What Happens When a Mall Is Split Between Two Minimum Wages?
What happens when half of a mall's minimum wage shoots up by $2, while the rest stays the same? The Westfield Valley Fair Mall just found out.
The California mall straddles two cities: Santa Clara and San Jose. With San Jose's 2012 decision to raise the city's minimum wage from $8 to $10 an hour, a huge chunk of the mall's employees quickly received a salary boost, reports NPR.
Stores that paid employees minimum wage, or close to it, were faced with the difficult task of attempting to find a way to turn a profit even with increased employee costs. NPR interviewed Wendy's Pretzels owner Yvonne Ryzak who struggled to find a keep her shop profitable while increasing workers' pay 25 percent.
"I don't sell 250 to 300 more pretzels magically just because minimum wage went up," she told the outlet.
Ryzak was reluctant to fire employees, fearing longer lines and lost sales. And she reportedly couldn't increase prices and still compete with pretzel shops on the Santa Clara side of the mall. In the end she raised prices slightly, and accepted that profits would decrease – a decision that ultimately cut into her staff's bonuses, which are 15 percent of profits.
Meanwhile, the other side of the mall has faced a different set of problems. Unsurprisingly, potential employees flock to stores where they will be paid more, leaving the Santa Clara side with reportedly subpar service.
"We get the bottom of the barrel here," Philip Sandigo, a shoe store manager, told NPR in an interview.
Of course, there is no maximum wage law forcing the $8 per hour contingent from raising their wages. Sandigo says that the owners of the shoe store he manages refused to allow him to raise wages to draw in higher quality workers. However, presumably if quality ended up impacting sales, the Santa Clara side of the mall would have an easier fix than San Jose – simply offer salaries that compete with the $10-per-hour stores.
With cities like Seattle raising minimum wage significantly higher than their state's mandate ($15 versus $9.32 per hour, in Seattle and Washington), minimum wage gaps' effect on competition and employment is becoming an issue across the country. Westfield Valley Fair Mall is just a case study in what hard decisions businesses across the country will soon be forced to make as new minimum wage laws take effect.
Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor.