Not just hanging on, it appears to be stabilizing. At the end of March, they had actually sold a handful of more sponsorships in year 3 than they had by the same time in year 2. The goal now is to use the additional funds to purchase a building in SF to be a permanent home for the store once the current lease runs out.
I love this. It's both the epitome of anti capitalism, while being so completely fundamental free trade, that it almost makes my head explode (as a university trained economist). I especially love that many who espouse capitalistic ideals will have a hard time wrapping their minds around this too. It's so easy to forget that any time money changes hands without extortion involved that's capitalism at it's finest. And the fact that the store is looking to the future, and using the patronage (in it's most classical sense) to increase it's capital to help stabilize itself in the long term just really makes me smile from all the dichotomous ideas at play.
Capitalism works under a lot of assumptions, one of them is no friction with information. This particular story is just taking advantage of a small, imperceptible (to the rentors) risk capital gap, but some savvy and attached fans saw it and wanted to take advantage of it.
It's just like a lot of microfinance in say a poor struggling neighborhood in Bangladesh. There's money to be made there, but most traditional bankers or participants would ignore it or be blind to it. When socialism steps in is not when it's able to cover that gap, but when it has the foresight or wisdom to know why that gap should be covered. That wisdom is something that doesn't always happen in less than ideal capitalist systems.
It's an interesting example of the value of customer goodwill.
In addition to being a bookshop, Borderlands is a cultural hub for SF/F readers in the Bay Area. As such, it's not simply selling SKUs at the cheapest viable price, it's providing an intangible curatorial service. Amazon may crowdsource reader reviews but they're unlikely to be as insightful as suggestions by enthusiastic staff who know what they're selling, and the usual recommendations engines are less effective than one of those staff engaging in Q&A with a customer to find something new that they might like.
(And this is before we get into things like the cafe side of the business, or the author readings/signings. Disclaimer: I am an author and I occasionally do events there.)
This is a perfectly rational response in a capitalistic society. Sponsors obtain value from sponsorship through perks, social signaling, continued existence of Borderlands, personal gratification, and so on. On the other side of the transaction, Borderlands monetizes it's social and goodwill capital.
This exchange of value for money is done in a way that may be somewhat unique for a retail establishment, but isn't anywhere close to anti-capitalistic.
Just another reminder that the money (and the people behind it) just do whatever they want Honeybadger style, and we scramble along behind them trying to stick labels on what just happened.
> It's so easy to forget that any time money changes hands without extortion involved that's capitalism at it's finest.
I thought that the existence of an individual or group of individuals who hold material wealth and can invest it (those who hold capital, or capitalists) instead of selling labor was capitalism at its core, and maybe therefore at its finest - is that not your take on it?
I know a lot of small business owners in SF, and Borderlands' story is one that I've heard before. The minimum wage hike is killing a lot of coffee shops who had previously been able to offer quality coffee at not much more cost that what you'd find at Starbucks. With the wage hike, Starbucks takes the hit, keeps prices the same, and the smaller shops are forced to hike prices and turn away customers.
I'm guessing I'll see a lot of commentary about paying a living wage and how these businesses must be mismanaged and that this is just the way the market "works." I won't necessarily disagree, but what is happening in practice still feels wrong.
Well, assuming the small coffee shops are well-managed, then we still have to ask ourselves which is more important, the cheap good coffee or a living wage for the workers?
Low minimum wage = not enough to survive on, so you're typically working multiple jobs, which is insane. A high minimum wage is one key element of a strategy to ensure that nobody has to do that.
Anyway, there's extremely little hard evidence of minimum wage raises leading to higher unemployment. Studies generally show no effect. There's no shortage of dubious anecdotes from people with a political ax to grind, though.
I see this cited a lot, my problem is that these studies (from what I've seen, happy to accept more data) are done on a state or nation scale where most every business is then on a somewhat equal playing field. My problem with what SF and Seattle are doing is that it is easy for large companies to compensate in other markets. I'd be really interested to see a study done somewhere comparable to that dynamic.
Also, how many people transitioned from a job at a small business to a larger one? Unemployment could remain unchanged, but competition could drop drastically.
As I've said elsewhere, I'm in support of paying a living wage, but I don't think it can work on a city scale and these experiments only hurt the cause by producing bad data.
I think the assumption is that the demand for coffee stays relatively similar, and so the coffee shops that have been displaced by rising costs will be replaced by Starbucks.
If that is the theory, total employment would stay the same.
The customer cares about good cheap coffee, and regionalized regulation like this ensures that local businesses can never compete.
I'm not against a minimum wage increase, but the country is watching places like SF and Seattle to see how a higher minimum wage plays out. The big players can always recoup loses in other markets, but the small businesses are unable to compete. Small businesses close, people lose jobs, and the wage hike is declared a failure. To me, if you really want to support a living wage, then don't support experiments that are doomed to fail.
> The big players can always recoup loses in other markets
If it's unprofitable for Starbucks to continue operating in SF, why would they do so? Big businesses can recoup short-term losses, sure, but if a given market is going to be unprofitable for the foreseeable future, there's not much reason to keep operating in that market.
That said, companies like Starbucks may see this as an opportunity to reduce competition, by operating at a loss until the smaller businesses close, and then raising prices to make the market profitable again. But if they actually do that, once they raise prices, small businesses can start competing again.
I doubt it Starbucks will see any significant loss. They typically have both higher volume and lower material costs than a typical coffee shop, so they can absorb cost increases better.
If they are even close to breaking even, then it's probably worth it to stay open in the area for marketing value.
Experiment? It's not like this is the first time this sort of thing has happened. There's piles of data and research on this, and it's not hard to make an estimate of the impact yourself. Just make an Excel spreadsheet with past minimum wage increases and the change in unemployment X years later.
Or you can just look at news articles from the past. There is long history of people predicting dire employment impacts that never materialize.
However, minimum wage hikes in the past have generally been small increments usually below the existing prevailing wage for a lot of entry level labor. Partially as a result you had to squint hard to see any kind of effect.
Just as customers at this book store didn't just care about a good selection of books for low prices, good coffee for low prices isn't always the impetus for a visit to a specific cafe. Some places are just cool for whatever reason, and people will hang out there despite the coffee being crappy or the prices being high. Coffee shops sell coffee, sure, but for many of them, that's not the point of going. I can get free coffee from my workplace, and we actually have nitrogen cold-brew, espresso machines, half a dozen types of milk, syrups, half a dozen different drips in pumps, ice, blenders, RO filtered water...and I still go out to buy coffee. Many of my coworkers also go out for coffee. Sometimes it's nice to go somewhere else, and coffee is a great excuse. Sometimes we'll hang out at whatever coffee place we end up at for a good conversation.
Back in high school, there was a big old dirty cafe all the kids hung out at. It had room for maybe 200 people on busy nights, which was probably over what fire code allowed. The coffee was made by stoned hippies on rarely-cleaned equipment and was pretty bad. It was normal coffee shop prices. It was the place to be because they were open 24 hours and had open-mic nights, where angsty teens could play guitar in front of their friends.
Another place in that same state was super tiny (seating for about 10 people) and had a line out the door most mornings. Their coffee was good, as was their pastry. It wasn't cheap at all. The service was pretentious and rude, but mostly in a funny way. Being a regular there felt cool, and you'd chat with other customers in line.
There are places in Chicago that charge >$6 for a cup of pour-over. These are typically fantastic. They could charge $7 and likely lose very little business. People who go to these types of places aren't cross-shopping Starbucks.
I'd bet that a place charging $10 for a cappuccino in SF would do just fine assuming it had something else going for it as well. Build a business that is Instagram-worthy and charge whatever you like for your product, and you'll still get lines around the block if it's a good enough gimmick.
A gimmick can work in a place with a large population: even if most customers only go a couple of times, there's enough of them to keep the place running. But SF isn't that big.
Regulation often has the dangerous side effect of making it impossible for smaller players to stay in the game, while, as you note, the big players can weather the storm for a couple of years until they've got no competition left...and then they can raise their prices without competitive pressure from the little guys. That doesn't necessarily mean the regulation is bad, but as someone who has always owned their own (small) businesses, I'm sympathetic.
And, of course, there is a tendency for those who support regulations to see the negative side effects and address it with more regulation. Also a potentially dangerous response (though also not always wrong).
I tend to prefer regulations be applied more lightly to very small businesses. The dynamic of "faceless evil overlord that doesn't care about their employees vs. powerless peon" doesn't usually apply to a bookstore with a dozen employees. But, that's probably not tenable for a minimum wage; even if smaller businesses weren't required to comply by law, they'd likely have a hard time hiring people if they weren't paying the same as the big chains.
Then again, this is not just a story of the minimum wage increasing; all bookstores are facing pressure from online sales, and have been for years. Employees are expensive and it takes more of them per-sale for a brick and mortar than for a shipping warehouse. They're all having to innovate their way out of obsolescence or die trying.
I guess we'll see how this plays out in SF. The economic disparity in SF is so high, it's probably a good thing that there's a people-driven attempt to rectify it.
And that the owners sat in the back drinking expensive whiskey and counting money? These are low margin businesses, small business owners aren't taking home 10X their employees. By hiking the minimum wage, you make these businesses inviable for anyone but the large players. The business closes, employees go work at the big company who can afford to stay afloat, competition all closes, prices go up, small business is viable again. Is that really the cycle we want to encourage?
When you can explain to me why you SHOULD be able to make a full living wage putting books on a shelf, or pouring coffee, or putting hamburgers in a bag, you can claim it as a terrible salary.
Sounds good. Then eliminate welfare of any kind for anyone who's working a full-time job, because, by definition, they're making a "full living wage", and don't need additional assistance. I'm legitimately curious what things would look like when a new equilibrium is established. Which industries were destroyed, which arose, and which pivoted? What happened to the people who worked for the unsustainable businesses?
Why are you measuring effort that goes into a job and not it's utility to other people? Wasting effort on things that people don't value doesn't make you automatically deserve anything.
Because otherwise these people will use our welfare system to subsidize their job. Basically, the choice we make when we choose to require a living wage for those jobs is that we want the business owner and their customers to find a way to pay for their business model, rather than us subsidizing it indirectly through means-tested welfare.
So the people that lose their jobs because of this suddenly need less subsidizing? Its become expected now... with min wage hikes, that businesses are turning to automation and cutting jobs... thats becoming the norm. Those people who now lost their jobs, you feel, are less of a burden?
I don't recall that happening in Seattle when we raised our minimum wage. Stuff got a little more expensive, but there weren't mass layoffs like you're suggesting. If it's there it's too subtle for us to argue from the seat of our pants.
Let's not get ahead of ourselves. We're talking on a forum where guys can get paid $100k+ to play table tennis and hammer out basic cookie-cutter web apps.
It's kinda alarming the disdain you're showing for service workers, I really hope you're trolling
You earn your effort. You _EARN_ your wage. If you work less, if you put in less effort, if you give less... you get less in return. Its balance. Its equilibrium... without it, with more people taking more than they are giving out, you end up with bad. Bad all around... giving more to people who put in less effort solves nothing
A beloved cafe closed in Seattle recently for the same reason (no crowdfunding campaign was forthcoming).
