By Sal Bednarz, owner of Actual Cafe & Victory Burger

I’ve been giving some thought to the issue of increasing minimum wage since various initiatives started circulating earlier this year, and I thought it was time for me, a resident of Oakland for over twenty years and an Oakland small business owner for the last five, to join the discussion. I own Actual Cafe and Victory Burger, with 37 employees on our payroll today.

I was raised believing that I lived in the land of opportunity: that through hard work and persistence, any individual could succeed financially, support a family, contribute to the community, or at the very least not struggle every day until their last. I learned later that this option isn’t available to everyone; that willingness is sometimes not met with possibility.

I was taught that our society was fair; that the least among us was still among us, and deserving of our respect and support. That we, as a wealthy nation, could afford to provide for the basic needs of those who struggled to provide for themselves. Later, I saw that we often didn’t put our money where our words implied we ought to.

I was a teenager during the Reagan years, and I didn’t understand the implications of policy changes that were set in motion then. I heard and repeated stories that might not have been true, and certainly weren’t the whole picture. Some of those stories were about welfare mothers who bilked the system and drove Cadillacs on the taxpayer’s dime, and about unions who were making us uncompetitive because their demands for higher wages and more benefits were eating into the profit margins of the companies that employed them.

I saw the release of the mentally ill in droves as the (admittedly pretty awful) institutions which housed them were closed. Those people were left to fend for themselves in huge numbers.

I saw waves of tax-cutting, deregulation and corporate consolidation, but didn’t understand what they meant. I didn’t realize that in just a couple decades, our social fabric would be disrupted by the near-total excision of local commerce from our daily lives. I saw chain stores displace mom-and-pop businesses, while at the same time more power and money aggregated to a small group of already-wealthy people, who then used that increasing power and wealth to further exert their influence on the political process to protect and advance their own interests.

Don’t get me wrong. I believe in the power of our economic system to do good. I believe that investment in so many areas has improved our standard of living in too many ways to count, even in my short lifetime. Our food and products (and even our air and water) are safer, information is abundant and accessible, diseases have been cured or their symptoms made treatable. But at the same time, we’ve automated away or offshored millions of working-class jobs and reduced opportunity for those who don’t opt for (or don’t have access to) a college education without enough thought about what would happen to those people.

I run a restaurant. That’s hard. I work hard at it. I’m not by any means rich, but I’m not poor. I don’t worry about where my next meal is coming from, or whether I can afford to fix my roof when it breaks. In fact, I live in a home with a roof that probably won’t break in the first place.

I’ve done lots of things in my life. Before I built a restaurant, I worked for big companies, and for startup companies with money. I got paid well to do that, and learned a lot. Before that, I was a laborer. I worked jobs that paid near minimum wage, and struggled to keep my finances in order. For some time, I was a musician and a jewelry maker. I was broke for much of my young adulthood, and had debts hanging over my head. I had no health insurance, and still got sick and hurt. During this time, I lost my driver’s license, couldn’t afford to restore it, and was constantly in fear of police attention — for years. As a youth, I was an angry troublemaker. I got in fights, vandalized, stole, and had little regard for those around me. In short, I’ve seen the world from a few different perspectives.

This has been a long preamble to get to the point, but here the point is: I support a substantial increase to the minimum wage, despite the fact that it probably will be hard for me and my business to adapt to that new reality.

Here’s the hard part: I’m in a low-margin business, and have cost pressures from all sides (from customers, landlords, utility providers, staff, vendors: you name the source, and there’s pressure coming from it). I’ve chosen a business in which making a living requires constant adaptation and adjustment, creativity and critical thinking, and dogged persistence. Lucky for me, I’m capable of those things, and I think that I’ll find a way to adapt to a different wage structure.

Photo credit: Treve Johnson

Photo credit: Treve Johnson

I should mention that more than half our employees are already making at least the $12.25 proposed by Oakland Measure FF, and although we don’t provide paid sick leave today, we’ll be doing so in 2015 to comply with the new California law which requires us to. Almost all our employees get some amount of tips in addition to their wages, and those tips put every one of them past that $12.25 benchmark. I’ve read several articles recently that have quoted a restaurant average wage (even among non-chain restaurants) of $10/hr. Ours is closer to $12, not accounting for the tips that all our hourly workers get a share of (both in our kitchen and in the front-of-house service crew). My managers get paid a good salary, and we’ve created a staff structure that allows us to hire people who want to grow with us and give them a real opportunity to do so, which can lead to more responsible and higher-paid jobs in this restaurant or more experience that they can put to work elsewhere.

We’re as generous as we can afford to be with wages, and payroll is our single biggest expense. It consumes more than 35% of all our revenue. Our profit is small (well below 10%) and constant pressures from all sides make it difficult to increase that margin.

