Yay minimum wage!

[Headless Thompson Gunner]

San Fran's recent minimum wage hikes are having the predictable consequence of forcing local restaurants to close.  The local foodies are in a tizzy.  I think I've seen similar stories from Seattle lately, too, but I misremember.

As usual, Thomas Sowell lays it out like nobody else can.  "Ruinous Compassion" indeed.

http://www.realclearpolitics.com/articles/2015/03/17/ruinous_compassion_125953.html

It is fascinating to see brilliant people belatedly discover the obvious -- and to see an even larger number of brilliant people never discover the obvious.

A recent story in a San Francisco newspaper says that some restaurants and grocery stores in Oakland's Chinatown have closed after the city's minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.

At an angry meeting between local small business owners and city officials, the local organization that had campaigned for the higher minimum wage was absent. They were probably some place congratulating themselves on having passed a humane "living wage" law. The group most affected was also absent -- inexperienced and unskilled young people, who need a job to get some experience, even more than they need the money.

It's worth reading the whole thing.  Sowell even gives a library assignment to his readers.   

[MillCreek]

http://www.seattletimes.com/seattle-news/politics/truth-needle-is-15-wage-dooming-seattle-restaurants-owners-say-no/

The local media interviewed several Seattle restaurant owners, who state that the $ 15/hour minimum wage is not a factor in their closing or relocation of the restaurant.  It is important to note that the $ 15/hour minimum has not started yet and will be phased in over several years here in Seattle. 

[Headless Thompson Gunner]

http://www.seattlemag.com/article/why-are-so-many-seattle-restaurants-closing-lately

And for Seattle restaurateurs recently, there is also another key consideration. Though none of our local departing/transitioning restaurateurs who announced their plans last month have elaborated on the issue, another major factor affecting restaurant futures in our city is the impending minimum wage hike to $15 per hour. Starting April 1, all businesses must begin to phase in the wage increase: Small employers have seven years to pay all employees at least $15 hourly; large employers (with 500 or more employees) have three.

Since the legislation was announced last summer, The Seattle Times and Eater have reported extensively on restaurant owners’ many concerns about how to compensate for the extra funds that will now be required for labor: They may need to raise menu prices, source poorer ingredients, reduce operating hours, reduce their labor and/or more.

Washington Restaurant Association's Anton puts it this way: “It’s not a political problem; it’s a math problem.”

[MillCreek]

^^^Yes, the Seattle Times article is a rebuttal to the Seattle Magazine article, who never actually talked to the restaurants profiled about the minimum wage issue. The Seattle Times did.  The Times article makes this point.

[Angel Eyes]

It is important to note that the $ 15/hour minimum has not started yet and will be phased in over several years here in Seattle. 

Yes, it's difficult to blame something that hasn't happened yet.

[Headless Thompson Gunner]

The hikes in Seattle start in 2 weeks.  Minimum wage goes up 16% increase on April 1.  Do you honestly think biz owners are not concerned about this yet?

[TommyGunn]

OK ,   you can't blame what hasn't happened yet.

I wonder why people think that making labor more expensive will have a beneficial effect on the operation of private businesses, though.  

And if $15 per hour is good, why not $50.00 per hour?  

[Angel Eyes]

OK ,   you can't blame what hasn't happened yet.

I wonder why people think that making labor more expensive will have a beneficial effect on the operation of private businesses, though.   

And if $15 per hour is good, why not $50.00 per hour?   

I am not arguing for an increase in minimum wage.  I am stating that it is premature to blame it for business closures in Seattle, for obvious reasons.

In general, increasing the cost of doing business will result in some business failures.

[TommyGunn]

I am not arguing for an increase in minimum wage.  I am stating that it is premature to blame it for business closures in Seattle, for obvious reasons.

In general, increasing the cost of doing business will result in some business failures.

I didn't say you were.  In fact, I was agreeing with you ....maybe I didn't express it all that well ..  

[MillCreek]

The hikes in Seattle start in 2 weeks.  Minimum wage goes up 16% increase on April 1.  Do you honestly think biz owners are not concerned about this yet?

