Silicon Valley, Not Willing to Wait, Forges Ahead on Boosting Minimum Wage

By Alejandro Lazo Features Dow Jones Newswires

Proponents of a $15 minimum wage have found fertile territory in Silicon Valley, where the region's booming technology industry is credited for helping drive soaring housing prices and a sizable income gap.

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California is on track for a $15 minimum wage by 2022, but some Silicon Valley cities are opting to hit that target faster, prodded by a campaign aimed at organizing low-wage workers in the region.

The city of Santa Clara is the latest to propose an accelerated $15 minimum wage, following the lead of San Jose and six other Santa Clara County cities. The City Council plans to vote on a measure that would raise base pay to $15 by 2019 next month.

Mountain View, where Alphabet Inc.'s Google is based, will have a $15 minimum wage next year, as will Sunnyvale. The $15 target will be reached in 2019 by San Jose, the region's largest city, and home to companies such as PayPal and eBay. Cupertino, hometown to Apple Inc., also will hit the $15 target in 2019, as will Palo Alto, Milpitas and Los Altos.

Minimum pay in all of these Silicon Valley cities are expected to continue to climb beyond $15, because all of the cities mandate more pay increases based on a regional inflation index.

The increases in one of the costliest regions in the country are being enacted when there is still much debate and research around the effectiveness of such wage increases. Proponents say raising the local minimum wage remains the easiest way to address stagnating pay. Critics say the rush toward a $15 minimum wage will hurt businesses and cost jobs.

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In Seattle, two academic studies released this month found conflicting results in that city's wage boost. The University of California, Berkeley, found Seattle's food-service workers benefited with a modest wage increase and no reduction in jobs. But a study from the University of Washington found employers cut worker hours and reduced employee earnings.

Many localities are barred by state law from boosting local wage. Cities in California, which allows for local wage laws, have been on the forefront of raising hourly pay locally.

State legislatures in Washington, Arizona, Colorado, and Maine have all approved measures to raise their states' minimum wages to $12 an hour.

Twenty-six states have local minimum-wage pre-emption laws on the books that block smaller jurisdictions from setting their own wages, according to the National Conference of State Legislatures. At least 10 states considered pre-emption laws this year.

David Neumark, an economist at the University of California, Irvine, said minimum-wage increases aren't an effective policy tool for alleviating poverty and the potential effects of a $15 minimum wage widely remain an unknown.

While smaller increases leave room for businesses to adjust margins through prices or by varying their workforce, a move toward a mandated $15 base salary will likely leave little room for anything other than layoffs, he said.

Michael Reich, a professor at UC Berkeley and one of the authors of its Seattle wage study, said such concerns are overblown. San Jose's 2013 minimum wage increase to $10 in 2010 led to an average 1.5% price increase at restaurants.

In Silicon Valley, the median household income is $101,980--the nation's highest, according to U.S. Census data. Some question the impact of a minimum-wage boost in one of the most expensive regions of the country. Data recently released by the U.S. Department of Housing and Urban Development says a family of four in San Jose with an annual income of $84,750 is considered low income. In San Francisco, $105,350 is seen as low income, and in New York City, it is $76,300.

Unions and other activists say their efforts to raise wages in Silicon Valley are part of a campaign to organize service-industry workers and other low-wage employees in one of the wealthiest regions of the U.S. Activists say raising base pay will help the lowest-rung workers make ends meet, and boost incomes for those already making $15.

"We call it the invisible workforce," Derecka Mehrens, a founder of the "Silicon Valley Rising" campaign, which has been organizing low-wage workers in the area. "It is a wealth-producing region, and some of the wealth should be shared."

Blanca Rosell, 57 years old, lives in Sunnyvale, Calif., which borders Santa Clara, said she works 70 hours a week, splitting her time at a Burger King in Mountain View and a Carl's Jr. in Santa Clara.

In Santa Clara, where she has worked more than six years in a Carl's Jr., she holds a supervisory position and is paid $11.75 an hour. At the Burger King, where she has worked six months, she is paid $13, because of that city's higher minimum-wage policy.

The jobs barely help cover the rent in her $1,850 one-bedroom apartment in Sunnyvale, where she lives with her two sons, her eldest son's wife, and that couple's two younger children, she said. Her son works assembling motors at the Tesla factory in nearby Fremont.

She says she doesn't want to move because she wants her 15-year-old to be able to attend high school in the area.

"The rent is very high, and we don't make a whole lot, and so we can't make it paying all the bills," she said.

Ms. Rosell said a minimum-wage increase in Santa Clara would help retain workers because many low-wage workers are drawn to neighboring Mountain View for higher pay. She believes an increase in Santa Clara's minimum wage will allow her to work fewer hours.

Chris Horton, president of Santa Clara's Chamber of Commerce, said while the chamber supports "a living wage" the accelerated wage increase the city is considering will hit the bottom line for small businesses.

Ravinder Lal, who employs 15 people as the owner of two UPS Stores in San Jose and Santa Clara says he made about $150,000 more in revenue than last year--but $50,000 less in profit, generally brought on by higher costs due to wage increases in San Jose.

He says he already pays people more than the minimum wage but increases require him to also bump up workers making $15.

"Most small-business owners that I know, in this valley, are struggling just like somebody working, because it is so expensive," he said.

Write to Alejandro Lazo at alejandro.lazo@wsj.com

(END) Dow Jones Newswires

June 28, 2017 05:44 ET (09:44 GMT)