Jump to content
Sign in to follow this  
jerryskids

Seattle's $15 minimum wage may not have the effect they think

Recommended Posts

Figured I'd post this as part of my ongoing debate with MDC and other liberals who think that there is no impact on raising minimum wage. Disclaimer: the site says it is a conservative/libertarian blog. It seems pretty well-written though.

 

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.

 

 

Share this post


Link to post
Share on other sites

Wait...so they claimed restaurants already closing did so because of a wage hike that hasn't gone into effect yet?

 

(Though, i do agree it will have consequences like that and cause busniesses to raise prices...)

Share this post


Link to post
Share on other sites

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 suppose that she is entitled to those also no matter what her pay is, right, libs? :rolleyes:

Big, mean, uncaring hotels :cry:

Share this post


Link to post
Share on other sites

Wait...so they claimed restaurants already closing did so because of a wage hike that hasn't gone into effect yet?

 

(Though, i do agree it will have consequences like that and cause busniesses to raise prices...)

It's called cutting your losses.

If you had stocks in a company that you knew was going down the shitter, would you hold on to them in hopes of a possible brighter future, or gtfo while you can at minimal loss?

  • Like 1

Share this post


Link to post
Share on other sites

Also, the unemployment is prolly going to skyrocket.

Stoopid hippies

Share this post


Link to post
Share on other sites

It's called cutting your losses.

If you had stocks in a company that you knew was going down the shitter, would you hold on to them in hopes of a possible brighter future, or gtfo while you can at minimal loss?

So you think all of those places closed because of the wage increase?

Share this post


Link to post
Share on other sites

So you think all of those places closed because of the wage increase?

The restaurant business is already tricky as hell to turn a profit in. One of the highest failure / closure rates of any business there is to start. (From what I've read in the past, anyways.)

Of course I don't know each ones reasoning for closing down, but I'd be willing to bet the the upcoming increase in min wage sure played a large roll in it :dunno:

Share this post


Link to post
Share on other sites

So you think all of those places closed because of the wage increase?

Obviously not all of them. Some were certainly done in by a bad business plan, plain old incompetence, or any of the dozens of reasons why restaurants don't last.

 

But some, likely the most marginally profitable, probably saw the writing on the wall.

Share this post


Link to post
Share on other sites

I'm not sure how "ongoing" a debate is if it consists of 2-3 conversations over the course of several years. :dunno:

 

Also I don't think a min wage hike will have no effect on businesses, I think the idea that it will result in mass business closing a is overblown. In this case the article you posted implies that a lot of restaurants in Seattle already closed because of a wage hike that hasn't gone into effect yet. Hard to argue because the case the author makes is so vague.

 

I honestly can't even remember what we discussed last time. I think my point then was that a MW hike won't necessarily = layoffs because most MW workers are employed at places that don't have redundancies. For example if Burger King needs 3 fry chefs and 3 cashiers to operate at a speed their consumers expect they're more likely to raise prices than fire a fry chef.

 

It's possible I've just changed my mind on the issue too. The Democratic Party uses MW as a cudgel but there are many better ways to help the working poor IMO, like for example subsidized public education and mass transit.

 

Anyway I am happy to start the debate up again? I think this article is stupid for starters.

Share this post


Link to post
Share on other sites

 

 

For example if Burger King needs 3 fry chefs and 3 cashiers to operate at a speed their consumers expect they're more likely to raise prices than fire a fry chef.

 

 

And by raising their prices they lose more business vs the McDonalds down the street that keeps every thing the same and warrants this because of increased traffic to their establishment.

Or McDonalds does the same thing and the real loser is both of them given that their new higher prices result in less customers. :dunno:

Share this post


Link to post
Share on other sites

And by raising their prices they lose more business vs the McDonalds down the street that keeps every thing the same and warrants this because of increased traffic to their establishment.

