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A Minimum Wage Increase Means Nothing if Your Boss Is a Scofflaw

San Francisco Public Press
 — Nov 19 2014 - 5:17pm

Earlier this month, San Francisco voters chose by an overwhelming margin to raise the local minimum wage. In a telltale sign of how undeniable the city’s income disparity has become, no major group opposed the measure, the San Francisco Chronicle reported.

The wage hike is a boon for those who toil under law-abiding bosses. But thousands of San Francisco employers skirt existing minimum wage requirements, and without significant changes more could follow as the wage floor rises even higher.

Yank Sing restaurant is the latest offender, and today its owners began distributing $4 million in back pay that the state labor commissioner said was owed to 280 workers for violations of the minimum wage, rest period requirements and other regulations. The state found that the restaurant was paying workers $8 an hour — far below the $10.74 city minimum at the time.

Our spring 2013 cover story delved into the numbers and personal stories behind this rampant abuse by employers. At the time, the city’s Office of Labor Standards Enforcement recovered a total of $6.4 million in back wages for more than 3,000 workers. But the office’s small staff could open cases only in response to worker complaints. They said they lacked the resources to begin investigations on their own, making it difficult for them to get ahead of the problem.

Evidence suggests that wage theft in San Francisco affects many more people than the office has been able to account for. In 2006, the Chinese Progressive Association estimated that 9,000 Chinese restaurant and garment workers in San Francisco received less than minimum wage.

Meanwhile, a national study revealed that 26 percent of the labor force was paid below the legal minimum wage in Chicago, Los Angeles and New York City in 2008. A proportional slice of San Francisco’s population would add up to about 39,000 workers.

Most of the tracked wage violations in San Francisco occurred in the food service industry, said staff from the Office of Labor Standards Enforcement.

Mauricio Lozano, a Salvadoran immigrant for whom the office won back wages, used to work at Pizza Royal restaurant in the city’s North Beach neighborhood. His boss hired him at an hourly rate of $8, paid in cash — $2 below the minimum wage at the time. Lozano’s boss justified this by calling it the “training” rate.

Lozano stuck with the job for three months because he needed the money. By the time he left he was still earning less than the city’s legal minimum, despite two hard-won raises. But his boss’s attitude took its toll.

“All of my hard work and effort to do my job well, yet still earning less than the minimum,” Lozano said, “I felt that my job was worthless.”

But some restaurant owners say the high minimum wage is one more reason it is so difficult for San Francisco businesses to succeed.

The owner of Luna Park (where this reporter once worked) in the Mission District, said he sold the restaurant in expectation of the new minimum wage law.

And Peter Hood, former owner of nearby Dante’s Weird Fish and The Corner, said that fierce competition and city regulations compelled him to sell both businesses, the neighborhood news outlet Mission Local reported.

Since passing in 2003, the city’s local minimum wage law has put about $1.2 billion in the pockets of the San Francisco’s low-wage earners, said Ken Jacobs, head of UC Berkeley’s Labor Center.

The recent voter-approved measure will gradually increase San Francisco’s minimum wage every year. It will hit $15 in 2018 and continue to rise after that, following the inflation rate. That means that by 2019, the average food service worker will be earning an additional $500 per month, the city controller’s office estimated.

San Francisco was not the only place to raise the minimum wage this election cycle. In Oakland, 81 percent of voters approved a pay hike to $12.25 starting next year, Oakland North reported. Alaska, Arkansas, Nebraska and South Dakota also voted to elevate their lowest earners’ pay.

As more cities and states raise their wages, the taxpayer may be the real winner in the long run.

The fast-food industry made about $7 billion in profits last year — about equal with the estimated value of the public assistance that their low-earning workers used, Jacobs said. As those workers earn more, many of them may be able to transition off of government programs.

Employees in fast-food franchise restaurants may benefit the most. Company policies often tie the owner’s hands, making it difficult to opt to raise employee wages, Jacobs said. The owner pays a fee to sell the company product, and must buy food and equipment from company-mandated suppliers rather than pursue cheaper competitors.

“The small franchise owners are really squeezed in this operation,” Jacobs said. “Where the real heavy profits are, are at the top.”