San Francisco bookstore learns cost of $15 minimum wage the hard way

San Francisco bookstore learns cost of $15 minimum wage the hard way
Non-viable, with a 39% increase in payroll costs. (Image via Ricochet)

Another one bites the dust.  A San Francisco bookstore that’s been in business since 1997 will be closing its doors at the end of March, due to rising costs from the gradually implemented $15 minimum wage. (H/t: Ricochet)

Borderlands is a niche bookstore specializing in science fiction, and the sorrowful comments on its 1 February post indicate how beloved it is by customers.  Borderlands also runs a café, which will not be closing, at least for now.  The owners explain:

Although all of us at Borderlands support the concept of a living wage in principal [sic] 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.  The cafe will continue to operate until at least the end of this year.

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 Amazon.com 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 numbers just don’t work out.  Alert readers in LU Nation will no doubt recognize that there’s a limit to the price increases the café business can absorb as well.  I know you love that statement “viability is simply a matter of increasing prices” as much as I do.

At any rate, it’s interesting to go through the comments at both the Borderlands site and Ricochet.  Most commenters express sadness that Borderlands will have to close.  Some demonstrate understanding of the artificially induced economics behind it.

At Ricochet:

Albert Arthur

M.D. Wenzel: “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”

doesn’t this defeat the whole purpose of enacting a “living wage”? Congrats, those of you that still have jobs now make $15 an hour, and if you all pool your money together you can afford to rent a studio apartment in the city.

At which point the progressives start advocating for a $20/hr “living wage.”

ctlaw

Jon Gabriel, Ed.: …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…

Hopefully these libs will get a lesson about demand elasticity and how that relates to supply when they discover that they (and not Starbucks) are the marginal supplier for the present location on the long term demand curve.

At Borderlands:

vanderleun said…

Ah yes, the grotesque San Francisco political mental disease eats its own.

Isn’t the first and won’t be the last, but all those little people who manage to keep the fewer and fewer jobs will have a few more pennies to rub together before heading out to a life on the streets.

Too bad most of the long time lovers of Borderlands have been voting for its death for decades.

Principlex said…

Minimum wage is the principle of force applied to nothing more than an agreement between two people. Because force is applied is exactly why it causes problems and makes life harder than it needs to be. Force means ultimately that there is a gun behind the law – which can be direct or indirect. We need to learn that force in human relationships does not work – any where or any time.

But there is more than mere discussion of the economics of business on the comment boards.  Several folks weigh in at the Borderlands site with Good Ideas for how the owners can radically change the way they do business, in order to adapt to the artificially imposed condition of the higher minimum wage.

eve_prime said…

Up here in Eugene, one beloved bookstore started holding “rent parties” where patrons would drop by for the festivities and donate cash. Good luck to you, in any event.

sparkleblog said…

Could you join with Lost Weekend? I think at one point they were looking for a co-tenant!! A match made in space heaven if you ask me!!

Kylee Peterson said…

Have you heard of the Scarecrow Project? Seattle’s amazing video store was able to successfully crowdfund a conversion to nonprofit status last year, allowing them to remain open despite similar issues of digital viewing and online ordering taking over for in-person media sales. Borderlands doesn’t have exactly the same archival function as a rental store, but as a social and community space that people are passionate about you may have a chance to go a similar route. (And hey, who says you couldn’t add a lending library if you wanted?)

No one could blame you for closing at this point if that’s what you choose, but with such a great store and a large, loving following there may be other options. Best of luck with everything in the future.

mtraven said…

Have you considered converting to a worker-owned cooperative (ie make all employees owners) in which case the minimum wage law might not apply?

Michael said…

Hello! I love your store, and am very sad to hear that you’re closing.

I have a suggestion (admittedly an ignorant one in terms of laws/regulations/feasibility):

I’ve noticed that in SF, there is a general tax applied at restaurants that is specific to the area (there’s some sort of general statement regarding it at the end of the bill). Could you do something like this? A fee for each book purchased?

That, coupled with a suggestion made above (to increase cafe revenues to help out the book store), seems like it might be enough, if it were a feasible plan with the existing laws.

Your customers are loyal, and I don’t think they’d mind a fee, especially if it’s explained.

Regardless, thank you for the recommendations, and all the books!

One guy is taking no prisoners:

Leo K said…

I’m sorry to hear that you’re closing and I like your store. But I’m not convinced by the rationale you provide in your blog post. If everything you say is true, then every independent bookstore in SF will be shut down in the near future. Call me naively optimistic, but I don’t think that’s going to happen any time soon. Regarding the competition from Amazon, why not sell electronic books on your own website? I believe Green Apple books (also in SF) has been doing that for years. And in regards to making your store an experience unique from that of online shopping, clearly you can put a lot more emphasis on in-store and community events. The Booksmith on Haight St. has had sell out crowds (with people BUYING tickets) for their in-store events. And did your store take part in the first “California Bookstore Day” in 2014? I was at Green Apple Books that day and their store was so crowded that it was hard to move. I was standing in the long check out line for a half hour. I’m afraid your blog post sounds like its coming from someone who no longer wants to be in SF, not from someone for whom it’s no longer possible.

I doubt most of our readers here need to have it pointed out that none of these helpful commenters has any skin in the game (or, for that matter, the slightest idea what he or she is talking about).  Suggesting to other people what they should do with their money and time is the easiest thing there is.  It’s a far cry from facing the prospect of having to do it yourself.

Technology that people flock to adopt because it enhances their lives has a long history of making old-style businesses less viable – eventually, in many cases, completely non-viable.  A brick-and-mortar bookstore does face stiff competition from online commerce now.  Borderlands’ current position isn’t all about the high-regulation environment of San Francisco.

But all regulation, including the minimum wage, does hit businesses that are constantly adapting to the impact of everything else going on in the economy.  The “everything else” never stops.  The difference between regulation and “everything else” is that regulation is discretionary for a central authority.  The people and their representatives can choose whether to do it or not.

When they’re making that choice, they should keep in mind this iron principle: All regulation imposes additional costs.  All of it.  Those costs will be felt in higher prices, loss of businesses, loss of competition and choice, and loss of jobs.

J.E. Dyer

J.E. Dyer

J.E. Dyer is a retired Naval Intelligence officer who lives in Southern California, blogging as The Optimistic Conservative for domestic tranquility and world peace. Her articles have appeared at Hot Air, Commentary’s Contentions, Patheos, The Daily Caller, The Jewish Press, and The Weekly Standard.


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