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  1. #1
    Atomic Punk lovemachine97(Version 2)'s Avatar
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    Default San Fran's Borderlands Books is closing...due to minimum wage

    I find this owner's explanation for closing to be fascinating. I think we have a real world account of how minimum wage, though it might help some, hurts others.

    Borderline has dealt with other cost increases before. In 2000, their rent doubled, so they moved. There's also the emergence of online book shopping, e-books (and their devices), and the Great Recession.

    In their open letter, the owners state that they believe in a living wage, and they believe the scheduled minimum wage increases may be good for San Francisco, but that it renders Borderline a financially non-viable business

    (This month, minimum wage in San Francisco increased from $10.74 to $11.05. In May, that goes up to $12.25. Then, 7/16 to $13, 7/17 to $14, and 7/18 to $15.)

    Here are excerpts from their open letter on their website.

    Borderlands is Closing

    ...

    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 increase from $10.74 to $15 is the 39%. Of course, as we all know, businesses can make adjustments.

    ...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...

    So here we have a business telling us directly that their non-mandated prices in the coffee/service side of the restaurant, increasing prices is no problem. The competition will do the same. So all that changes is customers pay more across the board.

    But on the book side, it makes no sense. Their competition, mostly Amazon and Barnes & Noble, are not affected by the wage increase. Either way, manufacturers set the retail prices, not Borderline.

    There are other alternatives to just increasing prices, though.

    ...The other obvious alternative to increasing sales would be to decrease expenses. The only way to accomplish the amount of savings needed would be to reduce our staff to: the current management (Alan Beatts and Jude Feldman), and one other part-time employee.

    In other words, all but one employee gets laid off. But that means they could stay open as long as the employers do more work, right?

    Alan would need to take over most of Jude's administrative responsibilities and Jude would work the counter five to six days per week. Taking all those steps would allow management to increase their work hours by 50-75% while continuing to make roughly the same modest amount that they make now (by way of example, Alan's salary was $28,000 last year). That's not an option for obvious reasons and for at least one less obvious one

    So management doesn't want to increase their load 50-75% for no increase in pay. Fair enough.

    But here's the kicker (the less obvious reason):

    —at the planned minimum wage in 2018, [management] would earn more than their current salary working only 40 hours per week at a much less demanding job that paid minimum wage.
    http://www.borderlands-books.com

    That's $15 an hour multiplied by 40 hours a week for a year—$28,800.

    Borderline says they are open to other options, so the chapter isn't closed yet (get it?)

    Still, this is a refreshingly open look at an employer dealing with a minimum wage increase—even an incremental one.
    Last edited by Daisy Hill; 02.02.15 at 03:11 PM.

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    Goddamn autocorrect changed Borderlands to Borderline for some reason. Sorry.

  3. #3
    Gird your loins Daisy Hill's Avatar
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    the reason this bookstore is closing cannot entirely be blamed on the minimum wage. Certainly that is the most direct cause, but bookstores are a very difficult business. Independent bookstores who rode out the vast expansion of Borders and Barnes and Noble booksellers, Books a Million and Amazon did so thru their tight relationships with their community. Those same connections helped them survive the economic downturn that gutted Borders and gave B&N a headache. But Amazon is still the big bad wolf in the life of the bookstore. Add to that the market percentage of e books, Costco and Sams and every grocery store and pharmacy selling books as loss leaders and you have yourself some formidable competition

    Independent bookstores rallied by offering in store events, adding sidelines, remainders, used books, giftware, cafes anything they could do to get the locals thru the store doors and closure vs new openings stabilized

    But the bookstore owner said, one of the main problems is that the publisher sets book prices, and the markup on books is only about 30%. (that's why you need the cafe and the coffee bar and the giftwares) Those big discount books at Amazon are killing the small bookstores. People walk in the door, browse the shelves, leaf thru the books and whip out their cell phones and order from Amazon. Ask any bookstore owner and they will tell you that they see it all the time. Independent bookstores become the showroom for Amazon in effect.

    yes the direct cause is that minimum wage increases expenses in a business where it is difficult to increase profits due to small margins. The real cause is people spending their book dollars elsewhere making the stores profits marginal at best. A truly profitable business with decent margins could adjust, as the bookstore owner said. to increased wages, rents etc. The bookstore business is just too inflexible
    Last edited by Daisy Hill; 02.02.15 at 04:31 PM.

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    Gird your loins Daisy Hill's Avatar
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    Quote Originally Posted by lovemachine97(Version 2) View Post
    Goddamn autocorrect changed Borderlands to Borderline for some reason. Sorry.
    I changed it for you

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    I'm in favour of a high min wage but that large a one time increase is bad public policy.

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    They could have saved everyone a lot of time by just saying that that we are greedy and cheap motherfuckers and we would rather close our store than have to pay our employees basic minimum wage. We may open a new location in the future, if America allows us to get away with paying our employees peanuts...literally.

