A tiny San Francisco suburb’s attempt to implement one of the nation’s highest minimum wages threatens to shatter an immigrant’s American dream.
John Nemec came to America from the Czechoslovakia in 1966 with $20 in his pocket and zero relatives and friends. He landed a minimum wage job in New York City that netted him $1.25 an hour.
"I thought I was a rich man—anyone coming from my country felt rich. We made 2,000 crowns in a month. That was about $57," he says.
He got drafted into the army in 1969 and served two years as a translator in Western Europe, the year after Soviet forces invaded Czechoslovakia to crack down on its Prague Spring reforms. He left the service in 1971 with his eyes set on college. He began selling clothes to raise money for college tuition and just happened to get a "large variety of suspenders at a very good price." He discovered the reason for the steep discount too late.
"They were all too short, so I put a sewing machine in my garage" to fix them, he recalled with a laugh. He put his college dreams on hold in a bid to recoup the $30,000 he put into the business. He worked night and day in the garage, sewing and stretching, trying to find orders. He even spent $1,000 to go to a Los Angeles trade show to unload the surplus suspenders.
"I sold one order of two dozen suspenders to Tony Chan in Honolulu. I’ll never forget his name," he says. He returned to his San Francisco home on the brink of failure. The city soon forced him to move his business from his garage after a busybody neighbor reported him for violating zoning laws. He rented out a cheap warehouse on "skid row" and incorporated the struggling business in 1977 as the Suspender Factory.
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"Gradually we were building. Then we were swamped with business for rainbow suspenders from all over—England, Canada, Japan, all over Europe," as consumers tried to replicate Mork’s signature look, he said.
He moved the business twice before settling in Emeryville in 1983. The company was doing well enough to send for his wife, who emigrated from Czechoslovakia in 1984. Nemec now does $3 million in business each year, employing 49 workers and churning out suspenders for the likes of country star Hank Williams Jr. and Swedish King Gustav, according to the San Francisco Chronicle.
The four-decade struggle to move his niche product out the door has become harder since China, Mexico, and the Philippines flooded the market with cheap garments over the last two decades, but he has managed. What he cannot survive is the zeal of the Emeryville City Council, which is on the verge of raising the city’s minimum wage to $14.42 per hour.
Nemec said he supports gradual increases to the minimum wage and "can survive a $12.25" minimum wage on par with neighboring Oakland and San Francisco.
"We have never had a problem meeting minimum wages because the increase was gradual. We adjusted by improving efficiency," Nemec says. "$14.42 is irresponsible, totally irresponsible—the standard of living here isn’t higher than San Francisco. That’s more than a 60 percent increase and our company will go bankrupt."
The legislation will give Emeryville, population 11,000, one of the highest wage rates in the country. Median income in the town is $65,000 per year, outpacing that of the state by about $4,000, according to the Census Bureau. The median home costs about $300,000, $70,000 cheaper than the state median and less than half that of San Francisco 11 miles to the west.
And yet, the City Council is insistent that Emeryville needs a minimum wage higher than the $12.25 wage San Francisco will introduce May 1st. The city will phase in a $15 wage by 2018.
The city originally considered a $12.25 minimum wage to mirror that of Oakland. However, the council insisted on implementing a "living wage" immediately, which comes out to $14.42 effective July 1, 2015. The proposal would also give employees nine paid sick days for the year.
"I wanted low wage workers to be able to work full time and not be eligible for any public benefit program and this wage basically comes close," Mayor Ruth Atkin said in her January State of the City address at the local Chamber of Commerce. "Some of you sitting in this room may need to make adjustments in your business model … I did want to alert you that it’s coming.
Nonprofits and small businesses, defined as those that employ less than 10 people, would be granted gradual phase-ins. Former Emeryville Mayor Ken Bukowski objects to the actions of the council.
"I definitely don’t agree that 10 employees constitute a small business. Forty-nine would be much more reasonable," said Bukowski, who submitted public comment on the ordinance on behalf of the Emeryville Property Owners Association. "[The council] have the ego to be the highest around. … They don’t have any real understanding of what small business means."
None of the five city council members, nor Mayor Atkin, responded to interview requests from the Washington Free Beacon.
The town received more than 70 public comments from residents and interest groups, including the National Healthcare Workers Union and Pixar, city Economic Development and Housing Manager Michelle De Guzman told the council on Tuesday evening. While some commenters and workers commended the council for its commitment to social justice, others such as Bruce Lim said the increase threatened his job as a Pai Gow dealer at the Oaks Card Club.
"Being a Pai Gow dealer is a good job. I am able to support myself and a family of six," he told the council. "I am worried that a big increase in cost would force the Oaks to reduce our hours … please do not put my job at risk. I know that is not your intention, but what you do could hurt us rather than help us."
Nemec spoke at two previous city council meetings hoping to educate members about what the wage would do to small business owners. While he has some minimum wage workers on staff, the majority are paid by their output and earn about double the $7.25 federal minimum wage.
If the minimum wage earners transform into $14.42 earners overnight, he said he will have to give comparable increases to his veteran workers or begin laying off the less efficient among his workforce.
"It’s an increase for the entire structure of company compensation," he says. "We’ll have to make up for the cost with productivity gains, but the older you get, the lower the productivity. What do you do with the older employees?"
Nemec has invested a lot of money in the Emeryville plant in recent years to deal with rising labor costs. He borrowed $500,000 against his home to install manufacturing equipment in the plant to increase productivity. At 69 years old his line of credit isn’t what it used to be. He could move the plant, but he estimates it would take "two to three years to pay for the move" to cover expenses of moving and "finding and training employees."
"Do I want to hang that debt over my family?" he says.
Nemec’s dilemma reflects the concerns of small businesses across the northwest, from Seattle and San Francisco to Berkeley and Oakland, according to Employment Policies Institute research director Michael Saltsman.
"Proponents who claim with a straight face that a 60 percent wage hike won’t kill jobs should spend a day with a business like the Suspender Factory, to understand the real-life consequences of their good intentions," he said.
Nemec hopes that the council will pay attention to the concerns of small business owners, as well as the few manufacturers that have not sold out to cheap labor in China and Mexico.
"It’s unbelievable how politicians are out of contact with reality," he said. "If America wants to create jobs and bring back manufacturing, it needs to do something different than what the city council is doing."
Published under: Minimum Wage