This letter to customers from San Francisco bookstore Borderlands is making the rounds. Apparently, the new "living wage" legislation in San Francisco is killing this store:
In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018. Although all of us at Borderlands support the concept of a living wage in [principle] 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.
I find the authors surprisingly open to the Progressive assumptions behind this bill, despite the death of their business. I don't know if this is a pair of hipsters destroyed by their own cause, or if the nods towards Progressivism are merely boiler plate that is required in any San Francisco conversation, like having a picture of Lenin on your wall in Soviet Russia.
Anyway, I found the language here familiar because I spent most of last year writing such letters to angry customer bases. In our case, fortunately, we had the ability to raise prices so the letters were to defuse customer irritation rather than to announce a closure. Here is one example I wrote in Minnesota:
Labor and labor-related costs (costs that are calculated as a percentage of wages, like employment taxes) make up nearly 50% of our costs. The Minnesota minimum wage is set to rise from $7.20 to $9.50 in the next two years, an increase of 31%. Since wages and wage-related costs are half our expenses, the minimum wage increase raises our total costs by 15.5%. This means that all by itself, without any other inflation in any other category of expenses, the minimum wage increases will drive a $3.10 increase in our camping fees (.155 x $20). Note that this is straight math. The moment the state of Minnesota passed their minimum wage increase, this fee increase was going to be required.
One of the problems with these minimum wage increases is that the people behind them, with their hazy assumptions and flawed understanding of economics, typically think that companies will just absorb the increase. Our net profit margin runs in the 4% range, so it difficult to see how any such retail company can absorb a 15+% cost increase, but it happens all the time. After some trial and error, the "this is straight math" phrase seems to work the best in communicating the need for price increases.