Free Markets, Free People

Again, what’s $15 times zero?

A “told you so” follow up on that $15 minimum wage hike in Seattle (and coming to San Francisco soon):

Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurant 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,

“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.”

Key quote: “It’s not a political problem; it’s a math problem.”  Of course it is a “political problem” because it is clueless politics that pushed this.  However, for the owners, it is indeed a “math problem”. And the math for staying open doesn’t add up.

Are there alternatives to closing.  Sure.  But they’re the same ones we’ve talked about for years:

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.”

Welcome to the land of $17 dollar cheeseburger.  And, as you can figure out fairly quickly, everything else will be more expensive too … which, of course, erodes the purchasing power of that $15 wage.  More importantly, if you work for one of those establishments that is closing, your wage is $15 times zero hours, isn’t it?

~McQ

 

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52 Responses to Again, what’s $15 times zero?

  • Well, I would bet that a substantial number of those business owners voted for the very politicians who enacted such laws, perhaps not on these issues, but overall they voted for these representatives.

    I’m of the ‘let it burn/fuel the fire’ mode for these areas.

    They want $15 min wage? Sure, heck make it $30.

    Oh, you just screwed yourself? Hah, sucks to be you.

    • I agree. Why not even higher? Put the blue establishments out of business, put the low/no skilled workers out of work.

      Then they’ll shift from raising minimum wage to more city/state welfare benefits (via higher taxes) and ruin themselves that much faster.

      Let them suffer.

    • Sure. Make it $50.00/hour

    • There’s a DJ in Denver that’s circulating a petition to raise Denver minimum wage to $52.21. Mile high wage for mile high city. He’s basically daring the Denver city council to block this.

  • Raising the minimum wage nationwide will increase earnings for millions of workers, and boost the bottom lines of businesses across the country.
    While Republicans in Congress continue to block the President’s proposal, a number of state legislatures and governors, mayors and city councils, and business owners have answered the President’s call and raised wages for their residents and employees.
    For example, a $10.10 wage could, over the course of a year, help a full-time, full-year minimum-wage worker in Arizona afford either 4 months of rent, 24 weeks of groceries, 68 tanks of gas, or the equivalent of 31 months of electricity.

    There are a lot of wealthy, successful Americans who agree with me—because they want to give something back.
    They know they didn’t—look, if they were successful, they didn’t get there on their own…
    If they were successful, somebody along the line gave them some help. There was a great teacher somewhere in their life.
    Somebody helped to create this unbelievable American system that we have that allowed them to thrive. Somebody invested in roads and bridges.
    If they’ve got a business—they didn’t build that.
    Somebody else made that happen
    Here’s an example –
    Recently, Kentucky State University interim president Raymond Burse decided to return $90,000 of his salary in order to raise the university’s minimum wage to $10.25!
    If only these business owners understood their debt to society like President Burse does!

    Raising wages can increase productivity: First of all, raising the minimum wage can increase motivation. Workers are motivated directly by feeling they are receiving a fair wage. Higher wages can increase employee morale, which raises productivity. In addition, higher wages help workers maintain better physical and mental health, allowing them to be more productive at work.
    Raising wages can reduce turnover and save on recruiting/training costs: Higher wages lead to lower turnover, reducing the amount employers must spend recruiting and training new employees.
    Raising wages can reduce absenteeism: When workers are paid higher wages, they are absent from work less often, increasing both their own productivity and that of their coworkers.

    Coupled with Obamacare’s coverage, this means workers won’t be job locked, they’ll be able to pursue their passions, like writing poetry.

    Almost everything above is exact, or slightly paraphrased statements from the Administration.
    and all you present to counter these many words are facts!
    Facts!
    Like those matter or something!

