Josh Harkinson

Josh Harkinson

Reporter

Born in Texas and based in San Francisco, Josh covers tech, labor, drug policy, and the environment. PGP public key.

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Do Small Businesses Deserve Exemptions From the Minimum Wage?

| Thu May 7, 2015 9:00 AM EDT
Brian Hibbs (far right) and his employees, some of whom may lose shifts or even their jobs, if San Francisco's minimum wage goes to $15.

Brian Hibbs, a Mother Jones reader and owner of Comix Experience, wrote in to object to San Francisco's plan to raise its minimum wage. Conservatives who argue against the minimum wage often point to jobs lost and heavy burdens on small businesses, and progressives largely brush off those arguments as so much Chamber of Commerce propaganda. And then you have guys like Hibbs. Read what he has to say, and then we'll discuss.

I own two comic book stores in SF, and while we're a profitable business and have been for 26 years, we're only modestly profitable, y'know? When you calculate my own salary on a per-hour basis, given that 70-hour weeks are not at all uncommon for me, I don't make much more than the high-end of SF's new minimum wage law.

Raising the minimum wage by 43 percent (from $11.05 today to $15 in 2018) means that we need to generate at least another 80 grand in revenue. Eighty grand. I don't personally make eighty grand in a year. I'm not some kind of fat cat getting rich off the exploitation of my workers or something. And look, if I did manage to increase sales by that amount, I'd sure be hoping that I got to keep a tiny little percentage of it myself.

Just so we're clear: The hole I find myself soon facing isn't one created by escalating San Francisco rents (my landlord is awesome!), or because of competition from the internet (in fact, our sales consistently grow year-over-year, and sales growth has accelerated since the introduction of digital comics), but one solely and entirely created by the increase of the minimum wage.

I'm a progressive; I support fair labor practices, and I try, above all else, to give the folks who work for me absolute agency in their jobs. I have multiple employees who quit higher paying jobs for corporate owners to come work for me, because I actively valued their passions. I don't own a comic book store to make money as my primary goal, right? The primary goal is to wake up the morning and be excited by what you do, to feel like you're spreading your passion, that you're promoting art, and creators and joy—and my staff feels much the same way.

I have staff who are supported by a spouse and are working for me to essentially make pocket money; I have staff who want to be full-time artists, and this helps them get closer to their goal by exposing them to the form and helping them make contacts. I have staff who are actively working toward having their own stores, and I'm basically paying them to get a master's class (though I am fine with that!). I have staff who are full-time students living at home.

I'm not exploiting any of them, I don't think. They all have options, and they all work for me because they want to.

If I can't increase sales by $80,000—which is not something that seems likely, given historical year-over-year gains—then I have to start firing people, or trimming hours of operation. We don't run extravagant overlaps—nearly 60 percent of the hours the stores are open we only have one person on deck; nor do we have a lot of waste or absurd inventory or anything like that. I've survived in a kind of marginal business for 26 years by being a savvy businessperson, and a relatively nimble and predictive one. But firing people, cutting hours…how does that help the employees? How does that help the business expand so I can eventually hire more people?

I have the largest staff of any SF comics business (because I have two locations), and, in point of fact, my two closest competitors have zero employees. Not being impacted by this mandate, they'd have no reason to raise prices in tandem…and really, every reason to not do so. If I raised prices by, let's say, 10 percent to meet this mandate, I'm absolutely positive we'd lose at least 20 percent of our business to stores that didn't raise their prices—thereby putting us at a net negative.

We’re trying to solve this problem by growing our way out of it with a new national, curated Graphic-Novel-of-the-Month Club, but I think that if we’re able to succeed from that (and I am not at all sure we will) it will be because of years of building our exceptional reputation. As a result, I do not at all think that this type of solution is scalable for the average small business. The City of San Francisco’s own Office of Economic Analysis believes the minimum wage hike will cost 15,270 jobs, or 2 percent of the private workforce!

Honestly, if San Francisco had voted for "Minimum Wage must be at least equal to X percent of your net profit" or "Every person in America gets a guaranteed income of $20,000/year paid for by progressive taxes" or some other scheme where you know that people being asked to contribute more can afford it, then maybe we'd be on sounder ideological ground...But I think that the higher minimum wage, the higher you're making the barriers for low-income people and marginal-but-promising businesses to even have a chance to enter the marketplace and to survive in the first place, let alone legacy businesses like ours.

