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Early indicators suggest the $15 minimum wage will not be as positive as City Hall intended.

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

Read more at Seattle’s $15 Min. Wage Is Making Something Happen That City Leaders Never Expected

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PR_Glen

those are only short term effects because its only in one city. Can you imagine an entire country doing the same thing? I can, it's called Canada... where everything is now expensive, and soon to go up even more!

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dyna mo

a profitable business pre-emptively closing, doesn't make sense at all. if it were accurate, then other industries and business could be pinpointed that are preemptively clsoing.

and neither does *foodie* make sense. i fucking hate that word. what's a foodie? someone who eats fucking food, i.e. everyfuckingone!

you are not special because you eat food.

L-Pink

To explain how fragile profit margins are to government workers with a guaranteed income or to employees who don't know what the pressure is like to meet payroll is fruitless. They just don't understand.

L-Pink

Unless your bank loan officer decides not to renew your lines of credit because it's obvious you are about to have a line item increase your bottom line won't cover.


.

dyna mo

would you have closed any of your profitable operations because of a future hurdle? give it all up because you gotta sort out a few % points?


of course not, you're more savvy than that.

Bladewire

No they're special cause they dress as hipsters, think they know more about their shitty food then us, and take pictures of every ugly fucking meal and post them EVERYWHERE on social media, every fucking day lol

dyna mo

there are so many ways to handle that, you know that. giving up because of what might happen? without even trying. just shuttering a profitable operation?

Bladewire

Gonna have to start paying models more soon, damn!

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dyna mo

that's got to be it, right? they take a fucking picture of a meal for a fb look at me, i'm eating food moment and now they are a unique snowflake! i mean really.

L-Pink

No, you're correct.

dyna mo

i noticed that article doesn't include any specific proof that the reason for the restaurant closures is due to the pending wage increase, but clicking through to the original article, it cites a couple restaurant owners' top reason for closing is poor location. after that is cost of ingredients.


Seattle Magazine | Restaurants | Why Are So Many Seattle Restaurants Closing Lately?

no offense meant to OP.

blackmonsters

Total bullshit.

Every business that is complaining routinely send workers home on the spot when business is slow.

Show up as a waitress to work 6 hours but then it rains and get sent home after two hours because it's slow.

The way they figure their cost ain't based on their books, it's based on bullshit hours that people never work or get paid for.

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vending_machine

News at 10, restaurant business is volatile.

crockett

As usual Right wing conservatives lie about everything. This whole restaurant closing due to $15 min wage thing was proven to be a lie a week ago.. Yet here they are still pushing the same lies.

The owners of each of these restaurants whom were closing were interviewed and every single one of them said the 15/hr min wage had nothing to do with it. In fact of the 4 restaurants which were closing.. 1 of the owners was opening 2 new restaurants in it's place...

This whole lie was started by a Right wing conservative "think tank" whom just took advantage of idiots whom don't care about facts but just what the title says.. As we notice several of those types are right here in this topic..


Minimum Wage Increase Killing Seattle Restaurants? Anatomy Of A Lie From Inside The Bubble - Forbes

No, the minimum wage isn't forcing these Seattle restaurants to close - LA Times

There was even a video interview with 2 of the restaurant owners whom were mentioned and they weren't exactly happy that the right wing media was using their business as a tool to lie to people.

This shit has been debunked over a week at this point, but as usual the lies keep going because certain types of people don't give a fuck about the truth just what they want to hear.

Markul

Yea the Scandinavian countries that had minimum wages for more than 50 years are doing horrible. With their low crime rates, almost no homeless people and high living standards....

What's next, banning guns are bad too because it causes more crime? or what about - god forbid - free heathcare! Now there is something that's going to destroy ANY country that gets it.

Oh wait...

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VikingMan

Hey great post I think the problem business owners face is not just the communist inspired $15 minimum wage but also the workers in Seattle who think mass murder and other inhumane byproducts of communist thought are actually fashionable. Those twats actually have a statue of Lenin that was shipped over from one of the Soviet block states and was put up for permanent public viewing in the Freemont area. Do you think these flea bag turds make good employees? I promise you they are taking full advantage of breaks, sick days, holidays, and any other way they can get out of being productive and helpful to a business. Yes Seattle has a law that forces all businesses to provide paid sick days for even part time employees.

That being said, I think any employer who cannot pay their employees at least $15 an hour need to quit trying to run a business and need to go back to being an employee themselves. However I do not think this wage requirement needs to be law.

