A Mall With Two Minimum Wages

Aug 28, 2014
Originally published on August 28, 2014 7:20 am

The Westfield Valley Fair Mall straddles two cities. One side of the mall is in Santa Clara, but walk a few feet down the mall, and you're in San Jose. In 2012, San Jose voters agreed to raise the city's minimum wage from $8 to $10 an hour.

Philip Sandigo manages a shoe store on the $8-an-hour side. When San Jose raised the minimum wage, he lost about half his staff.

They went to the stores on the side of the mall that paid $2 an hour more.

Sandigo asked the owners of the shoe store if he could raise wages, but they said no. Almost two years later, it's still a struggle to hire new employees.

"We get the bottom of the barrel here," Sandigo says. "Not really focused. ... One guy came in high the other day."

On the $10-an-hour side of the mall, stores like Wetzel's Pretzels have different problems. Suddenly, the shop had to pay the lowest-wage workers more — 25 percent more. That was great for the employees, but a challenge for the owner, Yvonne Ryzak.

Ryzak had a few options. One was to sell more pretzels. She did the math and it came out to selling 250 or 300 more every two weeks. But she didn't start selling more pretzels just because the minimum wage went up in San Jose.

Another way to deal with the wage hike was to cut staff. But Ryzak figured that would lead to long lines and lost sales.

She could also raise her prices. But the other pretzel shop on the lower-wage side of the mall made that difficult.

In the end, Ryzak raised her prices a little bit and made up the rest by cutting into her profits.

Ryzak says she's fine with raising the minimum wage. She just wishes it was the same everywhere — across the mall, California, and the entire country.

Since 2012, the minimum wage rates in the mall have changed again: Santa Clara's minimum wage is now $9 an hour; San Jose's, $10.15.

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Transcript

DAVID GREENE, HOST:

This is MORNING EDITION from NPR News. Good morning. I'm David Greene.

STEVE INSKEEP, HOST:

And I'm Steve Inskeep. President Obama's administration is still pushing to raise the federal minimum wage. In the meantime there are many minimum wages in addition to the existing minimum. Some states have their own and even some cities do. It's a patchwork of minimum wages across the map. And we're going next to a shopping mall that sits on two different patches at once. Here's Steve Henn with NPR's Planet Money team.

STEVE HENN, BYLINE: The Valley Fair Mall straddles two different cities. One side is in Santa Clara, but walk a few feet down the mall and you're in a different city, San Jose. In 2012, San Jose voted to raise its minimum wage from $8 to $10 an hour, and this caused some problems.

PHILIP SANDIGO: Right when it changed, we lost about a good five - five good employees.

HENN: This is Philip Sandigo, a shoe store manager here at the Shoe Palace, on the $8 side of the mall. He lost about half of his staff in just a couple months. And they didn't go far. There were shoe stores on the other side of the mall paying $2 an hour more.

HENN: They were just up and like ,see you. We like you, but sorry.

SANDIGO: No, we love you but - I understand it, you know, nothing we could do. They pay $2 more, so - an hour. So I really couldn't blame them. I didn't get mad. I just said good luck.

HENN: He asked the store owners if he could raise wages, and they said no. Two years later, it's still a struggle to hire new employees.

SANDIGO: We get the bottom of the barrel here, and you can tell right off the back. They come in - one kid came in high the other day, you know, drugs. You just - those are the kids you get.

HENN: It's awkward as he's saying this because standing right next to us is one of his employees, Lomar Gardner. So I ask him, did he know when he took this job that stores at the other side of the mall paid more?

LOMAR GARDNER: (Laughter) He did tell me that. But they wasn't looking, and he was looking, so I got hired right here.

HENN: Have you thought about just, you know, checking out what jobs are open over there?

GARDNER: Not at the moment, no. I'm fine.

HENN: You say in front of your manager.

(LAUGHTER)

HENN: Lomar says he stays because the Shoe Palace is willing to work around his schedule; they're flexible. And that's really one of the only things the store manager here can offer to keep his workers. On the other side of the mall, they have a different set of problems.

UNIDENTIFIED WOMAN: Hi. Welcome to Wetzel Pretzel. How can I help you?

HENN: At Wetzel's Pretzels on the San Jose side, suddenly they had to pay their lowest wage workers more - a bunch more, initially close to $2 an hour more. That's 25 percent, and that's great if you work here - not so much if you own the place.

YVONNE RYZAK: My name is Yvonne Ryzak, and I am the owner of six Wetzel's Pretzels in California.

HENN: Figuring out how to pay her San Jose workers more was a challenge. One option was to somehow sell more pretzels.

RYZAK: That's how I view everything that I buy and everything (unintelligible) how many pretzels do I have to sell to pay for this.

HENN: Yvonne did the math, and it came to a lot of pretzels, 250 or 300 more pretzels every pay period, every two weeks.

RYZAK: Now, I don't sell 253 pretzels more magically just 'cause the minimum wage went up.

HENN: Yvonne could cut staff, but she figured that would lead to long lines and she'd lose sales. She could hike pretzel prices, but there's competition in this mall. There's another pretzel shop. And the pretzel business is brutal. I asked Yvonne if she keeps a close eye on the competition's prices, and she whips out her cell phone, pulls up a picture of her competitor's menu complete with that day's prices. In the end, Yvonne raised her prices a little bit and realized she'd have to live with less profit. As it turns out, this affected her workers, too. Yvonne has a policy of paying bonuses every year. Every year she gives 15 percent of her profits back to employees.

RYZAK: And it's funny because I just did bonus checks, and usually people are so thrilled but.

HENN: Not this year, bonuses were smaller. Yvonne had to remind her employees the bonuses she pays are based on profits, profits which are smaller because she's already paying them more. Yvonne says she's fine raising the minimum wage. She just wishes it was the same everywhere, across this mall, across California, even across the entire country. But since 2012 here the opposite's happened. The minimum wage rates in this mall have changed again. Actually twice, once on the Santa Clara side and then again in San Jose. Steve Henn, NPR News. Transcript provided by NPR, Copyright NPR.