    • Liberals. You just have absolutely no idea how the world works. Why do people even vote for you clueless rubes? Businesses raise wages based on perceived increases in productivity and profits. If they voluntarily raise someone’s wage, it’s because they believe they will benefit from that. It’s a little thing called “the market.” Like everything else, there is a market for labor and it’s based on supply and demand. If there is a labor shortage in a certain line of work, the wage rate will go up. If not, it will go down. Government imposed minimum wages hurt people and destroy jobs, as this article demonstrates. And as for your lame “you didn’t build that” nonsense you borrowed from President 9-Iron, you’re talking about public goods that everyone paid for. Where do you think the money to pay for those roads and bridges came from? Mostly from the business owners who pay more in taxes than anyone else. They already paid for that infrastructure. They don’t owe anything to anyone over and above what they’ve already paid! Business work on profits. That’s they’re motivation. That’s why they’re called “businesses” and not “charities.” What is it about that concept that is so difficult for you liberals to understand? Here’s an idea: since, like most liberals, you obviously spent most of your time in school taking courses in musical theater and womyn’s studies, try going back and taking an introductory economics course. You’d be amazed to learn how the world actually functions outside of La La Liberal Land.

      • That won’t help…they use liberal math these days, where 2+2 can equal 5 if you want it badly enough.

      • Precisely.
        What I posted are nearly verbatim White House talking points and the idiot President ‘s, “you didn’t build that” speech from 2012.

        Those above who aren’t’t proposing a minimum wage that gives workers income of about $200,000 fantasy dollars a year aren’t thinking big enough. What the he’ll let’s go big. Wheelbarrows full of cash! Harrah!
        We can even theorize how they can then retire and write poetry after bout 16 years since they also will now have Obamac are to insure them and they won’t be job locked.

        I should have posted the (on sarcasm) tag, but that takes all the fun out of it.

    • ,” higher wages help workers maintain better physical and mental health,”

      By jingo, I think you are on to something there. The cure for our health care crisis! Dr. X walks into the hospital with a briefcase full of money and hands it out to the patients. The patients get better and go home. Presto! We can shut down those expensive hospitals. Once the patients are cured a simple monthly maintenance payment keeps them healthy. From your lips to Obama’s (PBUH) ear.

    • Please explain the relationship between Capital Investment, expected ROI and net Profit.. When you can do that, I’ll listen to rest of your BS.

    • I believe you missed the proverbial bus here. A national wage hike will produce the exact same results as in Seattle, but on a larger scale: Businesses will close, those workers who can least afford it will lose their jobs, the purchasing power of the dollar will be reduced effectively leaving workers right where they are…..those that still have jobs, that is. No gain, much pain.

    • Oh, you did catch the bus. My apologies. I missed the ending reference the first read through (I think my eyes had glazed over). Facts, indeed. Too many people refuse to let such things as mere facts get in the way.

      • It’s okay, I should probably dial the sarcasm down off of 12 which is where it seems to default when I get started.

        Anyone who blasted me for that and missed that I was “kidding” I should apologize to for raising the audience’s blood pressure.

        What should scare the hell out of all of us is I took almost all of that right off of the real White House web site and only changed the pronouns from ‘you’ to ‘they’ in Obama’s vapor about not building a business by yourself.

        My net from all of this is a great many of our leaders, and a lot of the media have never actually run any kind of for profit operation and don’t have the first clue.
        And our population understands where their own money comes from if they’re working, but sure as heck doesn’t seem to fathom where everyone else is getting theirs.
        Too much talk of ‘luck’ and ‘fortune’, not enough about work, patience, sacrifice, self restraint and self reliance.

        Too many people never ask where the government gets the money for it’s largess.
        If you have liberal friends, start asking them that simple question. Ask them what product the government is selling to make it’s profits.

        Sometimes you’ll be rewarded when you see a light go on.

        • “…I should apologize to…”

          Nay nay I say. I rather enjoyed watching folks embarrass themselves like that. It shows I am not alone

          It is also a good lesson in the need to actually read the entire selection and .THINK about what you have read before you comment.

          Plus, most of us can use a little boost to our humility.

          My compliments to Debbie R.

    • For those new to the site, Alan is parodying leftists in the post above.

      Don’t feel bad not to see it. His parody is so spot on, and the left is virtually parody-proof these days because they say the most preposterous things.

    • I was wondering where the hell your post was going until the very end. Well done.

    • Damn, Alan. You scared me there for a second until I read your last paragraph. I thought Erb had snuck into your house and brainwashed you with his ACME Obamatron device. 🙂

      • As I read the content and selected what to cut and paste from the White House site, I was struck by the volume of sensible sounding but essentially meaningless and unrealistic words they had written.

