Merced businesses react to minimum-wage hike proposal

The state Legislature is once again considering raising the state’s minimum wage, and Merced-area businesses could feel a strain.

The California Assembly’s labor committee on Wednesday voted 5-2 to advance the proposal that would raise California’s minimum wage to $11 in 2016 and $13 in 2017, then tie the minimum wage to inflation starting in 2019.

Sen. Mark Leno, D-San Francisco, author of Senate Bill 3, said the bill is needed to keep up with the cost of living.

SB 3 already passed the Senate, and will head to the appropriations committee before it can be considered by the full Assembly.

California has one of the nation’s highest minimum wage rates. It is $9 an hour and will rise to $10 an hour in 2016.

While this is good news for workers trying to support families on minimum wage, many believe bills such as these can come with a caveat.

The California Chamber of Commerce has labeled SB 3 as a “job killer,” saying it would lead companies to slow hiring.

Jennifer Krum, chief operations officer at the Merced Chamber of Commerce, said wage increases usually have a “trickle-down effect,” especially on smaller businesses.

“Businesses will have to raise prices to cover the wage increase,” she said. “They might have to lay off employees, or worst-case scenario, close their businesses.”

Raj Sawhney, franchise owner of the Wingstop on Yosemite Avenue in Merced, said most of his 17 employees make minimum wage. He estimates the proposed hourly wage increase could cost him an additional $30,000 a year.

If the bill were to go into effect, he suspects his business would take a hard hit.

“Prices would probably go up,” he said, “and customers are not going to be happy.”

The last time the minimum wage went up, Sawhney said, he had to cut employee hours. Another hike would force him to have to let people go, he said.

“The bottom line is that this would affect them (minimum-wage workers) because they would be out of a job,” he said.

Dan McNamara, owner of the McNamara Sports at Bear Creek Shopping Center in Merced, said most of his employees make a little more than the minimum wage, but another spike would also be a push to give his seven employees a raise.

His business was hit hard in 2008 when sales went down, and it has not fully recovered, he said. With big corporations and the Internet taking over the sporting goods industry, it’s been tough getting the business back in shape. News of an additional increase in wages does not come at the best of times, he said.

The problem, McNamara said, is that minimum-wage-paying jobs were initially meant to provide part-time opportunities for young people, or people looking to transition into another position.

“These jobs are now becoming careers for people because that’s all that’s available here,” he said.

McNamara, who has operated the 92-year-old family business since 1988, said if the bill were to clear the final hurdle, he would have to find other ways to cut back on costs.

“It’s definitely not getting any easier.”

This story was originally published July 9, 2015 at 7:20 PM with the headline "Merced businesses react to minimum-wage hike proposal."