I still support raising the minimum wage, but we shouldn't expect to have our cake and eat it too. Making labor more expensive will make goods and services more expensive, and it will make some businesses non-viable.
Now that I'm thinking about it, is the minimum wage a regressive tax in disguise? In low margin businesses, one would expect the additional labor costs to be passed along to the consumer in the form of higher prices.
Therefore, the extent to which a minimum wage raises your "tax" burden is proportional to the % of your income spent on low-margin consumer goods and services.
One of the issues Borderlands talked about when they first started the sponsorship program was that each book they sold had the price printed on the book cover (printed by the publisher), so they were unable to raise prices when wages increased. I suppose you could just put a new pricetag over the old one but it's so easy for someone to open up amazon's app and check prices online that it wouldn't make much difference.
Amazon already sells books for below the cover price (often, at least) so it's already the case that people buy from brick and mortar because of something other than price.
This is one of the major issues with selling books, I hear. There's very little profit margin on the books themselves, so most stores have to make up the difference with higher-margin items like a coffee shop, swag, etc.
On the bright side, there's little risk involved, since you're generally allowed to ship back any unsold books (or just their covers) for a full refund.
"is the minimum wage a regressive tax in disguise"
Anything that increases prices could be seen as that, but I don't think it is that bad if you cut down to the necessities and you end up having a job at the higher minimum. This is just my intuition though.
It's more of an example of bracket creep isn't it?
And I would say increasing minimum wage having a large impact on businesses is more of an example of unmanageable wealth distribution. Minimum wage should be a safety net to make sure people are paid at least enough to survive. If everyone is already lying in that net then yeah, it gets a lot harder to raise it.
I would think that when most of the wealth increase over the last 20 years has been for the very rich, then spending is down and margins get thinner for the (growing) very poor.
So not only do you have a large proportion of minimum wage earners, you also have less disposable income. Raising the minimum wage is sort of a mini-stimulus package for people, but also increases the burden on struggling businesses. I guess they don't balance out as easy in some businesses.
I never bought this "minimum wage increase destroyed us" story when it came out. The minimum wage increased from $11.05/hr to $12.25/hr. That's an increase of $1.20/hr.
They claim this will cost them an additional $30,000/year. Let's consider that. Assume that their employees are all current minimum wage employees (otherwise they would not be affected). Given that they're open for 8 hours/day (which works out to 56 hours/week), it would mean that their additional cost would be an additional $3500/employee; so an additional cost of $30000 means they have 9 employees working all the time. Anyone who has been to Borderlands (and I have been a few times) can see that they do not have 9 employees all the time. Max I've seen are about 4. It's a bookstore, not an oil change place!
In any case: whatever floats their boat. If sponsorships help them stay afloat, so be it. But they shouldn't blame the minuscule wage increase for their woes.
Or they could just impose a 10% price hike on all of their products and services to cover the cost. The thing that becomes clear is that greatly raising the minimum wage mostly affects poor people and the lower middle class. It reduces their buying power. It also greatly devalues the $15/hr woman who went to trade school to be an EMT for several years.
EITC is a much better way to redistribute this wealth and it puts money in the people's pockets who need it most.
So you're saying that employers should introduce a price hike that they don't need to make so that it can prove your theory that it devalues buying power?
Not sure where you got that. There are two conflated issues. One, if they are not profitable and can't cut costs, then they need to raise prices or go out of business. This is essentially what they did. They offered "sponsorships" which are more like VIP memberships and people paid money for things that used to be free or not exist.
Separately, there is a separate question of the (many) consequences or raising the minimum wage. A lot of smart people think that EITC and other programs are a better way to redistribute wealth. I happen to agree. If a small business has to raise prices, that doesn't generally affect the upper middle class and wealthy. They don't tend to shop at Walmart.
> And they couldn't sell anything in addition to books?
They do that. In the bookselling business, these are called "sidelines". Borderlands has several, including postcards, greeting cards, small gifts, journals, local art, etc. They've tried many others as well that haven't been profitable for whatever reason (which they then have to eat the cost of.) New sidelines are a gamble for that reason.
> Or change their selection to reduce their overhead?
This is an oversimplification, but selection doesn't involve overhead in the usual sense because unsold books can be returned to the publisher. Anyway, their focus on sci-fi/fantasy and mystery books is a large part of what makes them special and beloved, rather than just another generalist bookstore.
> Or buy/sell used books?
They do that.
> I don't know, I'm not them. But "we can't raise those prices, and we couldn't lower our expenses" always sounds like a bit of a copout.
I've been to several of their sponsor meetings and spoken with the owner on a few occasions. Alan is very open and transparent about the bookstore's finances. If I recall correctly, because of the way publishers eat of the cost of unsold books, the store's expenses are dominated by labor and rent in that order (with utilities and credit card processing fees a distant 3rd and 4th). Everything else is basically rounding errors in the store budget. It's like trying to cut the Federal Budget without touching healthcare entitlements or defense - there's no way to make a meaningful dent. See also: Amdahl's Law.
When labor makes up about half of your costs, changes to the minimum wage affect you disproportionately compared to many other kinds of business.
Doesn't this seem like a major problem with the business model? Of course you're going to have flexibility problems if you don't decide your own prices...
That was meant to be sarcastic because essentially that is what they did. The "sponsorships" are more like a VIP membership with lots of extra services. These services have a high margin (unlike books where they compete with Amazon) and now they are more profitable.
Do you have any studies that back up your claim? Most actual peer reviewed work I've seen on the subject suggests that
A) Minimum wage increases helps everyone overall by increasing the wage floor.
