Sep 30, 2014 - 10:15am

A Tale of Two Wages: California Mall Straddles Minimum Wage Boundary

san_jose_gap_store_by_coolcaesar_for_wikimedia_commons.jpg

A Gap in the state's minimum wage laws.
A Gap in the state's minimum wage laws.
Photo: coolceasar via Wikimedia Commons

For mall workers at Westfield Valley Fair Mall, payday can be the best of times, the worst of times. It all depends on which side of the mall they’re working in.

Westfield Valley Mall is what NPR’s Planet Money recently referred to as “A Mall Divided,” where workers on one side of the mall were being paid $2 less than the other side.

The Westfield Valley Fair Mall straddles two cities. One side of the mall is in Santa Clara, but walk a few feet down the mall, and you're in San Jose. In 2012, San Jose voters agreed to raise the city's minimum wage from $8 to $10 an hour.

Philip Sandigo manages a shoe store on the $8-an-hour side. When San Jose raised the minimum wage, he lost about half his staff.

They went to the stores on the side of the mall that paid $2 an hour more.

Sandigo asked the owners of the shoe store if he could raise wages, but they said no. Almost two years later, it's still a struggle to hire new employees.

The NPR story also features Wetzel’s Pretzels franchise owner Yvonne Ryzak, who told the Wall Street Journal in April that she rotates employees between the mall’s two stores – one on the Santa Clara side, the other on the San Jose side. “That way, I don’t have employees who are resentful that their colleagues get paid more than them,” she told the WSJ.

Ryzak also had to account for the 25% higher wages she was paying. Ryzak has raised some of her prices but told WSJ she also gives employees up to 20% of her stores’ profits each year – bonuses she predicts will shrink as the rising wages chip away at her bottom line.

If minimum wage proponents have their way we’ll be hearing a lot more stories like those from Sandigo and Ryzak. As Entrepreneur notes:

With cities like Seattle raising minimum wage significantly higher than their state's mandate ($15 versus $9.32 per hour, in Seattle and Washington), minimum wage gaps' effect on competition and employment is becoming an issue across the country. Westfield Valley Fair Mall is just a case study in what hard decisions businesses across the country will soon be forced to make as new minimum wage laws take effect.

Those hard decisions include including halting entry-level hiring, scaling back on training, cutting work hours, and automating parts of the business--that would hurt the people a wage hike is intended to help, according to a 2013 poll from the U.S. Chamber and the International Franchise Association.

It found that 68% of franchise businesses are likely to make personnel decisions if the minimum wage were raised to $9 an hour, and 50% of non-franchises businesses said they would likely do the same. If the minimum wage were raised to a “living wage” of $15 an hour, 86% of franchises businesses and 72% of non-franchise businesses said they would likely make personnel decisions.

The two sides of the Westfield Valley Fair Mall, meanwhile, have gotten a slight bit closer on the pay issue. This year, Santa Clara raised its minimum wage to $9 an hour (effective July 1), while San Jose increased its minimum wage to $10.15 an hour in January.

An overall better approach for workers and businesses would be for lawmakers to pursue policies that help the economy grow, notes Chamber Deputy Chief Economist J.D. Foster:

Policymakers should not force businesses to bear the burden of national socio-economic policies. These policies express the national will as proxied by congressional action and should be paid for by the nation as a whole. As the economy labors under the Administration’s economic policies this is no time to be putting additional burdens on small businesses.   

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About the Author

About the Author

Sheryll Poe is a former senior writer at the U.S. Chamber, who covered public policies affecting businesses including the three "T's" - transportation, trade and taxes.