For years, the Left Wing has been agitating for hikes in the minimum wage. When conservative and libertarian critics have pointed out that raising the minimum wage increases unemployment, they respond that “studies” prove this not to be the case (said studies usually being deeply flawed and having little connection to reality). As I’ve said before: you’re going to have to go a long way to convince me that the law of supply and demand is magically suspended when it comes to wages.
Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” Seattle Magazine,
According to the Washington Restaurant Association, restaurants currently spend 36% of their income on labor. This hike could send that as high as 47%. Very few businesses operate with that massive a profit margin. They either have to fire employees or raise prices to compensate.
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.”
Right now, this “grand experiment” is producing panic. We’ll see how things look in a year. Keep in mind that increased prices will move many of the poor out of the city completely, which may dim the impact of this on paper. But even with that cushion, this is looking very bad.
Told ya so.