NCPA - National Center for Policy Analysis

New Minimum Wage Cuts Both Ways

December 27, 2011

On January 1, San Francisco will become the first big city in the United States with a minimum wage topping $10 an hour.  That's deepening tensions between business owners worried about rising overhead and workers struggling to make ends meet in this costly town, says the Wall Street Journal.

Among the businesspeople concerned about the change is Steve Sarver, owner of the San Francisco Soup Co., a restaurant chain with 12 of its 18 locations in the city.

  • The automatic wage increase, pegged to inflation, will lift San Francisco's minimum wage to $10.24 an hour from $9.92 now.  
  • While the federal minimum wage won't change on Jan. 1, several states will also see minimum-wage increases commensurate with inflation.

Shaw San Liu at the Workers Organizing Center at the Chinese Progressive Association, an advocacy group for low-income Chinese people that backed the minimum-wage ordinance in 2003, says the minimum-wage increase is necessary for those "who are always hustling to make enough money to provide the basic things their family needs."

But Rob Black, executive director of the Golden Gate Restaurant Association, a trade group, argues the rising minimum wage encourages businesses to consider leaving the city and slows growth of new jobs -- hurting not only the businesses themselves but also their employees.

Steve Sarver, owner of the San Francisco Soup Co., says he will likely pass on the latest minimum-wage increase to his customers.  "Price increases will have to happen eventually," says Mr. Sarver, who charges roughly $5 for soup servings.  "There's no way around it."

Source: Vauhini Vara and Ian Sherr, "New Minimum Wage Cuts Both Ways," Wall Street Journal, December 22, 2011.

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