Here's my personal take: It's hard not to feel sympathy for Hibbs, yet it would be a mistake to take his situation as a case for abolishing or making exceptions to the city's minimum wage law. As I've noted elsewhere, raising the minimum wage doesn't tend to decrease overall employment; in general, businesses find new efficiencies and their workers find themselves with more disposable income to spend on things like comics.

Of course, that's probably little comfort to Hibbs, who faces competition from smaller comics stores whose sole proprietors are the ones manning the cash registers. Hibbs may well be able to keep his doors open by downsizing, bringing in volunteers, or drumming up donations from devoted customers (as one local bookstore has done), but when it comes down to it, there simply may not be much of a future for bricks-and-mortar comics stores in a city with astronomical real estate prices.

"I super commiserate with him because we are in almost the identical situation," says Lew Prince, a member of the group Business for a Fair Minimum Wage and the owner of Vintage Vinyl, a record store in St. Louis. Dwindling sales and rising labor costs forced Prince to consolidate his two Vintage Vinyl locations into one. He nonetheless supports increasing Missouri's minimum wage from $7.65 to $12 an hour because he thinks it's the right thing to do. "The job of the business owner is to prepare for the future," he told me. "I have great empathy and sympathy for [Hibbs], but you have to do the job every day, and sometimes the marketplace defeats you."

But maybe that point of view is too harsh. I'd love to hear, in the comments, what Kevin's readers think about all of this.

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Sen. Bernie Sanders Is Running for President. Here's a Sampling of His Greatest Hits

| Thu Apr. 30, 2015 5:50 PM EDT
Sanders hopes to put some progressive ideas on the agenda for 2016.

Senator Bernie Sanders (I-Vermont) officially announced today that's he's running for president. The self-described socialist faces long odds in the Democratic primary, but chances are good that he'll at least force a discussion on issues dear to liberals. Here are some highlights of the best of Mother Jones coverage of Sanders:

The Progressive Coalition obviously never went national in the way Sanders had envisioned. But in 1991, a year after he was elected to Congress, he founded something more enduring: the Congressional Progressive Caucus. Since then, Sanders' view of third parties has evolved: "No matter what I do," he told Mother Jones last month, "I will not play the role of a spoiler who ends up helping to elect a right-wing Republican."

How Californians Screwed Drought-Plagued California

| Wed Apr. 22, 2015 12:25 PM EDT
The state's water hogs and Silicon Valley's tech shuttles benefit from the same tax exclusion.

Solving California's water crisis got a lot harder on Monday when a state appeals court struck down steeply tiered water rates in the city of San Juan Capistrano. Like many other California cities, this affluent Orange County town encourages conservation by charging customers who use small amounts of water a lower rate per gallon than customers who use larger amounts. The court ruled that the practice conflicts with Proposition 218, a ballot measure that, among other things, bars governments from charging more for a service than it costs to provide it.

In the process of thwarting taxation without voter approval, Prop. 218 stops state and local governments from addressing urgent problems, such as drought.

The drought isn't the only way Prop. 218 is hamstringing California cities. Early last year, San Francisco's Municipal Transportation Agency announced a controversial pilot program that would allow Google buses and other tech shuttles to use public bus stops for $1 a stop. Activists, who saw the shuttles as symbols of inequality and out-of-control gentrification, wanted the agency to charge Google much more than that and use the profits to subsidize the city's chronically underfunded public transit system. But MTA officials argued that their hands were tied: Prop. 218 prevented them from charging more than the estimated $1.5 million cost of administering the program.

Prop. 218, the "Right to Vote on Taxes Act," was a constitutional amendment drafted in 1996 by the Howard Jarvis Taxpayers Association, the group that led the tax revolt that swept California in the 1970s and eventually helped elect President Ronald Reagan. After 1978, when the group's signature initiative, Prop. 13, began severely limiting property tax increases, cities and counties moved to plug their budgetary holes with other types of taxes and fees. Prop 218 was designed to constrain those workarounds by requiring that any new tax be approved by voters or affected property owners. For the purposes of the act, taxes included any fees from which a government derived a profit.

Prop. 218 has been widely criticized for making it harder for cities to raise revenues, but the recent cases with water rates and tech shuttles point to another issue: the way the initiative prevents state and local governments from addressing urgent social and environmental problems. It's worth remembering that withdrawing water from California's dwindling reservoirs to feed verdant lawns is in itself a tax of sorts, and Mother Nature may not wait until the next election to revoke our ability to levy it.

