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Comment by andrewguenther | Hacker News Reader

I know a lot of small business owners in SF, and Borderlands' story is one that I've heard before. The minimum wage hike is killing a lot of coffee shops who had previously been able to offer quality coffee at not much more cost that what you'd find at Starbucks. With the wage hike, Starbucks takes the hit, keeps prices the same, and the smaller shops are forced to hike prices and turn away customers.

I'm guessing I'll see a lot of commentary about paying a living wage and how these businesses must be mismanaged and that this is just the way the market "works." I won't necessarily disagree, but what is happening in practice still feels wrong.

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Regulation often has the dangerous side effect of making it impossible for smaller players to stay in the game, while, as you note, the big players can weather the storm for a couple of years until they've got no competition left...and then they can raise their prices without competitive pressure from the little guys. That doesn't necessarily mean the regulation is bad, but as someone who has always owned their own (small) businesses, I'm sympathetic.

And, of course, there is a tendency for those who support regulations to see the negative side effects and address it with more regulation. Also a potentially dangerous response (though also not always wrong).

I tend to prefer regulations be applied more lightly to very small businesses. The dynamic of "faceless evil overlord that doesn't care about their employees vs. powerless peon" doesn't usually apply to a bookstore with a dozen employees. But, that's probably not tenable for a minimum wage; even if smaller businesses weren't required to comply by law, they'd likely have a hard time hiring people if they weren't paying the same as the big chains.

Then again, this is not just a story of the minimum wage increasing; all bookstores are facing pressure from online sales, and have been for years. Employees are expensive and it takes more of them per-sale for a brick and mortar than for a shipping warehouse. They're all having to innovate their way out of obsolescence or die trying.

I guess we'll see how this plays out in SF. The economic disparity in SF is so high, it's probably a good thing that there's a people-driven attempt to rectify it.

Well, assuming the small coffee shops are well-managed, then we still have to ask ourselves which is more important, the cheap good coffee or a living wage for the workers?

Losing your job because your employer couldn't afford to stay in business is better?

Low minimum wage = not enough to survive on, so you're typically working multiple jobs, which is insane. A high minimum wage is one key element of a strategy to ensure that nobody has to do that.

Anyway, there's extremely little hard evidence of minimum wage raises leading to higher unemployment. Studies generally show no effect. There's no shortage of dubious anecdotes from people with a political ax to grind, though.

I see this cited a lot, my problem is that these studies (from what I've seen, happy to accept more data) are done on a state or nation scale where most every business is then on a somewhat equal playing field. My problem with what SF and Seattle are doing is that it is easy for large companies to compensate in other markets. I'd be really interested to see a study done somewhere comparable to that dynamic.

Also, how many people transitioned from a job at a small business to a larger one? Unemployment could remain unchanged, but competition could drop drastically.

As I've said elsewhere, I'm in support of paying a living wage, but I don't think it can work on a city scale and these experiments only hurt the cause by producing bad data.

Just do the easy math first: 2000 hours (40 hours x 50 weeks) per year. Multiply by $10.00 per hour. Annual salary of $20k.

I think the assumption is that the demand for coffee stays relatively similar, and so the coffee shops that have been displaced by rising costs will be replaced by Starbucks.

If that is the theory, total employment would stay the same.

The customer cares about good cheap coffee, and regionalized regulation like this ensures that local businesses can never compete.

I'm not against a minimum wage increase, but the country is watching places like SF and Seattle to see how a higher minimum wage plays out. The big players can always recoup loses in other markets, but the small businesses are unable to compete. Small businesses close, people lose jobs, and the wage hike is declared a failure. To me, if you really want to support a living wage, then don't support experiments that are doomed to fail.

> The big players can always recoup loses in other markets

If it's unprofitable for Starbucks to continue operating in SF, why would they do so? Big businesses can recoup short-term losses, sure, but if a given market is going to be unprofitable for the foreseeable future, there's not much reason to keep operating in that market.

That said, companies like Starbucks may see this as an opportunity to reduce competition, by operating at a loss until the smaller businesses close, and then raising prices to make the market profitable again. But if they actually do that, once they raise prices, small businesses can start competing again.

I doubt it Starbucks will see any significant loss. They typically have both higher volume and lower material costs than a typical coffee shop, so they can absorb cost increases better.

If they are even close to breaking even, then it's probably worth it to stay open in the area for marketing value.

Experiment? It's not like this is the first time this sort of thing has happened. There's piles of data and research on this, and it's not hard to make an estimate of the impact yourself. Just make an Excel spreadsheet with past minimum wage increases and the change in unemployment X years later.

Or you can just look at news articles from the past. There is long history of people predicting dire employment impacts that never materialize.

However, minimum wage hikes in the past have generally been small increments usually below the existing prevailing wage for a lot of entry level labor. Partially as a result you had to squint hard to see any kind of effect.

