Seattle’s minimum wage fiasco
The government-mandated minimum wage goes up yet again in Seattle on New Year’s Day.
For the “progressive” city’s largest employers, the wage floor will rise from $16 hourly to $16.39.
Acolytes for setting wages by government fiat, and not productivity, love to insist that the economic effects are either very small or de minimus.
Try telling that to Simone Barron of Seattle. Here’s the opening paragraph of her commentary in last Thursday’s Wall Street Journal:
“This city’s minimum wage is rising to $16.39 an hour on Jan. 1. Instead of receiving a bigger paycheck, I’m left without any pay at all due to the policy change. That’s because the restaurant where I’ve worked for six years is closing as a consequence of the city’s harmful minimum-wage experiment.”
(For a fuller context, note a Barron commentary in The Washington Examiner from a year ago at the bottom of this At Large.)
Wages, of course, are a cost. Raise an employer’s cost to do business and it either has to raise prices to offset increased costs or find other ways to keep in line his costs to continue in business.
Some, such as the Tom Douglas chain of eateries where Barron works, have chosen to close a number of restaurants. It neither happens in a vacuum nor is it an isolated occurrence.
Yet, government-types, egged on by “social justice warriors,” continue to believe they can “command” prosperity by arbitrarily setting wage floors, never appear to learn the lesson, no matter how hard it slaps them in the face.
And that’s no matter whether they ply their trade in Seattle, Harrisburg, Pittsburgh or anywhere else.
Indeed, we live in ignorant economic times. And such ignorance, fueled by a growing hubris, is anathema to sound public policy.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (firstname.lastname@example.org).
(Now, that aforementioned fuller context from Simone Barron, from December of 2018. It certainly represents another in a long line of “unseen” consequences of government interfering in the marketplace):
”Upon winning back a majority in the House of Representatives, Democratic leaders have thrown their support behind a $15 federal minimum wage. But across the country in Seattle where I work, the promised utopia of a $15 minimum wage is far from a reality.
“I have worked in the full-service restaurant industry for nearly 33 years in several cities across the country, including Chicago and Indianapolis. For the past 17 years, I’ve worked as a tipped employee in Seattle. Currently, in Seattle, the minimum wage is $15 and will rise to $16 starting next year. One would expect my income to rise with these wage increases. Instead, I’m actually watching my income drop.
“Let me start off by explaining why my industry is a little different. Seattle is one of just a few of locales in the country that doesn’t allow for tips to count towards hourly wages. What this means is that the pressure all businesses are feeling from a $15 wage minimum is magnified for full-service restaurants.
“Since most restaurants work off slim profit margins — between 3 and 5 percent — each increase in labor costs makes it harder to operate. This forces restaurant owners to make tough decisions such as reducing hours, eliminating staff positions, or even closing altogether.
“As a $15 minimum wage went into effect in Seattle, some restaurants made the decision to change their tipping models. My employer took away tip lines and switched to a service charge model in order to keep his restaurants sustainable for as long as possible. This has reduced my income substantially, because the 14 percent I receive from a service charge is far less than the 20 percent I used to receive in tips.
“This model has also changed my job from an art of professional service to a standard sales job; now, it’s less about how I use my skills to maximize my income and more about selling you the most expensive item on the menu to maximize the service charge. With tipping, I used to work four shifts a week, and I made enough money to raise a son, pay my rent, and go to school. Now, thanks to the $15 minimum wage, I work six days a week just to make ends meet.
“I’m not the only tipped worker who’s been significantly harmed by rising minimum wages. I have many friends who have lost jobs because of Seattle’s minimum wage increase. One of my friend’s restaurants had to leave Seattle because the owner could no longer sustain the city’s high labor costs. Another friend’s restaurant closed down entirely because the owner could no longer make the numbers work.
“I understand the typical arguments for legislating higher wage rates. I especially understand it in Seattle, where the cost of living is incredibly high. But there’s no free lunch. Under our minimum wage increase, tipped workers are losing income and moving backward to $15 an hour. Right now, I’d happily trade my gig in Seattle for the golden days in Indianapolis, a so-called “low wage” market where I earned more and was both more financially secure and happier.”