San Diego will raise minimum wage to $16.30 next year. What can businesses and workers expect?

With San Diego’s minimum wage for all employers set to rise from $15 an hour to $16.30 on Jan. 1, Amanda Morrow, co-owner of the Flower Pot Cafe and Bakery on Fay Avenue in La Jolla, says she isn’t concerned about the potential effect on her new business, which opened Sept. 20.

“[It] will not affect us too much, as we understand that everyone needs a living wage,” said Morrow, who co-owned La Jolla’s former Pannikin coffee house, which closed in April.

Businesses of all sizes in all industries in the city will have to abide by the change for employees who perform at least two hours of work in one or more calendar weeks of the year. The wage hike is part of the city’s Earned Sick Leave and Minimum Wage Ordinance, which was approved in 2016.

The scheduled increase comes as consumers face rising housing costs and higher prices for gasoline and food.

“With the cost of living rising, this increase could not come at a more needed time for workers and working families,” Mayor Todd Gloria said in a statement. “This increase means a better ability to make ends meet, put food on the table and spend in our local businesses.”

Employees will continue to be eligible for accrued sick leave, which can go toward time for their own medical care or the care of a family member. Tips and gratuities do not count toward payment of minimum wage.

Morrow said Flower Pot staff members often begin at minimum wage but will receive a raise and promotion after a review a few months in.

“Our seasoned staff are not affected by this,” she said.

Among other employers in La Jolla, Nancy Warwick of Warwick’s bookstore declined to comment about the wage increase. Representatives of Sweet Paper stationery did not respond to a request for comment.

According to the ordinance, such mandated wage increases help ensure a livable wage for San Diego workers and their families. It states that when workers are not paid a livable wage, “the surrounding community and taxpayers bear costs in the form of increased demand for taxpayer-funded services, including homeless shelters.”

San Diego’s minimum wage has increased steadily by $1 since 2019 based on the previous year’s increase in the cost of living, according to the city.

Earlier this year, San Diego’s inflation rate hit a 40-year high of 7.9 percent. But its labor market remains tight, with an unemployment rate of 3.4 percent in August.

Economist Chris Thornberg, founder of Los Angeles-based Beacon Economics, said the timing of this minimum wage increase doesn’t make total sense given that many places are already offering more than $16.30 per hour to combat the competitive labor market.

“It’s a solution looking for a problem,” Thornberg said.

Thornberg noted that the change will be most evident in industries that rely on minimum wage workers, such as restaurants, senior centers and nonprofits. Restaurants already are struggling to attract workers, and labor costs account for 30 percent to 35 percent of expenses at a typical fast-food restaurant, he said.

From his perspective, increasing the minimum wage may not significantly move the needle for low-income families in this economy.

“If you really want to help low-income households, you’re better off providing them with subsidized child care, earned income tax credits and making real efforts to expand the housing stock,” he said.

Economist Alan Gin, a business professor at the University of San Diego, said the current labor market has already created a rising tide of prices and wages, so the impact of San Diego’s mandated minimum wage increase won’t be huge.

Still, Gin said the wage hike could be good for workers in low-paying jobs by ensuring wages don’t slip if the employment landscape changes, as the cost of living and inflation don’t show signs of dropping.

“A lot of people are stressed in terms of their ability to afford to live in San Diego,” Gin said. “So for those who are impacted by this, they will get a little bit of benefit from the higher minimum wage.”

Because of the tight labor market, he doesn’t think this minimum wage increase will result in sweeping layoffs. He also doesn’t foresee major price increases for consumers.

California’s minimum wage is set to rise to $15.50 per hour on Jan. 1 for all businesses statewide, regardless of the number of workers they employ. ◆