Posted on 03/17/2015 8:50:32 PM PDT by nickcarraway
Early indicators suggest the $15 minimum wage will not be as positive as City Hall intended
In a few weeks, Seattle’s new, highest in the country, $15 per hour minimum wage will go into effect. Like many liberal policies, it was passed by City Hall with the best of intentions. The only problem is, in the end, it may do more harm than good for many.
Private businesses, unlike government entities (which, in theory, can always raise taxes or borrow), must make more than they spend in order to pay the rent, make payroll, keep the lights on, pay their business taxes, and, heaven forbid, have some left over for the owners and investors who are taking the risk and putting in the long hours.
Earlier this month, Seattle Magazine asked, Why Are So Many Seattle Restaurants Closing Lately?:
Last month—and particularly last week— Seattle foodies were downcast as the blows kept coming: Queen Anne’s Grub closed February 15. Pioneer Square’s Little Uncle shut down February 25. Shanik’s Meeru Dhalwala announced that it will close March 21. Renée Erickson’s Boat Street Café will shutter May 30 after 17 years with her at the helm…What the #*%&$* is going on? A variety of things, probably—and a good chance there is more change to come.
The magazine went on to report that one “major factor affecting restaurant futures in our city is the impending minimum wage hike.” Anthony Anton, president and CEO of Washington Restaurant Association, told the magazine, “It’s not a political problem; it’s a math problem.” He estimates that restaurants usually have a budget breakdown of about 36 percent for labor, 30 percent for food costs, and 30 percent to cover other operational costs. That leaves 4 percent for a profit margin. When labor costs shoot up to say 42 percent, something has to give.
Restaurants can take actions to adjust, such as raise their prices, acquire cheaper ingredients, and cut their operating hours and labor force. However, all those actions generate reactions from the public which can still lead to lower revenues for the restaurant and, for some, the decision to close their doors.
The Washington Policy Center explains:
When prices rise consumers seek alternatives, a behavior economists call the “substitution effect,” which results in lower demand for the higher-priced product. In the case of restaurants, consumers have access to the ultimate substitution – they can stay home. A spokesman for the Washington Restaurant Association told the Washington Policy Center, “Every [restaurant] operator I’m talking to is in panic mode, trying to figure out what the new world will look like.”
Seattle had a foretaste of the effect of the $15 minimum wage earlier this year when Prop 1, which made a $15 minimum wage for those working in parking garages and hotels near Seattle-Tacoma International Airport, took effect. A reporter asked a cleaning woman and a part-time banquet server, who work in a hotel near SEATAC, what they thought of the new law:
The cleaning woman responded, “It sounds good, but it’s not good,”
“Why?” I asked.
“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.
The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
“What else?” I asked.
“I have to pay for parking,” she said.
I then asked the part-time waitress, who was part of the catering staff.
“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.
The Seattle Times reported that a Clarion Hotel recently made the decision to close its full service restaurant (laying off 15 people) and let go of a night desk clerk and a maintenance worker. It also plans to raise its rates by 10 percent to offset increased labor costs.
As the April 1 deadline approaches, the residents of Seattle will have a front row seat to the effects of the $15 per hour minimum wage, but early indicators suggest it will not be as positive as City Hall intended.
Yeah, the idiots couldn’t see this stuff coming? Amazing.
As Hillary! once said, and I paraphrase: “It’s not the fault of the government that these businesses are undercapitalized”.
Gonna be interesting to see what this does to the whole notion of tipping in Seattle. Will people tip a waiter who makes $15 an hour? I could see this being disruptive to the way waiters and their patrons have traditionally related. I wonder if the sophisticated inhabitants of that city who enjoy the full restaurant experience have considered this possible loss of culture. Liberals simply do not understand that swinging the Marxist billy club around can cause damage to delicate things in unexpected ways.
That's an interesting point. It also drives out the kinds of businesses that rely on entry level labor. I guess the end result would be a kind of sanitised up-market never-never land.
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This whole minimum wage ruse was for the benefit of the unions. First, numerous union negotiated collective bargaining agreements (CBA) tie union member wages to increases in the minimum and living wage. This increases the wealth of the union from increased union dues.
Second, several recent minimum and living wage laws allow for the new wage standard to be waived in a union contract. This exemption came to light during the SeaTac (a suburb of Seattle, Washington) $15 dollar per hour living wage ballot measure, which allowed for unionized employers to be exempt from the new wage increases and sick leave mandate.
Union exemptions from living wage laws give unions an unfair bargaining chip that is unavailable to individual workers attempting to negotiate their own pay and benefits. What this does is draw new workers into union franchises. This serves to increase union monetary returns from dues and will not help low income workers.
stupidity can be pretty sad.
The restaurants that do stay in business by charging more should be okay since theres less competition. People will always dine out just not in the same numbers. It always gets back to supply and demand.
For the city however and for property prices its a different story. Now new businesses will have to set up which may or may not happen. Theres also the issue of the type of business. Not every operation needs or desires what a restaurant space has to offer which is a window facing the street.
why anyone listens to anyone on the left in regards to business or the economy is beyond me.
i could have listed off the effects immediately. they’re not mysterious in the least.
Let see how long this will take to isolate Seattle then watch it dry up. As city fathers complain about nearby communities profiting from their collective stupidity. Or complain about an underground economy that springs up like mushrooms run mostly by illegals and goes out of control.
Won’t be just restaurants it’s the tourist industry as a whole. Kiss the convention business goodbye. Nobody will want to go there because its too expensive and not worth it. If your a Senior living there you’re so screwed.
This would have painfully obvious to any one with the business experience of running a lemonade stand.
I don’t see how this is a racial issue.
Please correct me if I am wrong.
Federal contractors (due to the Davis-Bacon Act) have to pay union employees (e.g., road construction crews) a multiple of the local minimum wage. That’s why unions support raising minimum wages.
The “ordinary” folks either lose their jobs or get a raise of $5 an hour. The union workers get at least double that amount, and their jobs are pretty much guaranteed.
“To me this sounded like killing people...”
Agreed. Vaccinate the African population into oblivion...
As I understand it, parking in Seattle is a pretty big deal. I visited Seattle recently and was very impressed with their transit system. A lot of well-paid Amazon and MS people commute via bus, ferry or water taxi due to the exorbitant cost of limited parking in downtown.
You mean socialist top-down central-planning wage-price-controls don’t work????
C’mon!
This country will become like Western Europe where going to McDonalds is considered dining out at I have read $20+ per person. Residents in the UK do not dine out because it is too expensive so when you want to meet friends and family to break bread you do it at someone’s house.
Time to bring back the automat restaurants.
http://en.wikipedia.org/wiki/Automat
I actually to one of the last ones in NYC during the 70s.
so, it’s true...... in Seattle there is no free lunch
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