Another huge factor is the surge the numbers food trucks. These are not roach coaches but are high quality food trucks. Just go to the Amazon campus any weekday and those food trucks are EVERYWHERE and have amazing food that is often prepared by the actual owner of the food truck.

Axeman

No way the closings were tied to the hike in the min wages. But you will see more stories like the hotel/parking lot employees who lose a lot to get the new salary. And as Glen said, you will see prices rise for everything. Salaries for other employees above min wage will rise. Inflation will spike good in Seattle.

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k0nr4d

You will see alot of stores go under as they will ahve to rise prices too, which will just in turn make more people shop online (and out of state)

TimS

Maybe they closed to re-open outside the $15 zone that was going to affect them?

sperbonzo

San Francisco Bookstore Closing Due to Minimum Wage Increase | Washington Free Beacon

It's happening in San Fran also....


San Francisco Bookstore Closing Due to Minimum Wage Increase


AP

BY: Stephen Gutowski
February 6, 2015 4:40 pm

San Francisco?s Borderlands Books will be forced to close as the city increases its minimum wage, and its owner Alan Beatts is tired of being criticized for talking about it.

?Most critics say ?how dare you blame the minimum wage increase for you closing,?? he told the Washington Free Beacon. ?It?s bullshit.?

?They?re either calling me a liar or chastising me for telling the truth.?

Borderlands is a specialty bookstore that has been able to carve out a niche in San Francisco for the past 18 years. It has been able to support a staff of five, most of whom have been working together for more than a decade.

Beatts said he made a mere $28,000 in gross salary last year.

With the added labor costs the city?s new minimum wage will eventually impose on the business, and the fact that books come pre-priced leaving no room for price increases, Mr. Beatts sees no way it can survive.

?At this point the business is doing fine but I look down the road and the business is losing $25,000 a year,? he said. ?It?s going to put me out of work.?

He is more concerned about how the store?s closing will affect his employees though. ?We?re all friends,? he said. ?In some ways this is harder on the employees than me.?

?For some of them book selling is the only thing they?ve ever done.?

Mr. Beatts isn?t just fed up with those who?ve attacked him for speaking out. He?s also upset with the city for raising the minimum wage in the way it did and with the media for oversimplifying the issue. He doesn?t see it as about whether there should or should not be a minimum wage, but about how the minimum wage is applied.

He blames the city for implementing a one-size-fits-all approach to the minimum wage hike without attempting to offset the damage it would do to small businesses. ?They could?ve tried reducing our taxes or maybe implementing a separate minimum wage for small businesses,? he said. ?I?m not an economist, I?m just a guy who sells books.?

?But I know that nothing was done,? he said. ?It was applied in a thoughtless manner.?






.

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beerptrol

Tough shit! If your business is not that profitable, it should close!

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sandman!

Im sure there are other reasons.

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ITraffic

how can costco do it?

Dorkside

$15 US is like $300 Canadian. Maybe it's time to head south.

marcop

That article was debunked by Michael Hiltzik in the LA Times over a week ago: No, the minimum wage isn't forcing these Seattle restaurants to close - LA Times. I also read another, slightly different, take-down of it somewhere else where they interviewed one of the restaurant owners who admitted to closing one restaurant but having plans to open another... just can't remember where I read it.

It's a sign of the times that news, particularly from right-leaning sources, is now more like propaganda. ALWAYS consider the source.

TheSquealer

Funny that the original article is clearly just an opinion and the author states many possible reasons many local Seattle restaurants are closing.... yet libs find it necessary to "debunk" it as it ever stated anything remotely close to fact.

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ITraffic

linkbait for right wing drones.

Grapesoda

Marco I wouldn't say the la times is neutral by any means...for instance ask AHF if condoms affect bottom line for producers then ask.... well, you

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marcop

I wouldn't say the LA Times is neutral either--each media outlet has biases--some subtle, others not so subtle. As I wrote earlier--consider the source.

marcop

brentbacardi

The government fucks the poor people but everyone is too stupid to see it. Tax refunds are free loans with no interest paid. SCAM! New exemptions that most people can't use or don't know about make useless paper pushing tax specialist junk jobs that waste workforce labor.

Minimum wage does not fix any problem ever, anywhere at any time. It is a crappy band aid that will get peeled off again in a few years to increase it further due to inflation.

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blackmonsters

So you agree that the minimum wage is not the cause of the inflation but only being raised to meet inflation right?

So isn't inflation the problem and not minimum wage?

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brentbacardi

Yes. Inflation is the problem. But minimum wage does not solve the problem in any way and probably is more harmful than helpful because it drives further inflation.

