Borderlands Books, an 18 year-old independent bookstore in San Francisco, announced Sunday it will be closing its doors due to the city raising the minimum wage to $15 per hour.
“Although all of us at Borderlands support the concept of a living wage in principal and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage,” the announcement read.
It continued, “The change in minimum wage will mean our payroll will increase roughly 39%. That increase will in turn bring up our total operating expenses by 18%. To make up for that expense, we would need to increase our sales by a minimum of 20%. We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.”
A follow up post on the Borderlands blog said, “Based on current business, the new minimum wage, once fully in effect ($15 per hour in 2018) would move the bookstore from being modestly profitable (roughly $3000 in 2013 before depreciation) to showing a yearly loss of roughly $25,000.” That’s a $28,000 annual reduction caused by a $4.45 increase in the hourly minimum wage from 2013 to 2018.
The announcement said that the business had weathered the storm of rent hikes, online shopping, and the rise of ebooks and appeared to be doing well before the minimum wage hike. “2014 was the best year we’ve ever had,” according to the announcement.
Borderlands’ closing also shows that minimum wage hikes don’t just hurt employers and employees, they hurt customers too. First and foremost, its dedicated customer base will lose its favorite science fiction bookstore. Borderlands also has an accompanying cafe, which plans to remain open because “Viability is simply a matter of increasing prices. And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards.” Higher prices will hit customers without any improvement in service.
Academic studies have frequently shown that the minimum wage kills jobs. Most recently, a National Bureau of Economic Research working paper said a federal minimum wage hike reduced the employment-population ratio by 0.7 percentage points from December 2006 to 2012. On average, low-skill workers lost $1,800 annually in states that were hit hardest.
In 2014, San Francisco’s minimum wage was $10.74 an hour. In November 2014, San Francisco voters passed a ballot measure to hike the minimum wage with 77 percent in favor. As a result, the minimum wage rose to $11.05 an hour in January 2015, gradually rising to $15 an hour in 2018 and then linked to inflation. The $15 hourly minimum wage in 2018 will be 77 percent higher than the 2004 hourly minimum wage of $8.50 an hour.
The problem with minimum wage hikes is that too often the positive effects are seen while the negative effects are ignored. Hopefully the closure of another small business will convince more voters that the minimum wage hurts everyone. Give credit to the Borderlands management for being honest about the harm inflicted upon their business by the minimum wage.