Or McDonalds does the same thing and the real loser is both of them given that their new higher prices result in less customers. :dunno:

Or they raise prices by a few cents across their entire menu to cover the added operating costs and at their volume the effect is negligible. :dunno:

Share this post


Link to post
Share on other sites

Or they raise prices by a few cents across their entire menu to cover the added operating costs and at their volume the effect is negligible. :dunno:

 

Using the 36% labor cost estimate in the article (seems reasonable), an increase of 50% in labor costs ($10 to $15) would increase overall costs by 18% (36% * .5). Thus they would need to increase prices 18% across the board, and maintain the same volume of sales, to offset it. Or more generally, increase sales revenue by 18%.

 

That's a lot. :dunno:

Share this post


Link to post
Share on other sites

 

Using the 36% labor cost estimate in the article (seems reasonable), an increase of 50% in labor costs ($10 to $15) would increase overall costs by 18% (36% * .5). Thus they would need to increase prices 18% across the board, and maintain the same volume of sales, to offset it. Or more generally, increase sales revenue by 18%.

 

That's a lot. :dunno:

The competition up the road is facing the same problem.

 

This is a good test case, somebody had to do it to see which arguments hold and which ones don't. We'll see how it unfolds from here. If it works in Seattle, other communities will try. If on the other hand, it fails, they won't.

Share this post


Link to post
Share on other sites

$15/hr is just stupid. Especially an immediate onset with no progressive hikes over time

  • Like 1

Share this post


Link to post
Share on other sites

What do you care if they increase the wages? Don't eat there if you don't like it.

what do you care if he cares ?

Share this post


Link to post
Share on other sites

$15/hr is just stupid. Especially an immediate onset with no progressive hikes over time

Who stole your password?

Share this post


Link to post
Share on other sites

 

Using the 36% labor cost estimate in the article (seems reasonable), an increase of 50% in labor costs ($10 to $15) would increase overall costs by 18% (36% * .5). Thus they would need to increase prices 18% across the board, and maintain the same volume of sales, to offset it. Or more generally, increase sales revenue by 18%.

 

That's a lot. :dunno:

As someone with experience in running a restaurant, that 36% labor cost estimate is very close. In fact, I believe my labor goal each month around 33%. That was over 20 years ago though.

 

I was actually running this place when the minimum wage was increased, TWICE. Both times, the day of the increase, the owners and area manager came in and raised the menu prices on the menu to cover the new, additional costs.

Share this post


Link to post
Share on other sites

 

Using the 36% labor cost estimate in the article (seems reasonable), an increase of 50% in labor costs ($10 to $15) would increase overall costs by 18% (36% * .5). Thus they would need to increase prices 18% across the board, and maintain the same volume of sales, to offset it. Or more generally, increase sales revenue by 18%.

 

That's a lot. :dunno:

 

It's not, really, when you're dealing with a relatively small average transaction amount. But it's different for higher class establishments obviously.

 

My quick googling says that McDonald's average transaction value is $4.75. As a patron, I'm not going too be upset when that shoots up to $5.60.

 

As a said earlier, I'm still not convinced that a Minumum Wage is even necessary. But I've raised the wages at my theatre 27% over the last two years and my P&Ls are relatively unaffected.

Share this post


Link to post
Share on other sites

Why?

It's scary to find an issue where worms is to my right. I don't know that this has ever happened before. This is uncharted water. I'm trying to rationalize how this is possible, I'm thinking it may be because of his middle class upbringing whereas my roots are thoroughly white trash.

Share this post


Link to post
Share on other sites

The competition up the road is facing the same problem.

 

This is a good test case, somebody had to do it to see which arguments hold and which ones don't. We'll see how it unfolds from here. If it works in Seattle, other communities will try. If on the other hand, it fails, they won't.

 

I guess we'll see. Depends how close the restaurants are to the city limits, because "up the road" may not be facing it.

 

We had a similar experiment here years ago before indoor smoking was banned statewide; some cities tried to implement bans. So Tempe had one, but Mesa didn't, and they abut each other. Tempe bars near the Mesa border struggled; many closed. We quickly ended up with a statewide ban, maybe county first, I don't recall. I can see a similar path for Washington where they come to some county or statewide agreement, but it won't be as obvious a solution as the smoking ban.

