plans among San Diego businesses, as well as surveys showing an ambivalent attitude toward the wage hike, which would raise the minimum from the current $9 to $9.75 next January, $10.50 in January 2016 and $11.50 in January 2017.

Nearly 70 percent of small businesses in San Diego feel hikes in the minimum wage will not affect their businesses, according to a recent poll by California Bank & Trust.

Some businesses even tout the wage hike's positive benefits, arguing that higher wages reduce turnover among workers – meaning fewer hiring and training costs – and puts more spending money into the pockets of potential customers.

The Costco Wholesale Corp. (Nasdaq: COST) warehouse retail chain, for instance, already has a minimum wage of $11.50 per hour for its beginning workers -- following an example set by the late San Diego entrepreneur Sol Price, whose Price Club was merged into Costco in 1993.

"Paying employees good wages makes good sense for business …," CEO Craig Jelinek said in a statement last year. "Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty."

Costco has been so successful over the past couple decades that the Bloomberg news service this month held a panel discussion on whether low-paying Walmart (NYSE: WMT) should follow Costco's example.

Overall salaries at Costco average roughly $45,000 per year at Costco, compared to less than $18,000 at its direct competitor: Walmart-owned Sam's Club.

Point Loma bookstore owner Ann Kinner, who chairs the California leadership council of the National Federation of Independent Businesses (NFIB), said small businesses have a harder time absorbing the costs of a minimum wage hike than a major chain like Costco. Instead, she warned, they may scale back their work force or employee hours.

"We've been fighting this on all levels: federal, state and local," Kinner said.

The NFIB, together with the San Diego Regional Chamber of Commerce and the California Restaurant Association, are among the biggest backers of the petition drive to overturn the wage hike.

According to the chamber's poll, 5 percent of respondents view the wage hike as a new challenge to their business, rising gradually from 0.5 percent last December.

John Nienstedt, head of San Diego's Competitive Edge Research & Commmunication, which conducted the polling with funding from Silvergate Bank, said the bleakest responses on hiring and the economic outlook came from firms that cited the minimum wage hike or taxes as major concerns.

"My guess is that the drumbeat of minimum wage and other business regulations helped fuel that loss of optimism," Nienstedt said. "Still, it's important to note that San Diego businesses, like those throughout the county, remain positive, just not as positive as they were."

The Chamber of Commerce -- which has been providing financial backing to the $500,000 petition drive -- has been sending a barrage of material to its members urging support for the campaign.

"We have kept chamber membership informed every step of the way through our various forms of communication -- emails, advocacy newsletters, media outreach, social media and during our events," said Allison Phillips, the chamber's communications director.

The chamber has told members that the minimum wage hike would "hurt numerous small businesses" and "put San Diego at a competitive and economic disadvantage."

The projected cutback in hours in the Competitive Research poll mirror an employment projection released in June by the Manpower Group employment firm, which reported that 22 percent of respondents planned to hire workers during the summer, compared to 6 percent that planned layoffs.

Phil Blair, co-owner of Manpower's operations in the region, described those figures at the time as being "very positive," adding that it was "a brighter forecast" than the previous quarter or the same quarter of last year.

Blair reiterated his optimism earlier this month, when state reports showed that San Diego in July had its best year-to-year seasonally adjusted growth in jobs so far in 2014.

"Construction is booming, the private sector is hiring and the outlook is strong for the rest of the year," he said. "It is apparent that the economy is doing very well."

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