Your Favorite Indie Shop Is Out of Business if $15-an-Hour Happens A Lot of Activists Don't Understand How Small Businesses Like Mine Work

Businesses like mine survive on around a 5 percent net profit margin. Kelly O

Andrew Friedman is the proprietor of Liberty Bar and the soon-to-open Good Citizen. This piece is part of a series of minimum wage op-eds from activists, business owners, low-wage workers, and experts. If you have an editorial you'd like to submit, send it here.

A few weeks ago, I went to one of my favorite neighborhood restaurants and chose what I thought to be a simple tomato-sauce pasta dish. When it appeared, it looked beautiful and tasted great—so great that I wanted to re-create it at my house for my wife and birthday girl (1-year-old Baby Bowie). I was sure that I could do it—I mean, it was just a simple red sauce, right? But, when asking about the sauce and how to re-create it, I was surprised to find that it took three days to make, using a number of different kinds of tomatoes and ingredients I'd never heard of.

This $15-an-hour mess is just like my ignorant and ill-conceived belief that I'd easily be able to re-create this delicious pasta made by a professional chef. The pro-$15 people are me in that example: They look at an issue that appears simple but never get to the part where they ask the questions necessary to understand the complexities.

In publicly discussing the $15 minimum wage issue, I've been cautioned by allies not to use logic, reason, and data to make my point, but instead to mirror the 15 Now platform and stick to emotion-based polemics, apples-to-oranges "facts," and simple slogans, as it is suggested that such manipulation works much, much better.

Well, I just can't do that. But here is the reality to this situation:

That favorite coffee shop that you go to? That great neighborhood restaurant? That store where you buy your books, pet food, art supplies, or clothes? Each of those businesses survives on around a 5 percent net profit margin. That means that at the end of the year, after all the expenses—the payroll, the supplies, the inventory, insurance, rent, etc.—we all will end up with only about 5 percent income in our pockets if we're doing a half-decent job. Maybe a bit more, maybe a bit less—but you get the idea. This does not leave a small local business with much room to absorb even a small increase in costs, much less the 60 percent increase demanded by the well-meaning but ill-researched and biased reporters and neighbors involved in this discussion.

Here are some more boring facts:

Payroll is approximately 30 percent of my entire costs at Liberty, the bar I own (the average in this business seems to be 30 to 35 percent). If the minimum wage goes up to $12.50 an hour (a reasonable middle ground some have proposed), that would be an increase of 34 percent, which means just to stay even I'd have to raise prices 10 percent across the board—the labor's percentage increase in total cost to operate Liberty. If the minimum wage goes to $15 an hour, I'd have to raise my contribution to payroll by 18 percent. So my costs would have to rise by no less than 18 percent, just for payroll—and that's before my vendors' increases in costs have to be considered, which I believe will be around another 5 percent, and that's before Liberty adds any profit. So it's not impossible to imagine that costs for business like mine in Seattle will go up by no less than 20 percent.

Those increases are way more than my income. Again, my profit is around 5 percent. And it's not just me, that's across the board—for restaurants, for bars, for clothing stores, for pet stores, for art supply stores—many of whom have set costs and are competing with online retail. This makes it very difficult for them to adjust their purchasing.

Here's the deal though—small businesses like mine want to work with the mayor and city council to raise the minimum wage and find a reasonable middle ground. Because we know our numbers, and because we have worked so hard to get where we are, many of us are very serious about trying to communicate with our elected politicians and the Seattle citizenry to relate to you our REAL numbers. But when we talk about this, we're more often than not accused of lying (watch the comments section for this story), or we're accused of exaggerating...

Ask your local coffee-shop owner about their costs. Ask the owner of the card store or the shoe store. Find out the facts before you make your decision, because I believe that when you find out the truth, you'll start to question the propaganda of the 15 Now camp. You'll start to be suspicious of their talking points, and you'll demand that they consider these verifiable facts before they saddle all of us with this ill-considered "solution." Think about it. You can accuse me of lying because you don't know me, but when your local business owners, one after another, confirm my information, perhaps then you'll start to ask questions instead of just absorb propaganda. Local independent businesses WILL close, many of your neighbors WILL be out of work. Just ask around.