Share this post


Link to post
Share on other sites

 

Using the 36% labor cost estimate in the article (seems reasonable), an increase of 50% in labor costs ($10 to $15) would increase overall costs by 18% (36% * .5). Thus they would need to increase prices 18% across the board, and maintain the same volume of sales, to offset it. Or more generally, increase sales revenue by 18%.

 

That's a lot. :dunno:

 

I think the hike is stupid as hell, but just had to point out a small flaw in your calculation: raising the minimum wage doesn't raise everyone's pay (unless you thought these restaurants were only paying every employee the minimum wage...which would probably be bad).

Share this post


Link to post
Share on other sites

 

I think the hike is stupid as hell, but just had to point out a small flaw in your calculation: raising the minimum wage doesn't raise everyone's pay (unless you thought these restaurants were only paying every employee the minimum wage...which would probably be bad).

Yep. Another great point. All those folks who have worked their asses off for years to earn raises and make more money see it all wiped out for some feel good legislation that does NOTHING but increase costs. It helps no one.

 

The poor do not get help from this because prices go up. So that wipes out their new wage increase.

 

The folks who make above minimum wage are also hurt because prices went up, but as Zero points out here, that does not mean everyone gets a raise. So these people actually LOSE money when the wage goes up because prices are now higher to cover the incensed labor costs.

  • Like 1

Share this post


Link to post
Share on other sites

Yep. Another great point. All those folks who have worked their asses off for years to earn raises and make more money see it all wiped out for some feel good legislation that does NOTHING but increase costs. It helps no one.

 

The poor do not get help from this because prices go up. So that wipes out their new wage increase.

 

The folks who make above minimum wage are also hurt because prices went up, but as Zero points out here, that does not mean everyone gets a raise. So these people actually LOSE money when the wage goes up because prices are now higher to cover the incensed labor costs.

If the prices go up 10% while their wages go up 50%, it doesn't wipe out their wage increase, it's helping them a whole lot.

 

I can't believe I have to bring this up to you. Because besides me of course, if anybody else would understand how to shave off a few cents here and there to stretch a buck out as far as possible, cut coupons, shop resale and clearance rack and dollar stores, and constantly compare prices I would have thought it would be you. I thought we were white trash brothers.

Share this post


Link to post
Share on other sites

If the prices go up 10% while their wages go up 50%, it doesn't wipe out their wage increase, it's helping them a whole lot.

 

I can't believe I have to bring this up to you. Because besides me of course, if anybody else would understand how to shave off a few cents here and there to stretch a buck out as far as possible, cut coupons, shop resale and clearance rack and dollar stores, and constantly compare prices I would have thought it would be you. I thought we were white trash brothers.

If wages go up 50%, it going to be a hell of a lot more then an 10% increase. Hell, we had to raise the prices well over 10% just to cover a focking 25 cent an hour raise, and that was over 20 years ago. Prolly worse now.

Share this post


Link to post
Share on other sites

It's scary to find an issue where worms is to my right. I don't know that this has ever happened before. This is uncharted water. I'm trying to rationalize how this is possible, I'm thinking it may be because of his middle class upbringing whereas my roots are thoroughly white trash.

$15/hr is an awfully high starting wage for a job a person can do with a GED.

 

If they make $15 then your guy going to trade school has to make $25 starting. Your four year college grad has to make $35 starting. And so on.

 

Otherwise the incentives are skewed. A guy with a degree shouldn't be making the same amount as a seventeen year old kid or an adult who dropped out of high school.

 

So everybody makes more then? Yippee! But then your wage increase is essentially meaningless since it's all relative. Prices and cost of living rise so your new $15 an hour becomed equivalent to the old $9.50 (washington's current minimum wage).

 

Now if you were to tell me that this would increase the overall share of economic gain going to wages as opposed to executive pay or corporate profit or what have you, I'd probably be into that. (There's my leftism talking.) But I don't think that's how it's going to play out.

  • Like 1

Share this post


Link to post
Share on other sites

$15/hr is an awfully high starting wage for a job a person can do with a GED.

 

If they make $15 then your guy going to trade school has to make $25 starting. Your four year college grad has to make $35 starting. And so on.

