The Minimum Wage’s Negative Effect on Bookstores

Last year was a breakthrough year for those who believe the minimum wage (MW) needs to be increased. Even as those who showed up to vote last November voted mostly Republican, minimum wage hikes were passed in four states: Arkansas, Alaska, Nebraska, and South Dakota, all with large conservative populations, voted for some type of minimum wage increase. Other locales like San Francisco voted to raise their minimum wage to the $15/hour mark, a move which will be gradually phased in over time.

Why are MW increases so popular? It’s not that hard to see why. If you work an hourly job (your job is paid by the hours you work and is not guaranteed like a salary) you are being told you will make more money from your “greedy” employer, typically a fast-food or big-box chain, who is deliberately screwing you over to keep profits for themselves. Therefore the government will “give you” a higher salary, which will come out of the profit margins of big-box stores and their ilk. The truth is most business owners do not intentionally pay low wages in order to “screw over” their employees; market forces and other factors like cost of living and tax rates impact how much a business owner pays workers. $10.10 an hour in South Dakota is sufficient for the average worker to get by (wage does not count other federal or state benefits for low-income workers which are available), but $15 an hour in Manhattan would keep a worker in poverty. Now $10.10 an hour isn’t going to make people wealthy, but if you’re being promised a few extra hundred or thousand in take-home pay, you’re going to be supportive of these measures.

Also a large number of MW employees are young people or immigrants, a fact which is not often highlighted.

What tends to be missed though, is the effect MW hikes have on small businesses without millions or billions in annual sales. For Costco and other large companies, increase wages is manageable due to their size and for some businesses paying employees more is a benefit because they can retain workers and keep turnover low. If the costs are prohibitive they larger businesses can always charge a little extra for their products or services and if customers are willing to pay more for goods or services to support higher wages for employees (or healthcare for employees), this works for some businesses.

Indie bookstores are in a unique position, which is why I’m focusing on them today. Unlike most businesses, book prices are printed on the books by the publishers and indie bookstores don’t have flexibility to adjust their prices upward to cover the rising MW. Coupled with increasing demand for e-books and Amazon’s increasing status as the go-to place for books, a lot of indies are in trouble. The most recent news here was the closing announcement from a San-Francisco bookstore which came to the conclusion that the “City by the Bay”  was going to have MW wages too high to keep the bookstore open past the end of March(note: the owners say they have a cafe in the store which can survive the MW increase). They aren’t the only SF bookstore to take a hit, either.

Shelf Awareness has an entire article dedicated to this issue facing all bookstores, but especially indies. While many store owners or managers say they’d like to pay their employees more (this is a common sentiment for the vast majority of business owners- very few are truly miserly), economic realities just don’t allow for it for them. Between increased costs, inflation, and competition from Amazon and other e-book distributors, MW hikes have a real shot at closing down a lot more stores than Borderlands.

Of course some will argue Amazon and other e-book distributors are the real “culprits” but MW increases have a real chance at hastening the demise of the indie bookstore.

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