B) Increases in minimum wage are correlated with greater disposable income, even when put into context with inflation and goods prices increases (basically price of goods may go up a little, but labor wasn't a large portion of their cost to begin with).
I do think the minimum wage should be increased but by a more reasonable amount and then track inflation every five years or something. I just think EITC is a much more targeted tool. Additionally, raising minimum wage doesn't help if most of the jobs are automated away but EITC still helps.
Borderlands competes with Amazon, so a 10% price hike means they are much less competitive, plus books have prices on their covers from the publisher.
You make several statements I can take issue with, but the most interesting is to imply that if someone else makes more money, other people are devalued.
I think that's an interesting argument in a world where executive compensation has grown continually, and workers income has decreased, while GDP has continued to shrink. http://www.epi.org/publication/ceo-pay-continues-to-rise/
You are not factoring in benefits that increase as a result of the minimum wage hike, vacation time that acts as employees working on the floor even when they are not, and the fact that while the store is "open" 56 hours per week, that is certainly not the number of hours that people work there. Inventory, store cleanup, store redesign, meetings, any number of things go on before and after hours.
Yeah there are definitely off hours when employees still need to work. But I would guess that hourly employees earning minimum wage are almost never given vacation or sick time.
>But I would guess that hourly employees earning minimum wage are almost never given vacation or sick time.
Why? Just because they make ~$12/hr? I have employees making $15/hr (lowest we pay) who have 2-4 weeks of PTO plus flex days, and I don't consider myself exceptionally generous.
Typically you get 2 weeks of vacation a year. That's 4% of the cost. Not a significant amount.
As for work outside store hours: sure, there is some. But it's not a restaurant where you have to sterilize everything in the kitchen. It's a bookstore. At most you have to sweep the floors, maybe re-shelf some misplaced books, and shelf the newcomers. It's not a tremendous amount of work that has to be done before opening or after close.
I'm sure your armchair math is much more valid and accurate than their own projections. You should go over there and shower them with your perfect knowledge of the inner workings of their business.
That's not their claim. Their claim is that they would have lost $30k/year after the last year of known minimum wage increases, which is $15/hr in 2018. (Prop J also requires further annual increases indexed to inflation afterwards.)
From the blog post: "by way of example, once the final wage increase rolled out in 2018, we would have been losing around $30,000 per year"
Borderlands has always been a great place to go and discover new sci-fi authors and books, their staff is great and it sucks that the books business is so tough these days.
I joined their sponsorship program as soon as they started it, it feels great to walk in and see your name printed on the printout on the wall by the coffeeshop door.
Everyone is going on about a "living wage", but what about the illegal aliens who live in America who make substantially less than that, and come here illegally with great effort to get it? Why would they do that unless it was profitable? They seem to have no problem living on what most people would not consider a "living wage". It seems obvious then that the goal in mind with raising the minimum wage is to make it even more difficult to employ Americans, leaving those jobs to illegal aliens and punishing businesses who try to follow the law and only hire citizens. This gives those who hire illegal aliens more leverage by the fact that doing away with illegals would mean a substantially higher price hike for their products given that they would have to pay their employees that much more.
> It seems obvious then that the goal in mind with raising the minimum wage is to make it even more difficult to employ Americans
Do you realistically think that this is the goal? Do you think that someone thought, Let's look for ways that Americans can't get a job?
> leaving those jobs to illegal aliens and punishing businesses who try to follow the law and only hire citizens
If a business doesn't care about the law, why are they paying the minimum wage in the first place? Isn't hiring illegals, illegal?
I see why you are worried. As the article says "We said that we thought the dramatic wage increase might likely be very good for San Francisco, but it wasn't sustainable for us.". So what is good for the majority is not always good for all individuals. But that doesn't mean that it is a bad idea.
>Do you realistically think that this is the goal? Do you think that someone thought, Let's look for ways that Americans can't get a job?
Yes, for the reasons I mentioned in my post, which is that it gives them more leverage as an industry to protect their profits. If someone is looking to start enforcing the law and deporting aliens (harming profits because labor is now more expensive), they can then make an argument that this will lead to increased prices of their product. How much the price is increased is dependent on how much more they will have to pay citizens to work instead of aliens, which is determined in part by what the minimum wage is.
>If a business doesn't care about the law, why are they paying the minimum wage in the first place? Isn't hiring illegals, illegal?
Citizens have recourse and legal power to fight unlawful activity that illegal aliens do not. If a citizen is being paid less than the minimum wage, they have no reason not to try and extract the money they are legally entitled to by using the legal process. Aliens cannot do this, they do not want to bring attention to themselves because it could get them deported. So, it is better to violate the law by hiring illegal aliens than it is to hire citizens and pay them less than the legally mandated minimum wage.
The fact of the matter is that minimum wage doesn't magically make everyone get paid more, it just makes jobs that don't produce more money than the arbitrarily-decided minimum wage illegal, and now nobody gets them. This apparently includes small coffee shops, but not e.g. Starbucks. The small coffee shop employees by the way seemed to have no problem with the former status quo, because if they did they would probably have either unionized or found other jobs. Instead, they all lost their jobs when their wages were legally required to be increased beyond that which the owner could afford.
Way to go, guys. Now nobody gets anything, except Starbucks, who gets less competition and more customers. In whose best interests was this decision made in, exactly?
This bookstore is now basically selling an new additional "premium service" (Private Wi-Fi, preferred seatings etc) for a yearly fee. It's really cool that they found a new way to make money, and that it works. But lots of businesses offer premium membership services. My local club has been doing this for year with some success. What's so new about this besides changing the name from "Premium Membership" to "Sponsorship" ?
