A proposal to increase San Francisco's minimum wage, already the highest in the nation, won't do much to close the income gap in this high-cost city.

The proposal, which the city decided last week to put on the November ballot, would gradually raise the minimum wage from the current $10.74 to $12.25 on May 1, to $13 in July 2016 and to $15 in 2018.

Many employers in low-wage sectors already pay entry-level workers more than $10.74, so the first-year increase might not affect them. By the time it reaches $15 per hour, it still won't be enough to live on.

A single, childless adult living in San Francisco today needs to earn $15.66 per hour to cover housing ($1,504 per month) taxes, food, health care, transportation and other necessities, according to the Insight Center for Community Economic Development's "self-sufficiency calculator" ( http://bit.ly/1ltbrvM).

"It's impossible to live at the current minimum wage," says Abby Snay, executive director of Jewish Vocational Services. "It's not just the pay per hour, it's getting less hours. Many people are juggling multiple jobs."

In the first quarter of 2013, an estimated 8.8 percent of workers in the San Francisco metro area (which also includes San Mateo and Marin counties) were in occupations with an average wage less than $12.25 per hour, according to California Employment Development Department data. (The actual number could be different because the department does not have numbers for teachers and other occupations that do not typically work full-time and year-round.) The average wage for all jobs was $32.14.

The state does not break out San Francisco, but the city's Office of Economic Analysis estimates that 11 percent of San Francisco workers earned minimum wage in 2013. "It's an upper estimate," says Ted Egan, the city's chief economist. "It could be less than 10 percent."

In some ways the minimum wage proposal is politics catching up with reality.

Higher pay in S.F.

The sectors with the most low-wage workers are restaurants, retail establishments and personal services and care. Thanks to the booming economy, many employers in those sectors are offering more than minimum wage in San Francisco.

Last week on Craigslist, Chipotle Mexican Grill was seeking "crew members" for $12 per hour in San Francisco, compared to $10.50 per hour in San Jose. Anchor Brewers & Distillers advertised a part-time custodian job at $15 an hour. Biscuits & Blues was looking for a line cook at $12 to $18 per hour.

Starting pay at In-N-Out Burger is $12.50 per hour in San Francisco, versus $11 in Daly City, Millbrae and Oakland. "We do start all of our associates at a pay rate that is above the minimum wage. They can also earn raises pretty quickly as they master different positions in the restaurant," says Carl Van Fleet, a vice president with the burger chain.

Town + Country Resources is a placement and referral agency for domestic workers in San Francisco and on the Peninsula. "The average hourly wage for all the jobs we placed over the last 12 months was $23.84," co-owner Jens Hillen says. When people call in looking for a nanny, "we are quoting $20 to $25" per hour and for housekeepers, "the range is $22 to $27."

The Institute on Aging, a nonprofit agency that provides home care and support services, pays workers at least $12.26 an hour, per its union contract. "We have some that are making closer to $14 to $15 an hour," says Amy Andonian, vice president of home care and support services.

In the restaurant industry, "it's true that most of the back-of-the house staff makes more than minimum wage," because good ones are hard to find, says Gwyneth Borden, executive director of the Golden Gate Restaurant Association.

'Biggest winners'

They would not benefit immediately from a minimum wage increase, but waiters and waitresses would. Unlike in some states, where wait staff earn as little as $2.13 before tips, in California they earn minimum wage plus tips. At a typical full-service restaurant they can make $30 an hour, Borden says.

"Tipped workers are the biggest winners" under the minimum wage proposal, even though they are not the lowest-paid, Borden says. The restaurant association tried to exempt tipped workers from the proposed increase, which would be legal as long as their base wage was above the state minimum wage, currently $8 per hour. But it was unsuccessful.

Over time, all low-wage workers in San Francisco would benefit from a minimum wage increase. So would people making a little over minimum wage. If you are supervising someone who makes minimum wage and their pay goes up, in many cases yours will too, says Michael Reich, a UC Berkeley Labor economist.

Critics argue that a minimum wage increase is a blunt instrument because it would help teens from middle- or upper-income families, and people who work in San Francisco but live outside the city. Another fear is that employers will respond by cutting hours or employees.

"There are certainly studies that show there is a slowdown in hiring. There are also studies showing there is no slowdown in hiring," says David Cooper, an analyst with the Economic Policy Institute.

Minimal impact

Reich studied the economic impact of San Francisco's previous minimum wage law, which raised it from $6.75 in 2003 to $8.50 in 2004 and indexed it to inflation. Looking only at restaurants, he found that about three-fourths of the wage increase got passed on to customers in the form of higher menu prices and one-quarter was offset by reduced turnover. He found no discernable employment losses.

Based on his past study, Reich predicts that if the new proposal passes, "There will be a one-time restaurant price increase, which will absorbed by customers whose income has been going up faster than the people working there. That seems OK from the point of fairness and doesn't do any economic harm."