It’s clear that the effect of a minimum wage increase would ripple somewhat upward through my wage structure — that in order to retain (and continue to attract) the better people I need, we’ll need to maintain a pay differential, and it’s likely that we’ll need to increase pay for most of our workers. I’ve seen estimates of what the overall impact to business costs is. My own guess is that a $12.25 minimum wage would increase my payroll by over 10%, which, if we did nothing to adjust, would take more than a third of our profit.

But we would do things to adjust. Since we already spend a lot of time and effort trying to wring efficiency out of our operation, and we’ve already put pressure on our vendors and negotiated good pricing, and we’ve already done substantial energy efficiency work that has saved us a lot of money on our utility bills, there aren’t that many places left to go, and it’s likely that we’d have to pass along a price increase. I’ve seen studies and articles that say that restaurant prices would need to go up by 3-4%. For us, this might cover the cost of higher wages, but we’d likely need to push a bigger increase because we need to maintain a sane cost structure. If our payroll is running at 40% of our revenue, and our food costs are consuming another 30%, there’s just not a lot left to cover our profit and increasing fixed and variable costs. Prices would likely go up by $.50 or $1.00 for a meal.

That price increase might deter some of our customers from eating or drinking at our restaurant, especially those who don’t have tons of disposable income (which, by the way, is a significant chunk of our customer base). Some of those customers (those who are working for lower hourly wages) will get a raise as a result of the new minimum wage; others won’t.

If we were the only restaurant in town doing this, it would be a recipe for failure. We’d lose business, which would make it even harder for us to cover our payroll costs. The benefit of minimum wage legislation is that our competitors would have to make similar adjustments, and we’d find out together how to speak to customers about the situation. We’re near the border of two adjoining cities who likely won’t increase their minimum wage at the same time, or by the same amount, but increased wages will likely spread to some extent into those neighboring cities as well.

Those increased payroll dollars circulating in our local economy also can’t help but have some effect toward increasing spending. To the extent that our local residents spend their money in their own city, this has a multiplying effect of continuing to grow the hours and opportunities for hourly workers, while putting more dollars in their pockets, which can then be spent (hopefully locally), and on and on. This is what we talk about when we talk about economy, and it’s a powerful force.

Most of the pro-wage increase dialogue I’ve seen has focused on chain stores McDonald’s and Walmart. It’s important to understand some differences between small local business and large chains. Aside from the fact that virtually none of the profit generated by chains returns to the local economy in which the chain outlet is located, these large chains, whether they’re franchised or centrally-managed, have tremendous resources to bring to bear on cost efficiency.

For instance, McDonald’s burgers are cheap, not just because they’re made with low-quality ingredients and cheap labor (although both of these things are true), but because their systems are highly-tuned, immense purchasing power is leveraged in all areas, their reach allows for tremendous marketing without overly burdening an individual outlet, and there are highly-paid experts working at all levels to constantly innovate.

I have none of those things, and there isn’t any way to really level the playing field. This is just a fact. I can only hope that what we offer is in some way better than what my larger competitors can produce — that our food, our service, our atmosphere, and our engagement in our own community as members of it lead to an experience that convinces people to spend their hard-earned money with us.

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To take some of the pressure off small business owners like me, and also to take some burden off our already-struggling and shrinking middle class, I’m convinced that, in addition to increasing minimum wage, we’ll also have to look elsewhere for relief. Leaving the poor and the middle class to fight over an increasingly small slice of our collective wealth leads to division where there ought to be solidarity.

I don’t condone criminal activity, but I sure do understand that, given few alternatives, some will, in desperation, turn to extra-legal ways of making a living. Stopping crime by jailing offenders is closing the door after the horse has already gotten out of the barn. Providing meaningful opportunity and creating hopeful alternatives is a more appropriate response.

To this end, I’d sure like to see a larger share of income from high earners be spent to help relieve pressures on the poor. I’d like to know that all of us, regardless of our situations, could count on shelter, food, and health care. I certainly would have benefited from some help at various times in my own life. I’m willing to do my part, but more Americans at all levels of society need to be doing their part, and won’t do so without long and constant pressure. We need to keep reminding each other that fairness requires compromise and sacrifice.

I think frank and open communication can help us navigate these issues. I’m committed to doing my (admittedly long-winded) part to help.

Even though the process of adapting to a higher wage structure will be risky, and might result in lower profitability for my business, I think a boost to the minimum wage is the right thing to do. I think folks who work hard ought to be able to live without constant worry about financial ruin. I sympathize with our crew members who are living paycheck to paycheck, many of whom work two or three jobs to keep up with their bills. It’s expensive to live in the Bay Area.