It's like that restaurant that only allows up-front-paid reservations. It's kinda obvious once it's brought up, but goes against how that industry usually works
I'd definitely pay for a place to go and sit with a laptop or book for awhile...you know, I wonder if something like olde London's "social clubs" could work today, but cheaper.
They were basically buildings or floors rented out to simply be a place to relax, kick back, do some quiet work, play pool, drink/smoke in what I can only imagine were velour jackets, etc. In practice though, they were very expensive and mostly an upper-class affair.
I feel like we could do better these days with say, 4000 sqft. of mixed-use space on the border between an industrial and residential neighborhood where rent is reasonable.
Clubs in the classic sense absolutely still exist in cities like NYC. But they're definitely not oriented around sitting around and working on your laptop.
What you're describing sounds a lot like some kind of coworking space. Maybe something like betahaus in Berlin [1]. When you enter, it looks like a big cafe with lots of tables and many people with open laptops, but that place has layers: separate meeting rooms, a big events space (several floors up), "office hours" (one-on-one, free 30-minute consultancy sessions with experts from their community), group runs through the city, ... There's a monthly membership fee, but anyone can get stuff at the cafe or attend the public events.
> What you're describing sounds a lot like some kind of coworking space.
In my city a hotdesk at a co-working space starts at $250/month for just 2 days a week. So I go to cafes, partly because of cost, but mostly I prefer the ambience and staff there (much friendlier, better music, coffee on demand). If my local cafe chain had a $300/yr gold membership/sponsorship, I'd buy that in a heartbeat.
On the other hand my cafe doesn't sell Club Mate or Mate Mate, so betahaus definitely/easily beats Perth there! :)
Glad to see they came up a creative solution to stay open and it's working.
If my local bookstore needed sponsorship to stay open I would be first in line to donate. With that said, something feels off-putting when I read these stories of requests for sponsors and donors to failing businesses. Seems increasingly common story too. I understand there's multiple sides to this debate, and what the trend may or may not lead to. I have no idea. Maybe it is market efficiency or maybe it's serious market failure. I see comments on both those sides. Either way I don't think relying on sponsors and donors for failing businesses is a good or long term way for an economic system and market to function. Two more examples of this trend toward needing donations to band-aid the bullshit we created:
Noah Smith's recent tweet: "I swear to God, the sight of people with deadly diseases crowdfunding their health care is the most dystopian thing about America right now" [1]
Speaking of, an increase in the minimum wage was blamed by Borderlands and others for having to close down and/or ask for donations. (Side note, I was surprised to read of these book store employees they have who "cheerfully" worked for minimum wage. in San Francisco. for a ten-plus years! Amazing! but whatever). Wages are not the full story here...The cost of rent for good retail locations in these cities (SF, LA, NYC, etc.) is a major major issue. Nuts. I'm not suggesting we federalize major cities' downtown storefront real estate spaces. I think if someone bought or inherited real estate in a great city location and makes a fortune then congrats to them, smart move, happy for them.
But fundamentally it is economics 202 that a local B&M business model and employee wages will never keep up with the monopoly that is big city real estate and their pricing power to rent seek. The numbers don't work long term. Period. A regular business can't beat a monopoly like real estate but it's especially difficult when there are flocks of new, overconfident fools for tenants waiting in the wings with a shark-tank-quality-biz idea and fresh capital they got from who knows and they are ready to sign a lease they can't afford. Look at NYC restaurant spaces, why do they cycle so often and so quickly? Or come visit Los Angeles (I'll buy you a beer) and then go to Rodeo drive in Beverly Hills. Rent is so expensive on Rodeo now (+$1000 psf I think these days) that landlords know their tenants are running at a loss and they still raise rents on them every year (or sooner)...Half the shops on Rodeo Dr. are major luxury brands renting at loss but there for marketing purposes, the other half of shops belong to these weird little overconfident new luxury brands no one has ever heard of but think they will hyper grow and cover Rodeo rent. They never do. These little American dream, Italian leather type stores last maybe 6 months before closing and the next overconfident fool with a pink faux emu skin handbag is ready to roll the dice and pay an even higher rent
P.S. If your city or town still has a real bookstore, when was the last time you went in there and asked the staff for a book recommendation and then gave a new paper book chance? Good date idea too. Just good all around. Roll dice.
Do they really sell through all their stock?
One of the prime arguments in support of a livable minimum wage, is that is also increases purchasing power of people, increasing the revenue. More people could have bought books and made up for the difference in wages they had to pay.
They obviously wouldn't have ever seen that happen, had they shut down immediately before giving it a chance. And I have to assume that higher purchasing power in the book budget of people has been used up by the 300+ 100$ sponsorships a year.
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[ 2.8 ms ] story [ 114 ms ] threadCapitalism works under a lot of assumptions, one of them is no friction with information. This particular story is just taking advantage of a small, imperceptible (to the rentors) risk capital gap, but some savvy and attached fans saw it and wanted to take advantage of it.
It's just like a lot of microfinance in say a poor struggling neighborhood in Bangladesh. There's money to be made there, but most traditional bankers or participants would ignore it or be blind to it. When socialism steps in is not when it's able to cover that gap, but when it has the foresight or wisdom to know why that gap should be covered. That wisdom is something that doesn't always happen in less than ideal capitalist systems.
In addition to being a bookshop, Borderlands is a cultural hub for SF/F readers in the Bay Area. As such, it's not simply selling SKUs at the cheapest viable price, it's providing an intangible curatorial service. Amazon may crowdsource reader reviews but they're unlikely to be as insightful as suggestions by enthusiastic staff who know what they're selling, and the usual recommendations engines are less effective than one of those staff engaging in Q&A with a customer to find something new that they might like.