 

Otherwise the incentives are skewed. A guy with a degree shouldn't be making the same amount as a seventeen year old kid or an adult who dropped out of high school.

 

So everybody makes more then? Yippee! But then your wage increase is essentially meaningless since it's all relative. Prices and cost of living rise so your new $15 an hour becomed equivalent to the old $9.50 (washington's current minimum wage).

 

Now if you were to tell me that this would increase the overall share of economic gain going to wages as opposed to executive pay or corporate profit or what have you, I'd probably be into that. (There's my leftism talking.) But I don't think that's how it's going to play out.

The only part of your post I disagree with. :)

Share this post


Link to post
Share on other sites

 

I think the hike is stupid as hell, but just had to point out a small flaw in your calculation: raising the minimum wage doesn't raise everyone's pay (unless you thought these restaurants were only paying every employee the minimum wage...which would probably be bad).

 

Fair enough, but I could counter that waiters often make less than minimum; my link in the OP spoke to a waitress who went from $7 to $15.

 

My point was only that it was a lot more than "raise prices a few cents" as MDC stated. :cheers:

Share this post


Link to post
Share on other sites

This could finally prove rlld's theory of hyperinflation!

Share this post


Link to post
Share on other sites

If the prices go up 10% while their wages go up 50%, it doesn't wipe out their wage increase, it's helping them a whole lot.

 

I can't believe I have to bring this up to you. Because besides me of course, if anybody else would understand how to shave off a few cents here and there to stretch a buck out as far as possible, cut coupons, shop resale and clearance rack and dollar stores, and constantly compare prices I would have thought it would be you. I thought we were white trash brothers.

One more thing I forgot to post. I had a lot of pissed off employees every time the minimum wage went up. Folks would say shtt like "I have been working here for over a year and have received raises for hard work and now these new guys are making damn near the same amount as I am."

 

Also, I have been cutting my costs like crazy for years now. I am sick and tried of having to cut back on everything, especially for something I know for a fact will not help anyone.

Share this post


Link to post
Share on other sites

$15/hr is just stupid. Especially an immediate onset with no progressive hikes over time

 

This is a great point. If they had raised it $1 per year over 5 years, it might have been like boiling a frog, and 5 years from now it wouldn't be such a big deal. But a > 50% hike... :dunno:

Share this post


Link to post
Share on other sites

I'm finding myself agreeing with everything worms is saying and reasoning. $15/hr does seem high and all at once too, but I'm more willing than him to let that play out and see how it unfolds that outright call it stupid.

Share this post


Link to post
Share on other sites

 

Fair enough, but I could counter that waiters often make less than minimum; my link in the OP spoke to a waitress who went from $7 to $15.

 

My point was only that it was a lot more than "raise prices a few cents" as MDC stated. :cheers:

I'm thinking specifically of a fast good joint. If a mcdonalds employs the equivalent of 20 full time MW workers, the difference between the $10 or so an hour they were making and $15 is $16K per month. I have no idea what your average McD's pulls in on a monthly basis but I am guessing that is a sum that a fast food joint could easily relay to the consumer without losing many customers. I think that's the more likely outcome than slashing the workforce in half. I doubt many businesses that employ a lot of MW workers have much more than a skeleton crew as is.

Share this post


Link to post
Share on other sites

If all restaurants etc are impacted in a similar way then the most obvious impact would be elevated prices to the consumer.

 

Elevated prices would likely result in less patronidge, but perhaps not enough to instantly kill an establishment. I would expect competition for the reduced pool of patrons to become more intense, with some profit shaving transpiring. This would have the ancillary impact of reducing the number of new businesses arising.

 

Eventually a point of equilibirum would result with the right amount of businesses remaining profitable for the remaining pool of patrons. The main impact i guess would be less variety?

Share this post


Link to post
Share on other sites

I'm finding myself agreeing with everything worms is saying and reasoning. $15/hr does seem high and all at once too, but I'm more willing than him to let that play out and see how it unfolds that outright call it stupid.

Fair enough :cheers:

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×