Effective 1 April 2015, the minimum wage in Seattle goes up to $ 11/hour, up from the Washington state minimum wage of $ 9.47/hour.  I would certainly hope that a prudent business owner already has plans in place to deal with this increase in operating costs.

http://murray.seattle.gov/minimumwage/#sthash.WpbKVSlW.dpbs shows the length of time it will take to reach $ 15/hour, it varies by the number of employees, if medical benefits are provided, etc.

[Angel Eyes]

I didn't say you were.  In fact, I was agreeing with you ....maybe I didn't express it all that well ..  

OK.  Glad that's sorted out.

[makattak]

OK ,   you can't blame what hasn't happened yet.

I wonder why people think that making labor more expensive will have a beneficial effect on the operation of private businesses, though.  

And if $15 per hour is good, why not $50.00 per hour?  

Yes, actually, you can blame something that hasn't happened yet.

People are capable of anticipating costs, especially ones that are created with the force of law. Obamacare caused many companies to limit the hours of their part time workers before it was implemented (but only just before) because they knew it was coming.

To think humans with the ability to adapt and plan are just unthinking machines surprised by a sudden change in the law going into effect is rather silly.

[Headless Thompson Gunner]

Wages typically represent something like 1/3 of a restaurant's operating expenses.  An increase in wages from $9.47 to $11 per hour would mean about a 5% increase in operating costs.

The profit margin for most restaurants is on the order of 3% or 4%.  

Hmm...

[wmenorr67]

Yes, actually, you can blame something that hasn't happened yet.

People are capable of anticipating costs, especially ones that are created with the force of law. Obamacare caused many companies to limit the hours of their part time workers before it was implemented (but only just before) because they knew it was coming.

To think humans with the ability to adapt and plan are just unthinking machines surprised by a sudden change in the law going into effect is rather silly.

I agree with this statement.  If you are barely getting by and making money and know in advance that increased labor costs are going to put you out of business why not cut your losses and get out ahead.

[MechAg94]

Exactly. 

I know my company has been limiting head count for the last few years ever since Obamacare passed.  There might be other reasons, but increased employment costs are a big one.

[TommyGunn]

Yes, actually, you can blame something that hasn't happened yet.

People are capable of anticipating costs, especially ones that are created with the force of law. Obamacare caused many companies to limit the hours of their part time workers before it was implemented (but only just before) because they knew it was coming.

To think humans with the ability to adapt and plan are just unthinking machines surprised by a sudden change in the law going into effect is rather silly.

OK, good point.  but I wonder if preparation really works .....there's always some unintended consequence.   
There's always some djits who have their heads up their butts.
And as Headless Thompson Gunner said if your profit margin is 3-4% and you have to prepare for a 5% increase .....ouch.   
And if you are prepping for that and the economy goes sideways .........

[Perd Hapley]

Effective 1 April 2015, the minimum wage in Seattle goes up to $ 11/hour, up from the Washington state minimum wage of $ 9.47/hour.  I would certainly hope that a prudent business owner already has plans in place to deal with this increase in operating costs.

Like reducing hours or benefits? Or lay-offs? That sort of plan?

[Monkeyleg]

How does the number of restaurants closed this year compare to prior years? Also, I wonder how many of those business owners interviewed were lying about their plans. You don't tell your competition what you're going to do with your business.

[Firethorn]

How does the number of restaurants closed this year compare to prior years? Also, I wonder how many of those business owners interviewed were lying about their plans. You don't tell your competition what you're going to do with your business.

Yeah, lots of restaurants close down each year anyways.  Surviving for more than a few years is unusual for new ones.

You can only cut so much labor to 'save costs' before you start losing business the way Walmart was because people were getting pissed off by the long lines and slow checkouts(among other things).

Generally speaking, losing customers is more expensive than paying your workers more.

[Hawkmoon]

You can only cut so much labor to 'save costs' before you start losing business the way Walmart was because people were getting pissed off by the long lines and slow checkouts(among other things).

I visited Santiago, Chile, a few years ago. Chile has a decent economy and a standard of living generally on par with the U.S. They have a chain of stores somewhat akin to Super Wal-Marts, called Jumbo. Jumbo is a bit heavier on foods and a bit lighter on clothing and toys, but generally about the same size as most Super Wal-Marts I've seen.