(And this is before we get into things like the cafe side of the business, or the author readings/signings. Disclaimer: I am an author and I occasionally do events there.)
This exchange of value for money is done in a way that may be somewhat unique for a retail establishment, but isn't anywhere close to anti-capitalistic.
I thought that the existence of an individual or group of individuals who hold material wealth and can invest it (those who hold capital, or capitalists) instead of selling labor was capitalism at its core, and maybe therefore at its finest - is that not your take on it?
I'm guessing I'll see a lot of commentary about paying a living wage and how these businesses must be mismanaged and that this is just the way the market "works." I won't necessarily disagree, but what is happening in practice still feels wrong.
Anyway, there's extremely little hard evidence of minimum wage raises leading to higher unemployment. Studies generally show no effect. There's no shortage of dubious anecdotes from people with a political ax to grind, though.
Also, how many people transitioned from a job at a small business to a larger one? Unemployment could remain unchanged, but competition could drop drastically.
As I've said elsewhere, I'm in support of paying a living wage, but I don't think it can work on a city scale and these experiments only hurt the cause by producing bad data.
If that is the theory, total employment would stay the same.
I'm not against a minimum wage increase, but the country is watching places like SF and Seattle to see how a higher minimum wage plays out. The big players can always recoup loses in other markets, but the small businesses are unable to compete. Small businesses close, people lose jobs, and the wage hike is declared a failure. To me, if you really want to support a living wage, then don't support experiments that are doomed to fail.
If it's unprofitable for Starbucks to continue operating in SF, why would they do so? Big businesses can recoup short-term losses, sure, but if a given market is going to be unprofitable for the foreseeable future, there's not much reason to keep operating in that market.
That said, companies like Starbucks may see this as an opportunity to reduce competition, by operating at a loss until the smaller businesses close, and then raising prices to make the market profitable again. But if they actually do that, once they raise prices, small businesses can start competing again.
If they are even close to breaking even, then it's probably worth it to stay open in the area for marketing value.
Or you can just look at news articles from the past. There is long history of people predicting dire employment impacts that never materialize.
Back in high school, there was a big old dirty cafe all the kids hung out at. It had room for maybe 200 people on busy nights, which was probably over what fire code allowed. The coffee was made by stoned hippies on rarely-cleaned equipment and was pretty bad. It was normal coffee shop prices. It was the place to be because they were open 24 hours and had open-mic nights, where angsty teens could play guitar in front of their friends.
Another place in that same state was super tiny (seating for about 10 people) and had a line out the door most mornings. Their coffee was good, as was their pastry. It wasn't cheap at all. The service was pretentious and rude, but mostly in a funny way. Being a regular there felt cool, and you'd chat with other customers in line.
There are places in Chicago that charge >$6 for a cup of pour-over. These are typically fantastic. They could charge $7 and likely lose very little business. People who go to these types of places aren't cross-shopping Starbucks.
I'd bet that a place charging $10 for a cappuccino in SF would do just fine assuming it had something else going for it as well. Build a business that is Instagram-worthy and charge whatever you like for your product, and you'll still get lines around the block if it's a good enough gimmick.
And, of course, there is a tendency for those who support regulations to see the negative side effects and address it with more regulation. Also a potentially dangerous response (though also not always wrong).
I tend to prefer regulations be applied more lightly to very small businesses. The dynamic of "faceless evil overlord that doesn't care about their employees vs. powerless peon" doesn't usually apply to a bookstore with a dozen employees. But, that's probably not tenable for a minimum wage; even if smaller businesses weren't required to comply by law, they'd likely have a hard time hiring people if they weren't paying the same as the big chains.
Then again, this is not just a story of the minimum wage increasing; all bookstores are facing pressure from online sales, and have been for years. Employees are expensive and it takes more of them per-sale for a brick and mortar than for a shipping warehouse. They're all having to innovate their way out of obsolescence or die trying.
I guess we'll see how this plays out in SF. The economic disparity in SF is so high, it's probably a good thing that there's a people-driven attempt to rectify it.
How about this: If your business can't afford to pay a "full living wage" for a full time job you "shouldn't" be in business.
It's kinda alarming the disdain you're showing for service workers, I really hope you're trolling
The last time I worked minimum wage I was 16... because I decided pretty quick i wanted to do better than minimum wage...
Nobody is forced to work a minimum wage job... it might be hard, but it can be worked out of... but there its difficult so most dont even attempt it
You earn your effort. You _EARN_ your wage. If you work less, if you put in less effort, if you give less... you get less in return. Its balance. Its equilibrium... without it, with more people taking more than they are giving out, you end up with bad. Bad all around... giving more to people who put in less effort solves nothing
I still support raising the minimum wage, but we shouldn't expect to have our cake and eat it too. Making labor more expensive will make goods and services more expensive, and it will make some businesses non-viable.
Now that I'm thinking about it, is the minimum wage a regressive tax in disguise? In low margin businesses, one would expect the additional labor costs to be passed along to the consumer in the form of higher prices.
Therefore, the extent to which a minimum wage raises your "tax" burden is proportional to the % of your income spent on low-margin consumer goods and services.
On the bright side, there's little risk involved, since you're generally allowed to ship back any unsold books (or just their covers) for a full refund.
Anything that increases prices could be seen as that, but I don't think it is that bad if you cut down to the necessities and you end up having a job at the higher minimum. This is just my intuition though.
Worst case: prices go up and you are unemployed.
And I would say increasing minimum wage having a large impact on businesses is more of an example of unmanageable wealth distribution. Minimum wage should be a safety net to make sure people are paid at least enough to survive. If everyone is already lying in that net then yeah, it gets a lot harder to raise it.
