56.9 F
Friday, April 12, 2024
NewsBusinessAs New Minimum Wage Takes Effect, Small Business Owners Look for Options...

As New Minimum Wage Takes Effect, Small Business Owners Look for Options to Stay Afloat

Casa Azteca, tucked away in a corner of a strip mall on Main Street, has been a Milpitas food staple for years, bringing together everyone from decades-loyal customers to Milpitas High Spanish classes looking to fulfill their “use Spanish in the real world” exercises.

Azteca’s owner, Harirhar Dahal, employs 25 Mexican workers who all get paid at least minimum wage. A decade ago, that meant his workers got around $10 to $11 an hour. But since July 1, Dahal must now pay them $15 an hour.

Milpitas joined six other cities last month — Alameda, Berkeley, Emeryville, Fremont, San Francisco, and San Leandro — in hiking up the local minimum wage. Milpitas’s minimum increased from $13.50 to $15 an hour, echoing the minimum wage offered in neighboring San Jose, and a rallying cry across the nation.

The hike is the fourth in just two years for Milpitas. In 2017, the city council approved a minimum wage ordinance, which gradually increased the city’s minimum from $11 an hour in 2017 to $15 last month, including two increases just this year.

While increased wages for workers is something embraced by workers struggling to survive in the city’s expensive housing market, others aren’t so certain about the increase’s future. In particular, small business owners are feeling the pinch.


Said Dahal, “I only use fresh vegetables and food, but that’s expensive. We’re going to keep using fresh food and not canned food though because we want the best for our customers.”

Even if the increased cost of goods goes along with increased wages for workers.

As a solution to rising operational costs, Dahal floated the idea of raising menu prices, one he’s since reneged on, “at least for now.”

Dahal manages 25 full- and part-time employees at Casa Azteca, a position he’s held for six years.

“It’s tough. When wages go up, then prices go up. And rent goes up,” said Cassandra Soto-Rodriguez, who was eating at Casa Azteca with her family and friend Jennifer Werner. Soto-Rodriguez was once a manager at IHOP locations in Dublin and Newark. “It’s great that minimum wage is going up, and it’s great for servers. But we want to be able to afford things, too. Servers are still just getting by.”

At IHOP, Soto-Rodriguez, who now works at a shipping company, recalled a time when her restaurant was so understaffed, she had to take on the roles of host and server, along with some kitchen duties, despite being a manager.

That amounted to three to four jobs in one shift — hours that didn’t factor into her salaried wage.

“So either I had to do all the work or hire another server. We couldn’t afford that,” said Soto-Rodriguez.

Her friend Werner is the manager of a restaurant in the South Bay. “It’s like a domino effect,” she said, referring to how rising wages impact prices, rent, etc.

All this calls into question the effectiveness of a minimum wage. Fifteen dollars an hour might be enough for a single, young adult to get by, but it’s nowhere near the amount of money needed to pay for expenses like rent, a car, or food — especially when you have children. That number — termed a “living wage” in both the public and private sectors — turns out to be higher than minimum wage. The highest minimum wage in the nation, Emeryville’s recently-approved $16.30, is still short of the required $18.62 living wage for a single adult, according to a recent study by the Massachusetts Institute of Technology (MIT).

In an apparent response, practices like charging a surcharge for select services are already par for the course at several San Jose restaurants. Restaurants at the popular Santana Row shopping center often tack on a 4 percent “living wage surcharge” to customers’ bills to help cover San Jose’s own increases in minimum wage. By law, any restaurant that utilizes a surcharge has to declare it, but there are no regulations on how to declare it. Most often, mention of a surcharge can be found in fine print at the bottom of the menu, or already tacked onto the receipt when the customer asks for the bill.

Such a surcharge might be able to solve at least part of the problem, but their lack of regulation raises some concern in Silicon Valley.

Case in point: At the Capital Club, San Jose’s ritzy, elite, big-wig establishment for tech executives and politicos, members were subject to a living wage surcharge on their bills for all services, which were supposed to go to a “living wage pool” of money for the club’s workers — 1 percent of which made for an additional bump on each employee’s checks. But an investigation alleged that the money wasn’t going to workers at all, and they often had no idea how much money was in the pool. In addition, servers weren’t even getting paid minimum wage, as the club’s management had failed to keep up with San Jose’s increasing minimums.