        Perhaps it was written by people who truly don’t understand that you are unlikely to increase the money supply in the hands of the public without a corresponding rise in prices. Perhaps they don’t understand that businesses operating on a low margin in the first place will be destroyed by even a minor price increase.

        General principles – Prices will almost always rise when surplus capital becomes available. Doesn’t have to happen, doesn’t always happen, but you’d be safe if you bet it WILL happen.
        Correspondingly the money in the supply has to come from somewhere, unless you work for government, and your product is government.

        Minimum wage increase justifications:
        It will increase productivity.
        Why should it?
        That’s the lowest amount you can pay someone no matter how good they are, no matter how fast they work, no matter how much they produce.
        They understand that if they bust their ass all day and do their best, the guy beside them who’s slacking off is collecting exactly the same pay for the time he stands there doing half the work.
        They KNOW that, they see it, they live it.
        If they’re getting an hourly rate, not a piece rate, they just have to do enough to not get fired and they’ll earn the minimum wage.

        It will increase happiness
        Yeah, usually it does, for a few months or so.
        Then prices rise to eat up the wage increase because business costs have gone up owing to increased wage costs,
        or demand has gone up owing to more money available,
        or because businesses realize there’s more money in supply and they can raise their prices because people have more in their pockets.

        Or idiots in government look and tell themselves they can raise taxes because now people have more money.
        The gas price drop is a perfect example.
        The fuel prices fell and it didn’t take too long before politicians seeing that ‘surplus’ cash in the pockets of consumers decided they were entitled to it and started talking about increasing the gas tax.
        Right?

        Another thing minimum wage increases get that the asshats at the White House didn’t mention is an increase in the government’s TAX income. You make more, they get more of it.
        Weee haaa! everybody wins!

        Well, except for the guys who had to come up with the additional money to cover the cost of the wage increase. Greedy capitalist slugs, who cares if they’re happy 🙁

        Everything from their site looked like college text book theory on how things OUGHT to work in the text book universe where the only considerations are those the course in question wants to consider.
        And they don’t want to consider why you can’t just mandate everyone earns at least $100,000 a year without making $100,000 the new poverty line.

  • Learn economic reality or die.

    Simple.

    • Let’s see fancy pants executive sign his way around this kind of thing, because that’s just the beginning.

    • Yeah, dumb ass people on the left from Lenin to Castro to Nixon to Chavez to Obama to the California state legislature keep trying to repeal the law of supply and demand. Might as well try to repeal the law of gravity.

      • The primary problem I see is that the drowning rich Collectivists drag down so many working people with them.

        Then they mostly just bob to the surface, and re-lather…repeat.

      • “Might as well try to repeal the law of gravity.”

        Hah! Already been done, Mr. smarty pants. You backward Westerners and your so-called “science” amuse me to no end. Physics, economics, pshaw! There are more powerful forces in the universe that you narrow-minded right-wingers just cannot comprehend like we spiritual, pragmatic types can. I feel pity for you Earthbound types. You blocks, you stones, you worse than senseless things.

        • Oops. Only meant to enclose the link. Still have not got the hang of this interwebby thing.

        • The audience is so quiet and they are taking this so seriously. Why isn’t there at least one person laughing their a$$ off at these gymnastics?

          • That struck me too. The scary thing is that those are probably all registered voters. Ah, well. It might be amusing watching them all fly down to the polls on election day.

          • By the way….wouldn’t you love to find out
            A) who they vote for.
            B) What’s their take on global warming

          • Why isn’t there at least one person laughing their a$$ off at these gymnastics?

            Good question, particularly since there aren’t fanatics running around murdering people who ridicule these types.
            They are committed to the bit they are all playing. I could speculate that the average audience member sees it as nonsense but doesn’t dare admit it, as they prefer to present themselves as enlightened and superior to outsiders, and are terrified that if they flinch, they would lose all the time and energy they’ve already vested in this. It’s how horrible art and fashion ends up in lavish exhibits and shows, with preposterous lunatics all pretending they enjoy it.
            I’d compare this to the Emperor’s New Clothes parable, and wonder at those who perpetuate abject delusion in politics, but at least those people usually have some substantive payoff via government benefits, special advantages/cronyism, or power. In that respect, this is more irrational, but at least they aren’t hurting anyone else.

