The latest casualty of higher minimum wage laws is an independent bookstore in San Francisco.  The owners of Borderlands Books have written a letter to their customers, which is available in full here.  But the basic economic reality is this:

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018.  Although all of us at Borderlands support the concept of a living wage in principal and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.

Many businesses can make adjustments to allow for increased wages.  The cafe side of Borderlands, for example, should have no difficulty at all.  Viability is simply a matter of increasing prices.  And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards.  But books are a special case because the price is set by the publisher and printed on the book.  Furthermore, for years part of the challenge for brick-and-mortar bookstores is that companies like have made it difficult to get people to pay retail prices.  So it is inconceivable to adjust our prices upwards to cover increased wages.

The change in minimum wage will mean our payroll will increase roughly 39%.  That increase will in turn bring up our total operating expenses by 18%.  To make up for that expense, we would need to increase our sales by a minimum of 20%.  We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.

The other obvious alternative to increasing sales would be to decrease expenses.  The only way to accomplish the amount of savings needed would be to reduce our staff to: the current management (Alan Beatts and Jude Feldman), and one other part-time employee.  Alan would need to take over most of Jude’s administrative responsibilities and Jude would work the counter five to six days per week.  Taking all those steps would allow management to increase their work hours by 50-75% while continuing to make roughly the same modest amount that they make now (by way of example, Alan’s salary was $28,000 last year).  That’s not an option for obvious reasons and for at least one less obvious one — at the planned minimum wage in 2018, either of them would earn more than their current salary working only 40 hours per week at a much less demanding job that paid minimum wage.