Two weeks away from the city minimum wage to $15 an hour, Seattle restaurants are dropping like, well, flies in soup.
Of course, minimum wage hike advocates are claiming it’s all just part of the normal attrition – ignoring the fact that the closings are running ahead of the normal rate of closures.
It’s reminiscent of 2005, when Minneapolis passed it’s smoking ban in bars and restaurants. There was a surge in bar closings – as patrons drove to bars in the suburbs, where until the state wide ban a few years later, you could still smoke.
Apologists for the ban said “bars close all the time!” Which is true. But conversations with bar owner after bar owner after bar owner who had just Tridar their establishments almost inevitably included the phrase:
The smoking ban was the final straw.
Hospitality is a tough business. In Seattle, it just got a lot tougher.
Seattle was already an expensive city. A business associate of mine sold his Seattle based 3rd generation wholesaling business to a national chain in 2012 for a few reasons including a lack of reliable low-skill help. He was covering for employees not showing up so much that he couldn’t get out and grow the business by selling more to his existing customers and finding new customers. He also had two employees that stole more $150,000 in product that they sold on E-Bay; he caught them and had to beg Seattle law enforcement to do something about it. He also was dealing with the fact that his low-skill help was expensive (he had to pay more than minimum wage to attract employees) relative to his internet/national chain competitors who warehoused outside of Washington. And his property and inventory taxes kept climbing higher and higher to cover for the Lefty ‘feels good’ social programs that seemed to just increase the number of people that needed ‘help’.
They turned a guy who was a strident pain-in-the-ass Democrat into a TEA Party Conservative at the end. Now he works as a salesperson for the national chain and makes a helluva a lot more money personally. Oh and the national chain closed his warehouse, laid off the low-skill help and sold the property to a politically connected developer who took a big government loan to buy the land and promptly defaulted.
Laws have unintended consequences?! Who knew
Seflores, I know a guy who managed a retail store there (part of a national company). He said he would only hire Minnesota & Wisconsin transplants, as the locals and California transplants were incredibly lazy and not very bright.
Reminds me of a labor union member that I used to know. He was giving me the party line: “We’d rather have one man working for a fair wage and 99 sitting idle, than let 100 men work for $1.00 an hour too little.” Sounds great . . . unless you’re one of the 99 guys sitting in the hiring hall, waiting for a job to open up. A barrista moves back into Daddy’s basement. Tough to do when you’re the Daddy.
Chuck, you are totally spot on and that practice extended down the coast to LALA Land and as far back as 1979.
The company that I worked for back then, promoted me and transferred us to LA in January 1979. That was my wife’s first residence outside of Minnesota and the culture shock almost ended our four month old marriage. To top it off, she did not have a college degree, so she was scared searching for a job.
We were both pleasantly surprised when, after a week of second interviews, she had three firms fighting over her, ultimately a benefit to both of us in the form of a higher than expected salary. She chose to work for a major, national real estate firm. A couple of days after she started and finished orientation, etc; she asked her boss, a Chicago native, why she chose her without a degree? Her boss replied that my wife’s attitude and midwest work ethic were more important, because that normally can’t be taught. Too many Californians will call in sick as soon as the weather is nice enough to hang out at the beach.
You are likely to hear more about this Seattle min wage in the coming months. Do not get bogged down in stats. If the number of restaurants does not decrease the libs will crow about that — but not mention that total number of restaurant employees has decreased.
The added hourly cost of employmenty has to come from somewhere. Either consumers pay it in terms of higher restaurant bills, lower quality food, or workers lose it in the form of fewer hours worked.
Alan Krueger is a labor “economist” who was once the chair of Obama’s council of economic advisers. He famously wrote this paper,
http://davidcard.berkeley.edu/papers/njmin-aer.pdf
which claims that when you raise the minimum wage, the money just magically appears. Consumers don’t pay more, and employment doesn’t drop. The paper has been heavily criticized by real economists because it uses dishonest methods to reach an preconceived conclusion. It’s not economics.
The two most damning critiques of the paper are:
1) Krueger and Card’s data is not reproducible. Rather than use publicly available information from standard sources regarding employment in restaurants, he conducted interviews with restaurant managers in person and by telephone.
2) Krueger only selected franchise restaurants for his study. Unlike restaurants that are owned by individuals or families, franchise restaurants can push costs around. If they have to pay their workers in fast food restaurants more, they can reduce back office staff hours or pay to compensate, or pressure suppliers to reduce their prices (which has the same effect). Krueger did not take this into account.
In the conclusion Krueger and Card acknowledge that the money to pay the higher wages had to come from somewhere, but gosh-darn if they can figure it out.
Lefties routinely cite the Krueger-Card study as ‘proof’ that raising the minimum wage has no negative effect on consumers or on employment. It gives them the ‘license to hate’ that they desire. If raising the minimum wage doesn’t increase prices or reduce employment, the only reason a person could be against raising the minimum wage is because they are evil and they hate workers.
Back when the oil sands were first being extracted in Alberta, I was spending a fair amount of time in Edmonton. Throughout Canada, they have this chain of donut & coffee stores called Tim Horton’s. In Edmonton, I was told, Tim Horton’s was paying $18/hr to the guy who swept the parking lot and emptied the trash because they couldn’t get anyone to work other wise. The coffee was about a $2 more per cup than other parts of Canada to cover for the higher labor expense. There were still lines around the block. I have no issue when the wage rates increases because of demand. But when it inflates just so the Democrat gets the ‘feels’ about it – that’s when there is going to be an adverse affect. Not everyone in Seattle is some young App Developer or Aerospace Engineer. There are plenty of people that just need a job – and when you are legislatively made too expensive to keep around, it ought to be reported that way.
Seflores: I lived in Edmonton from 1975 to 1985. I’ll buy $18/hr for a Tim Horton’s AM in McMurray in those days. In Edmonton? You were being told tales.
Economics will tell you that absent a sudden influx of cash, people willing to pay $2 more per cup of coffee don’t exist. Paying the guy $18/hr based on charging $2 more per cup will put you out of business.
Economics also tells you that the number of people willing to pay $8 for a Big Mac will always be less than the number of people willing to pay $4 for a Big Mac.
Seflores; Prior to 2010, I visited Seattle a fair number of times. Based on what my customers shared with me, I would also add in Seattle proper, the people that just need a job, are very picky elitists that can’t demean themselves by doing “peasant work. Even when these people do land a job, their work ethic sucks.
Laws have unintended consequences?! Who knew
Laws have intended consequences?! Who knew
There, fixed it for you PoD. You are welcome.
Loved the bit in the article about advocates of the higher minimum wage law simply paying the increase out of profits. Yep, that’s why someone goes into a really risky business like restaurants, he wants to give the profits to someone else!
Never mind that if you’ve got 4% profits and 36% of your revenue goes to labor (at an average of what, $10/hour), good luck pulling out enough profits to raise wages to $15/hour.
It strikes me that Webster’s ought to define “liberal” as “person who cannot do basic math”.
I don’t know what this Midwestern Work Ethic you folks keep referring to is. As a manager in retail, I’ve seen countless individuals cycle through and waste every opportunity they are given. Getting people to show up is a struggle. Getting them to complete tasks and assignments satisfactorily is even harder. The best part is when you get a bad review because your subordinates have a problem with a manager acting like a manager. It really strips a guy of all motivation to even continue trying.
As a manager in retail….
There’s your problem right there with lack of work ethic.