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    Atomic Punk CaboChris's Avatar
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    The employees were already making a "basic minimum wage ".

    In my state, it's $8.25. They were making $11.05 for retail work. Not great but not bad either.

    I'm all for making more money but It's also the responsibility of individuals themselves, to add to their skills, to deserve more. Not mandated by law...

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    Atomic Punk lovemachine97(Version 2)'s Avatar
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    Quote Originally Posted by Daisy Hill View Post
    the reason this bookstore is closing cannot entirely be blamed on the minimum wage. Certainly that is the most direct cause, but bookstores are a very difficult business. Independent bookstores who rode out the vast expansion of Borders and Barnes and Noble booksellers, Books a Million and Amazon did so thru their tight relationships with their community. Those same connections helped them survive the economic downturn that gutted Borders and gave B&N a headache. But Amazon is still the big bad wolf in the life of the bookstore. Add to that the market percentage of e books, Costco and Sams and every grocery store and pharmacy selling books as loss leaders and you have yourself some formidable competition

    Independent bookstores rallied by offering in store events, adding sidelines, remainders, used books, giftware, cafes anything they could do to get the locals thru the store doors and closure vs new openings stabilized

    But the bookstore owner said, one of the main problems is that the publisher sets book prices, and the markup on books is only about 30%. (that's why you need the cafe and the coffee bar and the giftwares) Those big discount books at Amazon are killing the small bookstores. People walk in the door, browse the shelves, leaf thru the books and whip out their cell phones and order from Amazon. Ask any bookstore owner and they will tell you that they see it all the time. Independent bookstores become the showroom for Amazon in effect.

    yes the direct cause is that minimum wage increases expenses in a business where it is difficult to increase profits due to small margins. The real cause is people spending their book dollars elsewhere making the stores profits marginal at best. A truly profitable business with decent margins could adjust, as the bookstore owner said. to increased wages, rents etc. The bookstore business is just too inflexible
    Quote Originally Posted by Daisy Hill View Post
    I changed it for you
    (Thanks for changing it, btw)

    I agree it's not the only thing, because times and technologies change. Sometimes people come up with a better business model. Those kinds of changes are fine. In fact, they are necessary. We forget sometimes that business failure is just as important to a thriving economy as success. It tells you that you're doing something wrong or that your skills are better off elsewhere.

    For example, it's sad that Icemen lost their jobs delivering ice door to door for our iceboxes. But the refrigerator is a much better product, and it made our lives better. Sticking with the ice box wasn't better.

    This is different. The owners and their employees had agreed upon providing certain work for a certain wage. The government came in one day and said, "Nope, not good enough. We are going to put more money in your pockets by making them pay your more."

    If a competing business model beats you, that's how it goes. The market is working. I worked for a small music store. The other local stores didn't kill us; the internet did. I couldn't even convince my former boss to just have a website until about a year and a half before the store closed (after 40 years). And even when he did, he didn't think it should be very informational. He didn't want anyone to have to go more than two clicks without being able to buy something. If the website didn't monetize itself, it wasn't worth it. I couldn't convince him that people go online first to check things out. If you don't even have your own website, most people move on to the next place. It would monetize itself by people not dismissing us before even walking in the door.

    These people at Borderlands had found a way to compete and stay open despite e-readers, e-books, and cheap prices on Amazon. That's an incredible incredible.

    Then the government imposed a burden on them that raised their cost of doing business by 18%. Amazon wasn't the problem anymore. It was the increase in the cost of doing business.

    Quote Originally Posted by It's Mike View Post
    I'm in favour of a high min wage but that large a one time increase is bad public policy.
    But it wasn't. It was $10.74 in 2014, $11.05 now, $12.25 come May, then $13 in 2016, $14 in 2017, $15 in 2018. This was incremental over 4 years.

    Quote Originally Posted by Hot Sauce View Post
    They could have saved everyone a lot of time by just saying that that we are greedy and cheap motherfuckers and we would rather close our store than have to pay our employees basic minimum wage. We may open a new location in the future, if America allows us to get away with paying our employees peanuts...literally.
    The only way you can say that is to call them flat-out liars. They seemed to be pretty open and honest with what they would have to do in order to keep the store open.

    1) Their cost of doing business went up nearly 20%. Sure, the owners could take a 20% paycut from $28,000 (the way I understand it, the managers are the owners), so each would make $22,400, and they'd still have to increase their workload.

    But why would they do that? San Francisco's minimum wage goes up to $12.05 in May. They would literally make more money and work a lot less by closing the store and getting a minimum wage job, paying them $23,520.

    2) Let's say they don't take quite the pay cut, say 10% (not 20%), but they do some combination of that, plus lay some people off, and a smaller increase in prices across the board.

    That still means you stop competing closely with Amazon on price, some people still lose their jobs, and your workload goes way up while taking a pay cut on a measly $28,000.