In San Francisco, a similar 4 percent surcharge to cover restaurant workers’ health care was met with mixed reactions. The City of San Diego went as far as legally challenging restaurants’ rights to levy a surcharge. And just last month, Original Joe’s, which has served San Jose patrons for 63 years, was forced to shut down lunchtime service, citing the city’s wage hike as a factor.

Of the businesses The Beat spoke with, none of them had considered a living wage surcharge, but all have considered raising prices on their goods and services. Whether or not they might actually do so remains to be seen.

If there’s a small, family-owned business that can rival the longevity of Casa Azteca, then Jensen School for the Performing Arts might be it. The school recently celebrated its 40th year of teaching dance to people of all ages and skill levels. Its founder, the eponymous Patty Jensen, employs around a dozen teachers to keep her programs for ballet, contemporary, hip-hop, jazz, and tap dance going.

But with any school comes tuition costs, which according to Jensen, have been “steadily rising” since the city’s wage hike announcement. She’s had to cut some of her teachers’ hours and cut down on the studio’s amount of classes.

“But I totally understand the policy,” said Jensen. “It’s great for our teachers because they’re earning more. But the cost of property and the area makes it hard without raising costs when you’re tuition-based. A surcharge doesn’t really work either since we’re not a restaurant.”

“It’s a catch-22,” Jensen added.

The city — or at least the City’s Economic Development Department — kept that in mind when the increased minimum wage was first implemented.

“We’re boosting the local economy and putting dollars in the pockets of people here,” said Economic Development Director Alex Andrade. “People can go out and spend that money and shop and dine out and put money back into the economy. It leads to a positive externality,” he added.

It’s a point that Dahal and Jensen both agreed with.

Andrade has been instrumental in overseeing the implementation of the minimum wage since his appointment in November 2018 by former City Manager Julie Edmonds-Mares. Edmond-Mares touted Andrade’s “strong track record” of creating a competitive business environment and “providing job opportunities and revenue to the city.”  

Andrade, the former City of Mountain View Economic Director, was careful to differentiate between the city’s current ordinance of an increased minimum wage and a “living wage.”

However, the implementation of something similar to a living wage might not be too far off. The apparent final step in Milpitas’s minimum wage ordinance comes on July 1, 2020. On that date, the minimum wage will be adjusted annually to match the Bay Area Consumer Price Index. 

And if the past is any indication, that number is only set to increase.

The adjustment won’t exactly make for a living wage, but it’s the closest the city has come to having a wage commensurate with the cost of living since the city’s founding. It marks the first dynamic minimum wage in Milpitas history.

“[The living wage is] not something we have thought about yet,” said Andrade, but he toyed with the idea when he spoke with The Beat. 

For now, businesses like Casa Azteca continue to serve their customers — and according to Soto-Rodrigiuez — “thrive” in today’s business climate, even as some business and residential complexes raise their rents by thousands of dollars a month. For Dahal, there won’t be any menu price increases anytime soon, but he isn’t turning his back on every fresh income opportunity.

“We won’t say no to donations,” Dahal said. “We’re lucky to have loyal customers. We love our customers and we love their support.” 

He also added, “And I value my workers. It’s good that they’re happy.”

Lloyd Alaban
Lloyd Alaban
Lloyd Alaban is a reporter who has lived in Milpitas his entire life. He has a BA in Sociology from UC Santa Cruz and an MS in Journalism & Mass Communications from San Jose State University. He has written for publications such as AsianWeek, realtor.com, Work+Money, SpareFoot, Uni Watch and San Jose Inside. Lloyd has covered numerous issues, including local businesses, protests, affordable housing policy, homelessness and city government. He is passionate about local news and its ability to shed light on underprivileged communities. In his spare time, he likes playing anything that has to do with trivia (especially watching Jeopardy!), running, drinking beer, reading, and playing with his Siberian Husky.


Please enter your comment!
Please enter your name here

- Advertisement -spot_img