As the push continues in various locations around the country to raise the minimum wage to $15 per hour, the real world consequences of such a move have begun to surface.
Seattle became the first city in the nation to implement the $15 per hour minimum wage this past spring. Fox News reports that one unintended effect is that workers who are earning the higher wage are asking for fewer hours, so they can remain eligible for low income government benefits like childcare and tax credits.
Full Life Care, a home nursing nonprofit, told KIRO-TV in Seattle that several workers want to work less.
Local radio talk show host Jason Rantz on KIRO-FM noted the irony: “If [employees] cut down their hours to stay on those subsidies because the $15 per hour minimum wage didn’t actually help get them out of poverty, all you’ve done is put a burden on the business and given false hope to a lot of people.”
“Despite a booming economy throughout western Washington, the state’s welfare caseload has dropped very little since the higher wage phase began in Seattle in April. In March 130,851 people were enrolled in the Basic Food program. In April, the caseload dropped to 130,376,” according to Fox News.
As reported by Western Journalism, private businesses, unlike government entities (which, in theory, can always raise taxes or borrow), must make more than they spend in order to pay the rent, make payroll, keep the lights on, pay their business taxes, and, heaven forbid, have some left over for the owners and investors who are taking the risk and putting in the long hours.
“Some restaurants have tacked on a 15 percent surcharge to cover the higher wages. And some managers are no longer encouraging customers to tip, leading to a redistribution of income. Workers in the back of the kitchen, such as dishwashers and cooks, are getting paid more, but servers who rely on tips are seeing a pay cut,” Fox News reported.
Earlier this year, as the implementation of the minimum wage law loomed, Seattle Magazine noted that something appeared to be afoot affecting the restaurant industry in the city, asking: “Why Are So Many Seattle Restaurants Closing Lately? “Seattle foodies [are] downcast,” the magazine reported, “as the blows kept coming: Queen Anne’s Grub closed February 15. Pioneer Square’s Little Uncle shut down February 25. Shanik’s Meeru Dhalwala announced that it will close March 21. Renée Erickson’s Boat Street Café will shutter May 30 after 17 years with her at the helm… What the #*%&$* 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 the 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.
Shah Burnham is just one Seattle restaurant owner who believes that keeping her doors open is no longer worth it. She owns a popular Z Pizza restaurant location and says that even though her one store only has 12 employees, she’s considered part of the Z Pizza franchise – a large business. So she has to give raises within the next two years. “Small businesses in the city have up to six more years to phase in the new $15 an hour minimum wage,” according to Seattle’s Fox News 13.
“I know that I would have stayed here if I had 7 years, just like everyone else, if I had an even playing field,” she says. “The discrimination I’m feeling right now against my small business makes me not want to stay and do anything in Seattle.”
“It’s what happens when the government imposes a restriction on the labor market that normally wouldn’t be there” …usually the “small, neighborhood businesses” get hit the hardest, said Paul Guppy of the Washington Policy Center.
San Francisco and Los Angeles have already embraced the $15 per hour benchmark being pushed by some Democrat politicians and labor unions, while New York regulators announced their recommendation to the state’s governor this week to raise the rate for fast food workers to the same level.
The Heritage Foundation notes the minimum wage is usually for new workers, with a low percentage of Americans receiving it. The organization notes some other interesting statistics:
* Over half of minimum-wage earners are between the ages of 16 and 24.
* Two-thirds of minimum-wage workers earn raises within a year – without the government’s help.
* Only 2.9 percent of wage earners earn the federal minimum wage.
* Most minimum-wage earners are teenagers or young adults, not heads of families.
* Two-thirds work part time (defined as less than 35 hours a week).
* Two-thirds of minimum-wage workers live in families with incomes above 150 percent of the poverty line.
* Just 4 percent of minimum-wage workers are single parents working full time, compared to 5.6 percent of all U.S. workers.
* Studies find raising the minimum wage does not reduce poverty.
Heritage recommends that if government leaders want to reduce poverty, they should focus on growing the economy through better tax policies and restructuring the welfare state to remove the current disincentives to work more hours, or work at all.
Early indicators suggest that the $15 minimum wage is a lose, lose proposition for employers and employees.