San Diego business owners are nervous and unhappy after city residents voted to increase the city’s minimum wage to $10.50 immediately and $11.50 per hour starting January 1, 2017. That’s a step above California’s statewide minimum wage of $10 per hour, and it’s left many small business owners wondering how they will cope with the increased labor costs brought by the higher minimum wage.

More than 60 percent of San Diego voters approved Proposition I, a ballot measure that, like earlier initiatives, seeks to raise the minimum wage gradually. Prop I also guarantees workers five paid sick days.

Small business owners planned to fight the initiative after the city previously announced it would appear on the June ballot. But that planned fight was overshadowed by moves in the California legislature, where lawmakers passed a bill that phases in an increase of the state’s minimum wage to $15 over the next five years. Governor Jerry Brown signed the measure and made it law in April, leaving business owners in San Diego with little motivation to oppose Prop I.

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The San Diego Small Business Coalition struggled to come up with the $1 million they needed to mount a campaign to combat Prop I, particularly after Brown signed the statewide minimum wage proposal and made it law in April.

San Diego will start paying workers $11.50 an hour on January 1, 2017. Statewide, workers will not start receiving that amount until 2018, which, whether small business owners like it or not, puts San Diego ahead of the curve when it comes to wage inflation in California.

But San Diego businesses are not taking the wage hike too well. Fast-food chain Wendy’s, announced its plans in April to introduce automated self-service kiosks in all of its restaurants and referenced upcoming minimum wage hikes in California and New York as the reason.

Pasadena-based Jacobs Engineering Group and the Burbank-based C and S Propeller announced they are moving to Texas, citing the business-friendly environment and lower labor costs.

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The restaurant industry, a bedrock of Southern California’s economy, is already feeling the effects of the proposed labor hikes. A spokesperson for the San Diego Small Business Coalition said that restaurants are already cutting entry-level positions, such as bussers, and asking wait staff to pick up the slack in order to save money on labor costs.

San Diego city leaders have been debating the proposed labor cost increase back and forth for the past two years. The Democratic city council first approved a plan to provisionally increase the city’s minimum wage in July 2014. Republican city Mayor Kevin Faulconer vetoed the proposal and has delayed the proposed increased ever since. Now, the city council has successfully overridden the Mayor’s veto, and the plan to increase the city’s minimum wage is going forward, despite opposition from the local business community.

About 172,000 San Diego residents will get an immediate increase of $0.50 to their minimum wage, and an extra $1.50 starting next year.

If you’re in the market for a luxury home in San Diego or Southern California, contact one of our real estate professionals today.

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(all data current as of 10/17/2017)

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