I would think that when most of the wealth increase over the last 20 years has been for the very rich, then spending is down and margins get thinner for the (growing) very poor.
So not only do you have a large proportion of minimum wage earners, you also have less disposable income. Raising the minimum wage is sort of a mini-stimulus package for people, but also increases the burden on struggling businesses. I guess they don't balance out as easy in some businesses.
They claim this will cost them an additional $30,000/year. Let's consider that. Assume that their employees are all current minimum wage employees (otherwise they would not be affected). Given that they're open for 8 hours/day (which works out to 56 hours/week), it would mean that their additional cost would be an additional $3500/employee; so an additional cost of $30000 means they have 9 employees working all the time. Anyone who has been to Borderlands (and I have been a few times) can see that they do not have 9 employees all the time. Max I've seen are about 4. It's a bookstore, not an oil change place!
In any case: whatever floats their boat. If sponsorships help them stay afloat, so be it. But they shouldn't blame the minuscule wage increase for their woes.
EITC is a much better way to redistribute this wealth and it puts money in the people's pockets who need it most.
Separately, there is a separate question of the (many) consequences or raising the minimum wage. A lot of smart people think that EITC and other programs are a better way to redistribute wealth. I happen to agree. If a small business has to raise prices, that doesn't generally affect the upper middle class and wealthy. They don't tend to shop at Walmart.
From the post.
And they couldn't sell anything in addition to books? Or change their selection to reduce their overhead? Or buy/sell used books?
I don't know, I'm not them. But "we can't raise those prices, and we couldn't lower our expenses" always sounds like a bit of a copout.
They do that. In the bookselling business, these are called "sidelines". Borderlands has several, including postcards, greeting cards, small gifts, journals, local art, etc. They've tried many others as well that haven't been profitable for whatever reason (which they then have to eat the cost of.) New sidelines are a gamble for that reason.
> Or change their selection to reduce their overhead?
This is an oversimplification, but selection doesn't involve overhead in the usual sense because unsold books can be returned to the publisher. Anyway, their focus on sci-fi/fantasy and mystery books is a large part of what makes them special and beloved, rather than just another generalist bookstore.
> Or buy/sell used books?
They do that.
> I don't know, I'm not them. But "we can't raise those prices, and we couldn't lower our expenses" always sounds like a bit of a copout.
I've been to several of their sponsor meetings and spoken with the owner on a few occasions. Alan is very open and transparent about the bookstore's finances. If I recall correctly, because of the way publishers eat of the cost of unsold books, the store's expenses are dominated by labor and rent in that order (with utilities and credit card processing fees a distant 3rd and 4th). Everything else is basically rounding errors in the store budget. It's like trying to cut the Federal Budget without touching healthcare entitlements or defense - there's no way to make a meaningful dent. See also: Amdahl's Law.
When labor makes up about half of your costs, changes to the minimum wage affect you disproportionately compared to many other kinds of business.
Is it, though? Isn't it what kills freemium websites?
A) Minimum wage increases helps everyone overall by increasing the wage floor.
B) Increases in minimum wage are correlated with greater disposable income, even when put into context with inflation and goods prices increases (basically price of goods may go up a little, but labor wasn't a large portion of their cost to begin with).
Here are some articles after a brief search: [https://www.forbes.com/sites/timworstall/2015/05/25/warren-b...] [http://www.ncpa.org/sub/dpd/index.php?Article_ID=25936] [https://www.bostonglobe.com/opinion/editorials/2014/04/02/mi...] - a little either or but EITC does more to amplify small increases to minimum wage than the opposite.
I do think the minimum wage should be increased but by a more reasonable amount and then track inflation every five years or something. I just think EITC is a much more targeted tool. Additionally, raising minimum wage doesn't help if most of the jobs are automated away but EITC still helps.
You make several statements I can take issue with, but the most interesting is to imply that if someone else makes more money, other people are devalued.
I think that's an interesting argument in a world where executive compensation has grown continually, and workers income has decreased, while GDP has continued to shrink. http://www.epi.org/publication/ceo-pay-continues-to-rise/
http://www.tradingeconomics.com/united-states/gdp-growth-ann... (click max, then trend under the bar graph button)
I urge you to look at the non partisan Congressional Budget Office's discussion of a federal minimum wage hike. https://www.cbo.gov/publication/44995
Why? Just because they make ~$12/hr? I have employees making $15/hr (lowest we pay) who have 2-4 weeks of PTO plus flex days, and I don't consider myself exceptionally generous.
Yes, if the employer is paying the minimum wage my guess is they are also paying for the minimum number of hours.
As for work outside store hours: sure, there is some. But it's not a restaurant where you have to sterilize everything in the kitchen. It's a bookstore. At most you have to sweep the floors, maybe re-shelf some misplaced books, and shelf the newcomers. It's not a tremendous amount of work that has to be done before opening or after close.
Even for those who work 10 years for a company, like Borderlands has?
I also don't think you've run retail operations at any sort of scale, given your comments.
From the blog post: "by way of example, once the final wage increase rolled out in 2018, we would have been losing around $30,000 per year"
I joined their sponsorship program as soon as they started it, it feels great to walk in and see your name printed on the printout on the wall by the coffeeshop door.
Do you realistically think that this is the goal? Do you think that someone thought, Let's look for ways that Americans can't get a job?
> leaving those jobs to illegal aliens and punishing businesses who try to follow the law and only hire citizens
If a business doesn't care about the law, why are they paying the minimum wage in the first place? Isn't hiring illegals, illegal?
