Sorry, but I don’t entirely buy these stories.
Here’s why.
Let’s assume all restaurants in Seattle are forced to pay the $15 minimum wage. They will by definition have to raise their prices to compensate. Most of these stories seem to assume that prices cannot be raised to compensate.
If restaurant A is forced to pay $15, but restaurant B pays only $10, then restaurant B will have a significant competitive advantage, undercut restaurant A’s prices and perhaps drive it out of business. OTOH, if both are forced to pay the higher wages, both will raise prices and the competitive situation remains the same.
Which means the main effect will be that the cost of restaurant meals across the whole city will increase. Especially at the low end, since wages consume a lower proportion of total sales at high-end restaurants. Higher prices may result in fewer meals eaten out, therefore a reduction in the total spent on such meals and some restaurants going under. Interestingly, this means that in the final analysis the main effect will be that lower-income people who eat out will have their costs increase more proportionately than higher-income people.
It may also give restaurants just across the city line a competitive advantage.
But restaurants are not a terribly price-sensitive business, as can be seen by the enormously wide price range found already.
Increasing costs across an industry simply does not in and of itself drive businesses under. Its primary effect is to raise prices for that industry. Witness the effects over the years of fuel price increases on the airline industry. Main effect is that ticket prices go up across the board.
Another effect, BTW, is to incentivize paying workers, especially illegal immigrants, under the table.
I’m not particularly in favor of these minimum wage increases, but they simply don’t have the effects these type of articles toss around.
Should have noted that beef prices went up in the last couple years an amount proportionate to the proposed increase in labor costs in Seattle.
McDonalds, BK and Wendy’s didn’t go out of business. Their prices (all) went up. People grumbled for a while, then got used to the higher prices.
One issue noted in the article is that the owner is a franchisee who has 2 years to reach $15. Her competition contains a good percentage of independents who have five years. Because she has a franchised shop, she will be at a competitive disadvantage for 3 years, which means she may well face 3 years of deficit.
That’s a hard pill to swallow for a small business.