Other than at Christmas, most Wal-Marts I've been in rarely have more than three registers open, regardless of how long the lines are. The automated lanes are always open, of course, yet people are lined up at the manned registers while the automated lanes are empty. You might think the stores would get the message that customers don't like using those things, but they keep trying to force us to use them. (Lowe's and Home Depot are the same, along with my supermarket chain.)

The Jumbo near where I was staying in Santiago had 74 check-out lanes (numbered, to make it easy for me). On any given day, at least 70 of those lanes were manned and open. Chile doesn't have a minimum wage, so they provide 70 jobs where a Super Wal-Mart provides maybe five.

Interesting comparison.

[Perd Hapley]

The automated lanes are always open, of course, yet people are lined up at the manned registers while the automated lanes are empty. You might think the stores would get the message that customers don't like using those things, but they keep trying to force us to use them. (Lowe's and Home Depot are the same, along with my supermarket chain.)

Halp! I'm being forced to use an automated register!

Around here, people take to the automated lanes pretty well. Folks line up to use them, if they're actually open. They're frequently closed, "forcing" us to all use the manned registers. I wish Target, and some of the other stores around here, would catch up with the times, and finally install some of their own. I wish stores that have them would quit closing them for no apparent reason. I'd be more likely to shop there, knowing I wouldn't have to wait ten minutes just to check out.

[De Selby]

It just seems to me ridiculous that anyone could demand any level of pay whatsoever - if Wal Mart wants to offer a ball of rice and some newspaper for housing as pay, anyone lame enough not to have other options should be happy to accept (or not, if they'd prefer to starve).

True freedom cannot be achieved until a huge portion of America is desperate for any wage at all, much less some artificial "minimum wage" that buys them food!

Meanwhile, in stalinist paradises around the world I can see the shame in those high wage earners' faces.  They pretend like they're happy with minimum wages that pay mortgages and food for whole families, but deep down inside they know it's wrong.  Some of them even have the gall to take vacations to America to buy cheap goods and pretend to be appalled at the poverty, when in reality they're jealous of those homeless folks' freedom.

[MillCreek]

Like reducing hours or benefits? Or lay-offs? That sort of plan?

Well, you have two choices: increase revenue or reduce costs.  In healthcare, we have gone the reduce costs route.  Since personnel is our largest cost, we have reduced headcount or cut benefits.  For the last two years, my annual raise plus some has been eaten up by my increased share of healthcare costs, reducing my net income but reducing costs to my employer.

[birdman]

I agree with this statement.  If you are barely getting by and making money and know in advance that increased labor costs are going to put you out of business why not cut your losses and get out ahead.

This is right.  Also, its the argument everyone forgets when they claim price gouging.  The proper price for an item of inventory isn't based on what it was purchased for to be placed in inventory, its based on the price to REPLACE that inventory.  This is why prices do, and should, go up in advance of an actual event-based supply decrease or demand increased.
Also, the purpose of raising prices is to ensure a balance of supply and demand so that -some- is always available...albeit at increased prices.

The same goes for labor...if the price of labor is going to go up in the future, adjustments in the present need to be made to soften the impact on cash flow and/or capital expenditures.

[Headless Thompson Gunner]

It just seems to me ridiculous that anyone could demand any level of pay whatsoever - if Wal Mart wants to offer a ball of rice and some newspaper for housing as pay, anyone lame enough not to have other options should be happy to accept (or not, if they'd prefer to starve).

True freedom cannot be achieved until a huge portion of America is desperate for any wage at all, much less some artificial "minimum wage" that buys them food!

Meanwhile, in stalinist paradises around the world I can see the shame in those high wage earners' faces.  They pretend like they're happy with minimum wages that pay mortgages and food for whole families, but deep down inside they know it's wrong.  Some of them even have the gall to take vacations to America to buy cheap goods and pretend to be appalled at the poverty, when in reality they're jealous of those homeless folks' freedom.

You forget that the true minimum wage is always 0.