I see why you are worried. As the article says "We said that we thought the dramatic wage increase might likely be very good for San Francisco, but it wasn't sustainable for us.". So what is good for the majority is not always good for all individuals. But that doesn't mean that it is a bad idea.
I suppose if it's easier to hide illegal employment altogether, rather than cook the books to hide underpaid employees, that would be a reason.
Yes, for the reasons I mentioned in my post, which is that it gives them more leverage as an industry to protect their profits. If someone is looking to start enforcing the law and deporting aliens (harming profits because labor is now more expensive), they can then make an argument that this will lead to increased prices of their product. How much the price is increased is dependent on how much more they will have to pay citizens to work instead of aliens, which is determined in part by what the minimum wage is.
>If a business doesn't care about the law, why are they paying the minimum wage in the first place? Isn't hiring illegals, illegal?
Citizens have recourse and legal power to fight unlawful activity that illegal aliens do not. If a citizen is being paid less than the minimum wage, they have no reason not to try and extract the money they are legally entitled to by using the legal process. Aliens cannot do this, they do not want to bring attention to themselves because it could get them deported. So, it is better to violate the law by hiring illegal aliens than it is to hire citizens and pay them less than the legally mandated minimum wage.
The fact of the matter is that minimum wage doesn't magically make everyone get paid more, it just makes jobs that don't produce more money than the arbitrarily-decided minimum wage illegal, and now nobody gets them. This apparently includes small coffee shops, but not e.g. Starbucks. The small coffee shop employees by the way seemed to have no problem with the former status quo, because if they did they would probably have either unionized or found other jobs. Instead, they all lost their jobs when their wages were legally required to be increased beyond that which the owner could afford.
Way to go, guys. Now nobody gets anything, except Starbucks, who gets less competition and more customers. In whose best interests was this decision made in, exactly?
It's like that restaurant that only allows up-front-paid reservations. It's kinda obvious once it's brought up, but goes against how that industry usually works
They were basically buildings or floors rented out to simply be a place to relax, kick back, do some quiet work, play pool, drink/smoke in what I can only imagine were velour jackets, etc. In practice though, they were very expensive and mostly an upper-class affair.
I feel like we could do better these days with say, 4000 sqft. of mixed-use space on the border between an industrial and residential neighborhood where rent is reasonable.
[1] https://www.betahaus.com/berlin/
In my city a hotdesk at a co-working space starts at $250/month for just 2 days a week. So I go to cafes, partly because of cost, but mostly I prefer the ambience and staff there (much friendlier, better music, coffee on demand). If my local cafe chain had a $300/yr gold membership/sponsorship, I'd buy that in a heartbeat.
On the other hand my cafe doesn't sell Club Mate or Mate Mate, so betahaus definitely/easily beats Perth there! :)
If my local bookstore needed sponsorship to stay open I would be first in line to donate. With that said, something feels off-putting when I read these stories of requests for sponsors and donors to failing businesses. Seems increasingly common story too. I understand there's multiple sides to this debate, and what the trend may or may not lead to. I have no idea. Maybe it is market efficiency or maybe it's serious market failure. I see comments on both those sides. Either way I don't think relying on sponsors and donors for failing businesses is a good or long term way for an economic system and market to function. Two more examples of this trend toward needing donations to band-aid the bullshit we created:
Noah Smith's recent tweet: "I swear to God, the sight of people with deadly diseases crowdfunding their health care is the most dystopian thing about America right now" [1]
Walmart asking for donations of food for its own employees who do not earn enough in wages to support themselves: http://www.cleveland.com/business/index.ssf/2013/11/is_walma...
Speaking of, an increase in the minimum wage was blamed by Borderlands and others for having to close down and/or ask for donations. (Side note, I was surprised to read of these book store employees they have who "cheerfully" worked for minimum wage. in San Francisco. for a ten-plus years! Amazing! but whatever). Wages are not the full story here...The cost of rent for good retail locations in these cities (SF, LA, NYC, etc.) is a major major issue. Nuts. I'm not suggesting we federalize major cities' downtown storefront real estate spaces. I think if someone bought or inherited real estate in a great city location and makes a fortune then congrats to them, smart move, happy for them.
But fundamentally it is economics 202 that a local B&M business model and employee wages will never keep up with the monopoly that is big city real estate and their pricing power to rent seek. The numbers don't work long term. Period. A regular business can't beat a monopoly like real estate but it's especially difficult when there are flocks of new, overconfident fools for tenants waiting in the wings with a shark-tank-quality-biz idea and fresh capital they got from who knows and they are ready to sign a lease they can't afford. Look at NYC restaurant spaces, why do they cycle so often and so quickly? Or come visit Los Angeles (I'll buy you a beer) and then go to Rodeo drive in Beverly Hills. Rent is so expensive on Rodeo now (+$1000 psf I think these days) that landlords know their tenants are running at a loss and they still raise rents on them every year (or sooner)...Half the shops on Rodeo Dr. are major luxury brands renting at loss but there for marketing purposes, the other half of shops belong to these weird little overconfident new luxury brands no one has ever heard of but think they will hyper grow and cover Rodeo rent. They never do. These little American dream, Italian leather type stores last maybe 6 months before closing and the next overconfident fool with a pink faux emu skin handbag is ready to roll the dice and pay an even higher rent
P.S. If your city or town still has a real bookstore, when was the last time you went in there and asked the staff for a book recommendation and then gave a new paper book chance? Good date idea too. Just good all around. Roll dice.
[1] https://twitter.com/noahpinion/status/844393961678655488?lan...
They obviously wouldn't have ever seen that happen, had they shut down immediately before giving it a chance. And I have to assume that higher purchasing power in the book budget of people has been used up by the 300+ 100$ sponsorships a year.