As Cities Raise Their Minimum Wage, Where's the Economic Collapse the Right Predicted?

| Thu Apr. 16, 2015 9:45 AM EDT
The Fight for 15 protest in New York City Fast Food Forward

Fast-food cooks and cashiers demanding a $15 minimum wage walked off the job in 236 cities yesterday in what organizers called the largest mobilization of low-wage workers ever. The tax-day protest, known as Fight 4/15 (or #Fightfor15 on Twitter), caused some backlash on the Right:

Conservatives have long portrayed minimum-wage increases as a harbingers of economic doom, but their fears simply haven't played out. San Francisco, Santa Fe, and Washington, DC, were among the first major cities to raise their minimum wages to substantially above state and national averages. The Center for Economic and Policy Research found that the increases had little effect on employment rates in traditionally low-wage sectors of their economies:

Economists with the Institute for Research on Labor and Employment at the University of California-Berkeley have found similar results in studies of the six other cities that have raised their minimum wages in the past decade, and in the 21 states with higher base pay than the federal minimum. Businesses, they found, absorbed the costs through lower job turnover, small price increases, and higher productivity.

It's the taxpayers who ultimately pick up the tab for low wages, because the government subsidizes the working poor.

Obviously, there's a limit to how high you can raise the minimum wage without harming the economy, but evidence suggests we're nowhere close to that tipping point. The ratio between the United States' minimum wage and its median wage has been slipping for years—it's now far lower than in the rest of the developed world. Even after San Francisco increases its minimum wage to $15 next year, it will still amount to just 46 percent of the median wage, putting the city well within the normal historical range.

The bigger threat to the economy may come from not raising the minimum wage. Even Wall Street analysts agree that our ever-widening income inequality threatens to dampen economic growth. And according to a new study by the UC-Berkeley Labor Center, it's the taxpayers who ultimately pick up the tab for low wages, because the federal government subsidizes the working poor through social-service programs to the tune of $153 billion a year.

This Chart Shows How State Taxes Screw You

| Mon Apr. 13, 2015 9:25 AM EDT

A lot of people think the federal tax code should be more progressive, but it looks downright socialist compared to the typical state tax code. A chart released last week by Citizens for Tax Justice puts it in context, showing how the wealthy typically pay lower state tax rates:

Citizens for Tax Justice

This problem isn't limited to conservative states: According to a recent report by the Institute on Taxation and Economic Policy (ITEP), every state places a higher effective tax rate on the poor than it does on the rich. In fact, several of the nation's most politically progressive states count among the worst when it comes to shoveling the tax burden onto low-income people and the middle class.

The nation's most regressive tax code belongs to Washington, a state that was ranked by The Hill last year as the bluest in the country based on its voting patterns and Democratic dominance. The poorest 20 percent of Washingtonians pay an effective state tax rate of 16.8 percent, while the wealthiest 1 percent effectively pay just 2.4 percent of their income in taxes.

There's a clear explanation for that: Washington has no income tax and thus heavily relies on a sales tax that disproportionately affects the poor. What's harder to grasp is why Washington's liberals put up with it.

Structural conditions help explain why regressive taxes endure in Washington and many other states. Some states require supermajorities to raise taxes or have constitutions that mandate a flat tax. In Washington's case, voters approved a personal income tax in 1932 by a two to one margin but were overruled the following year by the state Supreme Court, which decided that a constitutionally mandated 1 percent cap on property taxes also applied to income. An income tax bill passed by the state legislature a few years later was likewise struck down.

But the courts, weirdly, are no longer the biggest obstacle to a fairer tax code in Washington; over the years, they've gradually overturned most of the legal precedents that had been used to invalidate an income tax, and most experts believe such a tax would become law today if passed. The bigger problem is voters. In 2010, Washingtonians rejected by a whopping 30-point margin a proposal to establish an income tax that would only have applied to people earning more than $200,000 a year.

How do you square this with California, where, just two years later, a similar tax hike on the wealthy easily sailed through? Or with Oregon, Washington's political cousin, which has long had a progressive income tax?

I asked John Burbank, the executive director of the Seattle-based Economic Opportunity Institute and an architect of Washington's failed 2010 income tax measure, why he thought the measure had failed to pass. At first, he cited the off-year election and opposition scare tactics. But when pressed, he offered a third explanation that I think makes more sense: "There is almost like a cultural prohibition that exists."

In other words people, liberal or conservative, who live in states with low or no income taxes get used to paying little. They may differ on protecting the environment, legalizing weed, or raising the minimum wage, but when you start to mess with the system on which they've built their personal finances, they get scared and balk. This is why changing the tax code is so hard, even in states where people may in their hearts believe it's the right thing to do.

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