Just as customers at this book store didn't just care about a good selection of books for low prices, good coffee for low prices isn't always the impetus for a visit to a specific cafe. Some places are just cool for whatever reason, and people will hang out there despite the coffee being crappy or the prices being high. Coffee shops sell coffee, sure, but for many of them, that's not the point of going. I can get free coffee from my workplace, and we actually have nitrogen cold-brew, espresso machines, half a dozen types of milk, syrups, half a dozen different drips in pumps, ice, blenders, RO filtered water...and I still go out to buy coffee. Many of my coworkers also go out for coffee. Sometimes it's nice to go somewhere else, and coffee is a great excuse. Sometimes we'll hang out at whatever coffee place we end up at for a good conversation.

Back in high school, there was a big old dirty cafe all the kids hung out at. It had room for maybe 200 people on busy nights, which was probably over what fire code allowed. The coffee was made by stoned hippies on rarely-cleaned equipment and was pretty bad. It was normal coffee shop prices. It was the place to be because they were open 24 hours and had open-mic nights, where angsty teens could play guitar in front of their friends.

Another place in that same state was super tiny (seating for about 10 people) and had a line out the door most mornings. Their coffee was good, as was their pastry. It wasn't cheap at all. The service was pretentious and rude, but mostly in a funny way. Being a regular there felt cool, and you'd chat with other customers in line.

There are places in Chicago that charge >$6 for a cup of pour-over. These are typically fantastic. They could charge $7 and likely lose very little business. People who go to these types of places aren't cross-shopping Starbucks.

I'd bet that a place charging $10 for a cappuccino in SF would do just fine assuming it had something else going for it as well. Build a business that is Instagram-worthy and charge whatever you like for your product, and you'll still get lines around the block if it's a good enough gimmick.

A gimmick can work in a place with a large population: even if most customers only go a couple of times, there's enough of them to keep the place running. But SF isn't that big.

Does it feel wrong if rent increases to the point that the small coffee shop is priced out of the market?

The flipside is of course that they were doing so by paying their employees a terrible salary.

And that the owners sat in the back drinking expensive whiskey and counting money? These are low margin businesses, small business owners aren't taking home 10X their employees. By hiking the minimum wage, you make these businesses inviable for anyone but the large players. The business closes, employees go work at the big company who can afford to stay afloat, competition all closes, prices go up, small business is viable again. Is that really the cycle we want to encourage?

When you can explain to me why you SHOULD be able to make a full living wage putting books on a shelf, or pouring coffee, or putting hamburgers in a bag, you can claim it as a terrible salary.

I don't think anyone needs to defend the idea that working 2,000 hours per year "should" earn someone a living wage.

How about this: If your business can't afford to pay a "full living wage" for a full time job you "shouldn't" be in business.

Sounds good. Then eliminate welfare of any kind for anyone who's working a full-time job, because, by definition, they're making a "full living wage", and don't need additional assistance. I'm legitimately curious what things would look like when a new equilibrium is established. Which industries were destroyed, which arose, and which pivoted? What happened to the people who worked for the unsustainable businesses?

The wages paid are typically good enough for a single person to live. It's not good enough to support any dependants though.

Why are you measuring effort that goes into a job and not it's utility to other people? Wasting effort on things that people don't value doesn't make you automatically deserve anything.

Because otherwise these people will use our welfare system to subsidize their job. Basically, the choice we make when we choose to require a living wage for those jobs is that we want the business owner and their customers to find a way to pay for their business model, rather than us subsidizing it indirectly through means-tested welfare.

So the people that lose their jobs because of this suddenly need less subsidizing? Its become expected now... with min wage hikes, that businesses are turning to automation and cutting jobs... thats becoming the norm. Those people who now lost their jobs, you feel, are less of a burden?

I don't recall that happening in Seattle when we raised our minimum wage. Stuff got a little more expensive, but there weren't mass layoffs like you're suggesting. If it's there it's too subtle for us to argue from the seat of our pants.

Let's not get ahead of ourselves. We're talking on a forum where guys can get paid $100k+ to play table tennis and hammer out basic cookie-cutter web apps.

It's kinda alarming the disdain you're showing for service workers, I really hope you're trolling

Its not disdain... its a recognition of effort. Most of us with 100k+ jobs, have put in the time, went to school, gained experience... etc...

The last time I worked minimum wage I was 16... because I decided pretty quick i wanted to do better than minimum wage...

Nobody is forced to work a minimum wage job... it might be hard, but it can be worked out of... but there its difficult so most dont even attempt it

So minimum wage is meant to be like a stick to beat the poors, who just don't try hard enough? Got it

No, that kind of logic is a strawman...

You earn your effort. You _EARN_ your wage. If you work less, if you put in less effort, if you give less... you get less in return. Its balance. Its equilibrium... without it, with more people taking more than they are giving out, you end up with bad. Bad all around... giving more to people who put in less effort solves nothing

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