Extra

In a recent article in the online newsletter, Berkeleyside, the caption reads "Mokka to Close. Minimum Wage a Major Factor". Mokka is a cafe on Telegraph Avenue, just two blocks south of Ashby Avenue. Since the minimum wage issue is on the agenda of the Berkeley City Council next week (Tuesday, 2-9), the timing of the article is unfortunate. You can bet your bottom dollar that the business community will be screaming how mandating higher wages is causing a tidal wave of bankruptcies. The Berkeley minimum wage will be increased from $11 to$12.53 an hour in October. As a result, the owners of Mokka question whether they would be able to operate profitably. Berkeleyside's reaction is to take the owners at their word rather than seriously evaluating whether higher wages are really their most serious problem.

Had the newsletter done so, it would have reached a very different conclusion. Mokka suffers two insurmountable problems. The lease expires in June. Afterward they were informed that the new lease will include a large increase in rent. Also, the owners would be required to sign a five year lease. I spoke with one of the proprietors who told me that such a long lease is too risky. Instead, they want just a one year lease. If the economy sours or other unanticipated developments occur, he would still be legally obligated to pay the rent for the duration of the lease.

Mokka's situation reflects the problem of small business generally. Too many local businesses are taking a beating due to the exorbitant increases in their rents. But it is wrong that they are attempting to retrieve some of the losses on the backs of low wage working people.  

Moreover, Mokka is competing with a nearby Starbucks, which enjoys a better location. As Berkeleyside acknowledges, the owners attempted to prevent Starbucks from moving in. The Berkeley City Council could have prevented it, but obviously decided not to. Too bad that the owners were not successful. On Sunday morning I checked both cafes. At Starbucks there was a line of customers. At Mocca only two customers. 

Why then are the owners mainly complaining about the minimum wage? They are not doing so, as they claim, that wages are their most important problem? Their dilemma is they cannot do anything about the competition from Starbucks and the impending rent increase. So they feel that it is futile to focus on what they cannot change. Rather, they believe that it is best to focus on issues that they might be able to influence. The proprietors of Mocca along with other members of the business community think that they have a chance to persuade the Berkeley City Council to defeat or at least limit proposed increases in the minimum wage.  

Advocates of a higher minimum wage rightly oppose poverty wages. On the other hand, that certainly doesn't mean that they want to put any employers out of business. But there is no hard evidence that higher wages force businesses to close. In fact, a general increase in purchasing power due to better wages is good for business and the local economies. In the long run, when businesses win battles to lower the standard of living, employers as well as employees are the losers.