    But then that only makes sense for so long, since, with that 10% pay cut, by 2016, they'd make up for that 10% cut by taking on a minimum wage job instead.

    And by 2018, they'd be getting a significant pay increase, back to $28,000, if they closed the shop and got minimum wage jobs.

    So unless they are lying about all the numbers, I don't think there was a feasible way of staying in business AND paying the new wages.

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    Forum Frontman It's Mike's Avatar
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    But it wasn't. It was $10.74 in 2014, $11.05 now, $12.25 come May, then $13 in 2016, $14 in 2017, $15 in 2018. This was incremental over 4 years.
    But it kind of was, while they didn't increase it at once they did it over a very short period of time and it was done at a city level which will bury some businesses who compete against other businesses that aren't far away. Min wage is a delicate thing and it can't be moved around at a city level at such differing rates without causing significant stress to local businesses.

    All that said, based on everything i've read this place was already on death's door as it was. The min wage increase (going from 10.75 to 11.05 is basically a non raise as it just about mirrors inflation) just seems like a final little push. I can see them looking ahread and thinking we can't afford a 10% increase in wages for the next 3 years so we're shutting down now but this is the kind of policy (one they agree with by the way) that will only harm businesses that will be knocked out of business by the smallest business shock. That said, I think govt would be much better off scheduling these increases over a much longer term and ensuring they are done at a state level at the very least.

  11. #10
    Atomic Punk Dave's Dreidel's Avatar
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    Quote Originally Posted by Hot Sauce View Post
    They could have saved everyone a lot of time by just saying that that we are greedy and cheap motherfuckers and we would rather close our store than have to pay our employees basic minimum wage. We may open a new location in the future, if America allows us to get away with paying our employees peanuts...literally.
    Yeah, that's it, I am sure that people who own a new and used Science Fiction and Horror book store are "greedy motherfuckers" because, I bet they make a killing on that store.

    Please, expound on that and amaze us with your detailed financial knowledge of the used book store industry.

    Dazzle us, why are the owners of Borderlands "greedy motherfuckers."
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    Quote Originally Posted by CaboChris View Post
    The employees were already making a "basic minimum wage ".

    In my state, it's $8.25. They were making $11.05 for retail work. Not great but not bad either.

    I'm all for making more money but It's also the responsibility of individuals themselves, to add to their skills, to deserve more. Not mandated by law...
    Not everyone can be doctors and lawyers. Society needs customer service people and thus they should be able to make a living wage.

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    Baluchitherium Ted Van Halen's Avatar
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    Quote Originally Posted by Hot Sauce View Post
    Not everyone can be doctors and lawyers. Society needs customer service people and thus they should be able to make a living wage.
    So is that *cough* doctors and *cough* lawyers or just plain old doctors and lawyers?
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    It's "greedy motherfucking" lawyers and "greedy motherfucking" doctors, get your shit straight, or Brett will straighten it out for you.

    Got it Ted?
    Taylor Swift is nice to look at. Adele can sing.

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    Amazon stock worked out nicely. Fedex stock wasn't bad.

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    The reason I brought this open letter here is that the argument often is that minimum wage doesn't hurt businesses. Even Paul Krugman says that since minimum wage jobs can't be outsourced, they are exempt from the law of demand (when a price for something goes up, demand for it decreases). People bring up studies (that have since been debunked, but that doesn't stop anti-GMOers either) that show increases in minimum wage showed no decrease in employment and actually showed an increase in employment (which turned out not to be true).

    Look, most businesses are always fighting and struggling to stay open. That this business was doing the same does not mean anything other than they are just like nearly every other business. They aren't all Apple. The local clothing store, restaurant, movie theater, gym, whatever, they are struggling and constantly battling competition. The margins are pretty thin. If energy increases a lot, or the cost of food, etc., it's a big deal.

    This business did all it could to stay open against great odds. And it did. But it's no small thing for the government to mandate your cost of doing business increase 18%. That's huge, even if spread out over a couple years.

    Quote Originally Posted by Hot Sauce View Post
    Not everyone can be doctors and lawyers. Society needs customer service people and thus they should be able to make a living wage.
    Two things: not every business owner is a greedy millionaire who can "afford it," and most making minimum wage don't need a living wage.

    I spent 12 years in sales at a music store. I made a combination of wages and commission. Things went really well, peaking in 2006.

    One thing to note: the owner rarely took a paycheck. He took over a year before I started. For the most part, he and his wife lived off of her salary at Child Protective Services. The hope was to eventually get there, but he never did. While my wages were more than minimum, commission could swing wildly, so paychecks were all over the place.

    The vast majority of those making minimum wage young, not supporting a family, are going to college, or live at him in a middle class or better house. So let's be real: the whole point of low wage, low-skill jobs is to ease entry into the market, not to raise a family.

 

 

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