- The measure will disproportionally affect small business owners. Small business owners are going to be facing a 20% increase in the cost of unskilled labor (plus the associated payroll tax increase). In this economic environment, many of these types of businesses will not be able to raise prices by 20% to make up the difference. Large businesses, however, will likely be better equipped to absorb the increased labor costs. Longterm, I expect that this will cause more and more small businesses, especially those dependent upon unskilled labor, to re-evaluating their decision to operate in San Jose, especially as leases come up for renewal. Shorter term, many small businesses will have no choice but to lay off employees.
- San Jose is surrounded by towns and communities where the cost of unskilled labor will be 20% cheaper. New businesses which rely on unskilled labor will gravitate towards these communities instead of San Jose.
- Consumers inside San Jose do not have to drive very far to escape businesses which have increased prices due to Measure D. If prices begin rising in San Jose, many consumers are only a 5-10 minute drive from a similar business in a neighboring community where the prices will be lower.
Business leaders inside San Jose have estimated that the measure will result in the loss of 3,100 jobs. I expect that number will grow over time, although the exact impact of the measure in terms of unemployment and lost sales tax revenue for the city of San Jose will be difficult to quantify, with both sides touting their own studies as evidence for or against the success of the minimum wage increase.