        • That is SOOOOOOoooo lame…!!!

          They got NUTHIN’ on those Shoal Lynn guys in Crow-ching Tiger, Paint Your Wagon. THOSE dudes could FLY, vato…

        • I think you could get a few paraplegics at your local VA to do the same, perhaps better

        • Oh, the bouncing levitators!
          Amazing innit?

          All that’s missing is for them to yell “stay up! stay up! stay up! stay up!”

    • I’m sure they can legislate their way out of this.

      • Sign a law that forces them to stay in business comrade.

        • I’m sure that’s the first thought to enter their mind.

          But among the next ones
          a) require remaining businesses to offer food service
          b) State sponsored and subsidized restaurants. Made with government approved and sustainable food sources.

          I’d just be dying to eat at any of those.

          • I’d just be dying to eat at any of those.

            Very probably… Well, chronically sick, anyhow….

        • Serf’s up!

      • With all the noise about the “science” of Global Warming, you’d think there would be at least one working law that cures a rainy day .. but NOoooooo !

  • Maybe unemployment should be paid out of the city budget

  • My feel good story for the day.

    • I wonder if it’s possible to overdose on schadenfreude? If so, I think most of us around here are going to do so in the next couple decades.

      • No, no. It’s a rate problem. Little, delicious bites…spread out over a LONNNNNNNnnnggg sumptuous meal. Savor every one!

      • Rich liberal asshats will just blame greedy rich conservatives and whine about fairness and wealth distribution inequality.

        They will learn nothing. And since voters are busy signing White House stupidity petitions and repeals to plastic grocery bag bans they won’t notice until the sheriff of Nottingham shows up for his 110,% of income tax thugs.

        Then the boohoos will be way too late.

  • That depends on the definition of zero.

  • I don’t believe that a 700k gross revenue restaurant nets the owner 28k a year in profit. Perhaps if the owner is also the operator/chef and therefore also draws a salary that comes out of the operating expenses this is slightly more believable. But restaurants are a lot of work and a 4% net profit is very low. The so-called ‘sustaining’ restaurants must be doing better than 4%.

    • Okay, after doing some cursory research, the average net profit margin is 2-6% with really good restaurants doing up to 10%.

      This probably explains why there are many restaurant groups which own several restaurants. Still, it’s kind of a crappy business.

  • As someone in a small business, I believe that 4% number. Sometimes it is more, sometimes less. Sometimes you have to kick in some more to make the business continue. It is unpredictable what you will make, there are many variables that bring people to or away from your business. One youtube video of a young punk spitting on a hamburger, etc. can sink your business unless you have deep pockets, which many independents don’t have. Paula Deen slid far/fast on a 20 year old comment she made.

    When you can make more by letting your assets sit, like a lot are doing in the market now, that’s the smart thing to do.

  • Oops facts.

    “Little Uncle proprietors Poncharee Kounpungchart (who goes by PK) and Wiley Frank are closing one location, having found the space unsuitable after two years, while remaining open on Capitol Hill and considering new opportunities.

    “We were never interviewed for these articles and we did not close our … location due to the new minimum wage,” Kounpungchart and Frank said in an email. “We do not know what our colleagues are doing to prepare themselves for the onset of the new law, but pre-emptively closing a restaurant seven years before the full effect of the law takes place seems preposterous to us.”

    Shanik proprietor Meeru Dhalwala, who is also mentioned by Seattle Magazine, said in a Facebook message, “My closure is strictly due to location — nothing to do with wages.”

    Sharon Fillingim, the owner of Grub, the final restaurant referenced, said on Facebook that Grub was “a huge success.” In fact, the restaurant was sold and is reopening imminently under new ownership as Bounty Kitchen.

    Sorry Mr. McQuain, you’ll have to enjoy your schadenfreude elsewhere.

    • I’m sorry, I must have missed where the places cited said it wasn’t effecting them. And margin of profit is margin of profit. It’s either there or it isn’t. If the other owners think they can maintain it by raising prices or laying off, good for them. It still means someone is going to pay the difference, either out of their wallet or with their job. And my guess is many of them will eventually migrate to the edge of the city where the $15 isn’t in effect. So we’ll see, won’t we?