I don’t want to live in an Oakland in which our hourly workers can’t afford to live. Oakland is not an exclusive city. We’re not San Francisco. I’m proud of the variety in the people around me: in skin color, life experience, income level, sexual orientation, spoken language, religious affiliation or lack thereof. I live in an Oakland that I love, blemishes and all. Improving our city for some at the expense of the mass displacement of many others is wrong. An equitable minimum wage is one way to combat this. I hope that a minimum wage increase is a first step toward rebuilding a fairer society, not the last one.

Editor’s Note: This piece reflects an individual opinion and is not a reported story from Oakland Local. Oakland Local invites community residents to share their views about events and issues in Oakland.
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10 Responses

  1. Valerie Winemiller

    This makes me happy I’ve spent money at Actual Cafe, and makes me want to support you (and the minimum wage measure) more.

    Reply
  2. Sarah Cain

    Very thoughtful piece, Sal. I know how busy you must be, but seriously, you could lead a workshop for other restaurant owners to help them think their situation through, I think some of them need to hear this kind of talk from people who are in the business. Thanks for taking the time to write this.

    Reply
  3. OaklandNative

    This author makes several interesting point.

    He kind of skirts over the issue of unemployment. I am assuming as a businesses, he is already running things as efficiently and cost effective as possible. He will likely have to raise prices or lay off some people. Those people fired will like be those who have no reason to believe in the American dream in the first place.

    If one is raised to believe in the American dream (and has no reason to doubt it), he will try again and again which increases his chances of success. However, the American dream is not the reality for many.

    A few months ago, a commenter argued on here that the “New Oakland” needed more high-end bars and restaurants. People like him can probably afford the increase in prices. However, many families cannot.

    I think public housing, though it had its problems, helped minimize the cost-of-living. The Bay Area, especially San Francisco, has reduced much of it.

    However, the economy is cyclical. We are doing well right now (though signs point to a bust soon). We can’t continue to make decisions as if the economy will always do well. I remember back in 2000, everyone talked about the New Economy. The bubble burst soon thereafter.

    Reply
  4. Patanisha

    Unemployment is a real issue and I thank you for bringing it up. I don’t think Sal skirted over the issue I just assumed he stuck to the issue of raising the wage and why it’s needed. He addressed the fact that it would be a struggle for him to do but he would make it happen. He did not say it would break him, but he certainly is not rich and will personally feel the costs. This article I believe is directed more towards his fellow small business owners, and I, as a Native Oaklander, Single Mom and Employee appreciate it, I’m sure you do too!

    Reply
  5. Patanisha

    As someone who has worked with and for Sal, I’ve come to tremendously respect his visionary mind. He is extremely innovative in his approaches to building North Oakland’s intersection of Business, Art, Responsibility and Community. I hope it continues to expand across Oakland. There is alot of divide in Oakland regarding the changes and who they benefit. I have very strong opinions as a Native and simple humanitarian. The purpose of the article is clear and I’m grateful that it speaks directly to those who may not usually be so sacrificial any Cause that doesn’t seem familiar. I’m also grateful because it gives me personal insight to understanding the background of a man that I have grown to consider a Solid Community Leader. Tell Your Story, Live Your Legacy!

    Reply
  6. Matthias

    I’ve known Sal for years and he is one of the nicest and smartest people I know. A very thoughtful article from a very thoughtful man.

    Reply
  7. Saied Karamooz

    Brilliant, Sal. Most insightful analysis of how Lift Up Oakland may impact the small businesses in Oakland. I applaud your open mindedness and forward thinking approach on this issue. I have a suggestion on a way to address the additional cost that you need to charge your customers to cover the cost of LUO. I would suggest having a line item on your checks called something like: “Living Wage Surcharge”. I am certain that your customers have enough compassion to appreciate that the small increase is for a good cause and not for the owner’s greed. In any case, my wife and I have been to your cafe many times, but not to your burger shop yet. My next burger will be definitely at your store.

    Reply
  8. Keith Tivon Gregory

    This was my first read of the day, and I have to thank you for taking the time to share a true and honest viewpoint. If more people like yourself, at all levels of society could self-reflect and give honest & fair feedback, we will be on the right track as a society, and community.

    As an Oakland native and resident, I would proudly support any of your businesses, and others similar.

    Reply
  9. FoxStar

    I make $11 an hour working in the restaurant industry. I have just enough money for rent, food, utilities, and a few books here and there. It is so hard to save money. Every time I have been ill or injured it has taken me down to zero and it takes months to get back some savings.
    If I made more money I would definitely be spending it at restaurants!
    I would buy clothes! I haven’t bought new clothes for at least 2 years!
    I would shop local too.
    But I’m leaving the Bay Area. I can’t afford to live here.

    Reply

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