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ITraffic

the most interesting thing about this thread and article is witnessing the economy where self-confirming information is traded for traffic, clicks and ad revenue.

mineistaken

Restaurants is just a small part. What about national businesses NOT investing and closing their back offices etc?

Relentless

Nobody has ever closed a profitable business on the chance it may become less profitable in the future. Restaurants close all the time, usually from mismanagement or simply because the local consumer population got tired of them. Whoever wrote that article is either being sarcastic, or really wanted idiots to click it, or is absolutely batshit clueless.

The much more interesting thing to watch will be what happens to the Walmart stores in the area. Do they close? Their entire business model is based on underpaying labor and subsidizing that strategy with welfare payments to their employees from government entities. With a $15 min wage and obamacare in place those employees wont qualify for those subsidies and the burden of actually paying their own employees will shift back to Walmart. That may make their business model break - because nobody is going to Walmart in search of a charming shopping experience.

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Joshua G

i am sad that the right wing continues to fudge reality to make the minimum wage out to be a crisis. The fucking minimum is not even close to poverty level, for fucks sakes. maybe we should drive a delorean back to 1890 to see the lives of people who had no minimum wage at all. you know, the time that 99% could barely feed themselves while an oil tycoon controlled more money than the federal budget.

crockett

Clearly Costco and every other company whom pays livable wages are communist!

dillonaire

Book store closed because people discovered tablets and Amazon. That is like saying blockbuster closed here due to min wage increase. While min wage will force some businesses to close, that is not the case with Blockbuster or this book store. They were selling a products with decreasing demand.

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Rochard

This should be simple math... If you significantly raise the cost of labor, the price of EVERYTHING will go up. Using a restaurant as an example.... Not only does the cost of labor go up, but does the cost of printing menus - because the company that prints menus just saw a huge increase in labor costs, and has to pass them on. All of the products the restaurant buys - spoons and forks and plates - are bought from a local restaurant supply store in town, and those products have just now shot up because they too have added labor costs. And so on and so on.

But that is just the start of the problem. The people who charge $20 an hour for their services will say will have to raise their prices because all of the products they use to run their business just got more expensive.

In the end this doesn't help the people making minimum wage because all of their prices just went up - not only does the cost of the fast food they buy go up, but so does their auto repairs (the chick that answers the phone there just got a fat raise) and so does their rent (because landscapers and pool service cost a lot more") and so on. Everyone will be charging more because everything will cost more.

And that's great for one city - they are all making more, but everything costs more. Sounds great, but... What about the tourists? Tourists doesn't want to visit a town where hamburgers / hotel rooms / car rentals / parking costs 30% more on average than other cities.

This just doesn't sound like a good idea to me.

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takethebluepill

38 posts from people who do not own a restaurant (or likely any other business for that matter) and are clearly talking out of their asses.

kane

There is actually a theory that prices will only go up small amounts and profits will actually shrink because many products have a critical price point and people won't be willing to pay beyond that much for it.

Take for example McDonald's. If they tripled wages they would have to raise the cost of their food. However, there is only so much a person would be willing to pay for a Big Mac so there is actually a limit to how much they could raise the prices.

As for tourists. . . honestly, when you have thought about going on vacation somewhere has the price of parking and hamburgers ever really affected your decision to go there?

This wage hike could cause prices to rise, but I think a lot of people assume it will be more than it likely will be.

crockett

Funny that the OP posted a title that claims it's the fault of min wage, but you must of missed it. Odd that you find it necessary to complain when someone posts the obvious correction for the OP.

Then again Conservatives are always crying about something..

woj

you forgot the punchline...

when there is no (or very little) profit to be made, there is no point in starting/running a business... hence the point of the initial post... so result = businesses shutting down...

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brentbacardi

You have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation, you have inflation, you have pressure to increase minimum wage, you have increased minimum wage you get more inflation...

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blackmonsters

20 employees

$15x40 = $600 per week x 4 = $2400 per month x 20 employees = $48,000 a month.

Rent for the restaurant space = $48,000 per month.

Maybe we should have limits on rent for business space since that's just a fat ass land lord who produces nothing for America except inflation.

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brentbacardi

See but then people will default on their property, so we would also need to limit the amount they needed to pay banks per month and decrease amount of interest that could be charged. BUT WAIT! If we decrease the amount of interest and payments banks could collect, since there is tons of outstanding debt, they would need a bailout. BUT WAIT! If they continue to get more bailouts our taxes will increase and inflation will increase... and back to the next minimum wage increase to $25.

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JFK

I was thinking along the same lines

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