The Cleaners Minimum Wage Dilemna

Charles Cestaro, who runs a cleaning business in the Bronx, pays most workers the minimum.

Fearing a Minimum Wage Increase Will Be Bad for Business: Charles Cestaro runs a prospering business in the Bronx cleaning offices and stores, and he knows firsthand what the work is like because he himself long toiled as a cleaner. As a teenager, he found a job as a window washer, hauling a bucket and a squeegee to delis and dry cleaners in the North Bronx. He worked his way up, literally, strapping himself to apartment windows 10 floors high and also waxing floors and scrubbing “way too many bathrooms.” Today, Mr. Cestaro’s Servco Industries, based in a coffee-colored, one-story bunker in Westchester Square, has annual sales of over $5 million and clients that include Sears and Kmart stores. Like many cleaning contractors, he pays most workers $7.25 an hour, the minimum under federal and state law.

The State Assembly speaker, Sheldon Silver, and Mayor Michael R. Bloomberg recently announced that they wanted to raise the state’s minimum wage to $8.50 an hour, or roughly $17,000 a year. It would be a 17 percent increase, and the first since the previous federal increase, three years ago. “People who work full time should not be poor,” Mr. Silver said, arguing that the current minimum wage was too low for survival. But Mr. Cestaro fears that if he charges more he will lose customers, a concern shared by many other business owners in fiercely competitive, low-skilled businesses like fast-food restaurants and some manufacturing. “They’re not going to want to absorb it,” Mr. Cestaro, 54, said. “They’ll say, ‘Let’s do it ourselves. We can save a bundle of money.’ ”

Mr. Cestaro, who employs 250 workers, argues that he provides jobs that are in precious demand in a lagging economy. “There’s a need to fill positions that don’t require a specific skill,” he said. “When the labor rate moves up, what happens to those people who don’t have a skill? When the day comes when the labor rate is $11, where I can buy a more skilled labor force because I was forced to pay that wage, what’s going to happen to those people who don’t have a skill set?”

As he sees it, the 60 to 75 people — most Latino immigrants — who every week apply for a job at his company are evidence of the demand for jobs paying $7.25 an hour. One of Mr. Cestaro’s workers, Rosa Castillo (below), 39, works from 10 p.m. to 7 a.m. at a Kmart in the Bronx, swabbing restrooms, vacuuming floors, emptying trash containers. She works seven days a week so she can earn overtime. She took the job after moving to the city six weeks ago from Mission, Texas, where her mother and six siblings live, and failing to find work as a waitress. She can afford New York, she said, because she lives rent-free at her uncle’s apartment. Except for necessities like subway fare, she sends almost all her earnings to her husband, who lives in Honduras with their stepdaughter.

Rosa Castillo, who works for Mr. Cestaro, would like the minimum wage raised but is concerned that her hours could be cut.

She would like the minimum wage raised but has qualms. “I think it’s good because I’d be able to make more money,” she said. But she fears that her hours could be cut and that she would earn even less.

Mr. Cestaro, a trimly built, amiable man who favors designer jeans and leather boots, has had his share of lucky breaks, but his business story is mostly one of hard work. He is a workaholic who has not taken a vacation in five years. His major indulgences are his red Ferrari 360 Spider convertible, which costs $240,000, his collection of guitars and the time he spends with his 7-year-old daughter, Giselle.

When rock ’n’ roll gigs were not earning him a living at 20, he trimmed his shaggy hair, pulled out his single earring and, in 1979, with his father’s financial help, started a door-to-door cleaning company out of his parents’ home. Within four years, he was renting a $300-a-month storefront and employing two workers. His first boldface-name client was Giorgio Armani in Manhattan. He learned how risky the business could be when one of his cleaners accidentally sprayed bleach on a $16,000 Armani dress. Mr. Cestaro, with some proceeds from his insurance company, bought the blemished dress, and his sister altered it into a skirt for his niece.

“It’s a nonrespected industry because people can buy the service at the same price you’re charging,” he said. “People don’t look at cleaning bathrooms or carpets as a skilled trade.” He says that in 1996 he was charging clients $15.50 per worker per hour and that he is probably charging $15.50 to $17.50 today. His profit margin, he said, has declined to 9 percent from about 15 percent a decade ago.

His argument that raising the minimum wage might frighten clients is not uncommon in low-wage industries. Jamie Richardson, vice president of the 415-branch White Castle hamburger chain, said that if New York raised its wage, he might trim staff members or choose new locations in states like Indiana and Tennessee with lower minimums. “Adding costs is a job killer,” Mr. Richardson said. “Our customers are real resistant to paying more.”

However, a champion of raising the minimum wage, David Bolotsky, the chief executive of Uncommon Goods, a Brooklyn-based firm that sells designer gift items and pays its entry-level workers $10 an hour, said, “I could not look at myself in the mirror and pay somebody $7.25 an hour — you can’t live on it.”

For Mr. Cestaro, figuring out his price point can involve higher mathematics. He charges by floor space and what he calls density; an office floor that has 10,000 square feet with five desks is less costly than one with 80 desks. Apparel stores are a special category; clothing and sales tags have to be picked off the floor before mopping and waxing can begin. Restaurants are also a challenge because of the meticulous detail work required by health department letter grades.

Particularly skilled cleaners will receive up to $11 an hour. Cleaners in buildings that require unionized workers start at $9.20 an hour. Even a $7.25 worker costs an extra $1.74 for every hour worked because of liability and disability insurance, Social Security and other costs. Equipment can also be expensive; drivable scrubbing machines cost up to $12,000 each.

Should the minimum wage be raised this year, Mr. Cestaro cannot charge a store like Sears any more because he is under a long-term contract. “Sears could care less what the minimum wage is,” he said, “because I’m obligated to them until 2015.”