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.”
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 is the first city in this thing and everyone’s watching, asking how is this going to change?” The Washington Policy Center,
Oakland is seeing similar problems as it has raised its minimum wage from $9 to $12.25:
For 27 years, Sandy Vuong has supplied towering cakes and fluffy Vietnamese pastries to residents of Oakland Chinatown. Now she might shut her doors.
Vuong’s Delicieuse Princesse Bakery isn’t the only business that’s foundering after a new law raised the hourly minimum wage in Oakland from $9 to $12.25 — pushing the bakery’s payroll costs up by 36 percent overnight. According to Carl Chan, a board member of Oakland Chinatown Chamber of Commerce, four restaurants and six grocery stores in and around Chinatown have already shuttered since January, at least partly for fear that the wage increase was going to put them over budget.
Among them is Legendary Palace, one of two banquet restaurants in the neighborhood.
“If it doesn’t reopen, then a lot of business in Chinatown is gonna go back to San Francisco, or down the 680 corridor to Milpitas and Fremont,” said George Ong, an attorney representing Legendary Palace’s landlord. Legendary Palace closed for a variety of reasons, not solely the wage hike, said Ong. Another reason had to do with internal disputes among the old owners. Now, Ong worries that higher labor costs might inhibit a new owner from coming in.
“There’s no question it’s gonna have an effect,” Ong said. “The question is how much.”
There is a method to this madness. Labor unions and far left activists don’t care how many restaurants are forced to close, or how many workers lose their jobs. As long as there are some workers who make the “living wage” and some businesses willing to raise prices and try to make a go of it, they think their point is proved and the drive for a $15 minimum wage will sweep the country.
Urban centers are in danger of becoming vast wastelands. Many smaller businesses will not be able to jack their prices up high enough to pay the new wage. So the rich get richer and the poor simply disappear.
Meanwhile, the people least able to afford it are losing their jobs. I guess that’s the price we pay to enact “progressive” policies.