Wednesday, February 4, 2015

Minimum Wage Bunk.

A bookstore in San Fransisco is closing up and blaming the minimum wage.

I'm skeptical. I think that's bunk.

Most of the time, normal raises in rents and wages aren't enough to do a business in.  They become part of the equation of how you do business.  If rent becomes too high, you move. If business is slow, you have less employees.

I think most of the time it is business mistakes that do a business in.  Not ordering enough, ordering too much, not pricing correctly, etc. etc.

It's interesting, the wages they are talking about are pretty much what I'm paying -- or will be paying long before the time the 15.00 kicks in in S.F.  But done in at a steady pace, I think I can keep on making adjustments.  Add a dollar to a employee's wages and we're talking about 40.00 a week?  Add 2.5 dollars and hour, we're talking 100.00 a week?

Frankly, if that is enough to close you down, you had other problems.   

Remember, all these expenses are proportional.  If you have enough business to need two employees, you have two employees, if you have enough business that you need three employees, you should be making enough money to pay three employees, and so on.

But that means the higher minimum wages forced you to cut hours! I hear you thinking.  That means you were forced to cut employees!

But I would rephrase that: 

A properly managed store is a properly managed store, with or without the raises in hourly wages.  It may mean, as the owner, that you need to work more hours.  It may mean you need to make more money through other means.

Overhead is nothing to dismiss, but the job of the store owner is to carry enough of the right kind of product at the right prices to pay for the overhead.  Or to lower the overhead to match what you're making.



Liz said...

I'm sorry. I've known Alan & Jude of Borderlands for a long time. As long-time active members and supporters of the Northern California Independent Booksellers Association, they've helped dozens of other bookstores navigate the narrow roads around Amazon's crooked publishing deals, and helped them deal with the growth of ebook sales. They won the Amazon war, and they know sci-fi & fantasy better than any bookstore in the US.
But San Francisco will soon be home to the highest minimum wage ($15)in the nation. Because books are fixed-price by the publisher,(which I assume you know and understand) there's no way to increase profit per sale to compensate for the rising costs.
Instead of offering criticism, and telling us that there was under/ordering/over/ordering/bad/management (which IS pure bunk!) maybe you could take a very close look at the real situation that Borderlands is facing and help propose a real solution to helping keep the best bookstore in SF alive. If you'd like a full breakdown of the troubles and the math behind Borderland's decision, I recommend you read Alan's recent post on their website that breaks down the decision to close and the best solution Alan sees to keeping the business alive.

Duncan McGeary said...

Liz, I should not have named Borderlands in my post. It was not meant as a personal attack on them. But I still am sticking to my point about the minimum wage not being the true reason for any business's demise. A minimum wage of 15.00 an hour might require some adjustments, but all other things being equal, should be manageable. If you're standing on the edge of a precipice even a feather can push you off, but you shouldn't blame the feather.

Duncan McGeary said...

I've made my post a more generic argument about whether a 15.00 minimum wage should put a store out of business. I call it a "bookstore" in S.F. (I broke my own rule about using names.)