Seattle restaurants going dark as $15 an hour minimum wage goes into effect

The American Thinker ^ | 3-14-15 | Rich Moran

[afraidfortherepublic]

Seattle is about to embark on a civic experiment that most experts predict will be an economic disaster; a $15 an hour minimum wage is set to go into effect on April 1st. And some restuarants in the city have already shuttered their doors and are either going out of business or moving to friendlier climes.

This was entirely predictable - and was predicted when the measure passed the Seattle city council. Restuarants are particularly sensitive to this sort of increase in wages since most of their employees are paid at the minimum, and such a large percentage of their operating costs go to labor.

“Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”

“He estimates that a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36 percent of funds are devoted to labor, 30 percent to food costs and 30 percent go to everything else (all other operational costs). The remaining 4 percent has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restauranteur in Seattle has been making $28,000 a year.

“With the minimum wage spike, however, he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent.”

Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine. As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.”

[firebrand]

Don’t forget that in high-turnover businesses, like grocery stores and some high-volume restaurants, the profit percentage may look small but is compensated for by the volume of business.

[central_va]

I think there is a union floor you can’t go under. Face it some unions will not go away, ever. So I think we are pretty close to zero union for all practical purposes.

[sport]

I hope they all go out of business.

[driftless2]

Liberals don't understand economics, because at the root of liberalism/leftism is a basic hatred of free-market economics. Certainly, there are many liberals who do understand it, but like you said they don't run the country. What we have now is more of a leftist control of things. They base their goofy economic ideas on what a job should be worth rather than what the market dictates i.e. schoolteachers should be paid more than professional athletes.

Leftists have actually devised plans for economic "justice" detailing how the "important" professions (teachers, social workers) should be paid as opposed to the "unimportant" (admen, pro athletes, etc.) professions. Naturally, the market plays no role in the leftist economic system. Which, of course, is why leftists devised communism.

[Beagle8U]

Nope, too many public sector unions.

“Public-sector workers had a union membership rate (35.7 percent), more
than five times higher than that of private-sector workers (6.6 percent).
(See table 3.)

—Workers in education, training, and library occupations and in protective
service occupations had the highest unionization rate, at 35.3 percent for
each occupation group. (See table 3.)”

http://www.bls.gov/news.release/union2.nr0.htm

[Dilbert San Diego]

Jesse Jackson has already suggested that white businesses be forced to stay in towns after blacks take over the levers of power. Nothing would surprise me any more.

---

How can you force someone to stay in business? Suppose they just close up one day and never return? Suppose somebody running a business just doesn’t show up to open for business? Suppose they aren’t doing enough business and are going broke? Suppose they can’t find a buyer for their business when they want out? suppose the owner has health problems and needs to sell or close??

Just saying, how can you force someone to stay in business? Is Jesse Jackson realistic in his world view????

[Dilbert San Diego]

I did a very quick back of the envelope calculation, and based on the $700,000 revenues of a restaurant, with the percentages of labor costs noted, that they would have to increase sales by about 18% to make ends meet, after increasing minimum wage to $15 an hour.

Can a restaurant realistically increase menu prices by 18% overnight and still have the same sales revenue? Would the mix of products sold change; would customers opt for some cheaper menu items? Would they tend to skip coffee and dessert? Would they order fewer alcoholic drinks? Would regulars of a certain restaurant still go there, but eat out less often due to the increased cost?

People can do a more involved calculation than I just did, and the business owners affected in Seattle are doing just that. With such narrow profit margins, and a limited ability to just increase your prices to pass along their own increased costs, the squeeze will be on.

Businesses can’t have losses indefinitely and still stay in business. Liberals just don’t understand certain things. And they don’t understand that you can’t just burden business with increased costs with no fallout.

[Lockbox]

:)

[Popman]

Typically, you can add 25 % PAC (payroll added cost) to every dollar you pay someone...

Employer portion of Social Security tax
Employer portion of Medicare tax
State unemployment tax
Federal unemployment tax
Worker compensation insurance

$15.00 an hour would actually be $ 18.75 an hour

[Dilbert San Diego]

Good points about cascading increases in things like payroll taxes. As pay increases, those taxes increase also.

These businesses, if they want to survive, will have to redo their business models, and see if they can survive. The dispassionate review by a CPA would be very helpful to some businesses. Just closing up rather than trying to struggle to survive over a period of years might make more sense, dollars and sense, to these small business owners.

[Night Hides Not]

I just purchased a wood pellet barbecue. I expect to recoup the investment in less than three months. Don’t need to dine out, just make sure the pellets are in the hopper, and my steaks or chicken are ready in 30 minutes.

[Mr. Jeeves]

Small business owners are well aware that we are modern-day kulaks. The hatred coming at us from Obama on down is palpable. We symbolize everything they despise. Just by operating every day we are a living rebuke to their beliefs and ideals. Thus, they want us dead. Not regulated. Not even out of business. Dead.

But the laws of the United States continue to frustrate this Communist ambition, so they turn to these types of minimum wage polices and labor laws to try to drive as many of us out of business as possible.

Where are people to work, you ask? To a Leftist, when Utopia arrives everyone will be paid by the government. So they aren't especially concerned with whether people are able to earn money - they consider themselves to be liberators, freeing oppressed employees from the awful realities of capitalism. If the former employees need money, there is always some sort of social program out there to support them until The Revolution comes.

[CodeToad]

“Try saying that at a party and see if you survive the night. ‘-)”

Usually true, but I only go to parties that do not include liberals. I refuse to listen to their communist propaganda and keep quite.

[bjorn14]

Those are standard in every sit down restaurant in Norway but usually the waitron hands you the machine and walks away until you are done.

[Mama Shawna]

Hey Left! How ya doin! Tip jars are the norm around here. Our little group plays a LOT of coffee houses (imagine that...coffee house all over the Seattle area HAHA) and our normal pay is a meal, free beer, and we put out our tip jar. Some nights are GREAT, and sometimes there’s a quarter in the jar. Depends on the venue and who makes it to your gig. There’s one restaurant in Seattle that has cancelled bands on the weekends, can’t afford to pay them anymore. I can’t remember the last time we actually got PAID by a bar/coffee house, etc. Normally that only happens at private functions these days. But hey, it’s all for the love of playing.

[gogeo]

If it was as simple as just increasing prices, maybe you would have a point.

[bjorn14]

That’s only half the story. If it wasn’t for min. wage employers could hire as many employees as they wanted to to replace the ‘skilled’ union worker.

[Popman]

Just closing up rather than trying to struggle to survive over a period of years might make more sense, dollars and sense, to these small business owners.

According to the article 36 % of sales revenue go to labor costs...$.36 of every $1.00

What that means in real dollars, is for every additional $.36 of increased labor costs you need to increase your sales $1.00 just to stay even...

Having looked at operating statements for the last 30 years in various businesses...I'd either move or close shop and cut my losses...

I can't see how they crack that nut unless they completely change their business model to increase sales or cut costs...

That in the long run that costs time, capital and vision...

Which as a small business owner they have very little of these things..

[bjorn14]

What liberals don’t understand is that its not companies paying the bills its customers. The companies are just conduits to pass along the the employees wages.

[fieldmarshaldj]

Hope the Stalinists enjoy their $50 Lil’ Krystals.