Danny Westneat’s column in Sunday’s Seattle Times should be required reading for anyone concerned about the impact of a $15 minimum wage on Seattle businesses. I can’t do it justice in this post and encourage you to click through and read it now. He frames the column around restaurant owner John Platt, whom he describes as “liberal do-gooder.”
Westneat then allows Platt to explain his opposition to the $15 wage.
For a small restaurant, where waiters make minimum wage but rely mostly on tips, the math of the wage-hike proposal is brutal.
It works like this. About one-third of Platt’s costs are labor. Those costs will rise up to 60 percent if the wage is lifted from $9.32 to $15 per hour. His cost of goods also will rise, though not as sharply. The bottom line is St. Clouds’ total costs could easily go up 25 to 30 percent.
If he passes that on to his customers, then St. Clouds’ burger with green chili aioli, which sells for $13, could cost $17. The top of the menu, pan-roasted duck, could go from $32 to more than $40.
As Westneat writes, economists generally agree that price hikes like that cannot be passed on to consumers, so the owners have to absorb a lot of the cost, with predictable consequences.
Platt says his love is cooking, not math or experimental economics. He has no idea how he’d deal with a 25 percent increase in costs. At first, he said he would close St. Clouds and “just do something else.” Later, when I pressed him to brainstorm, he mentioned he buys 80 percent health insurance for his full-time employees, so he could maybe cut that and send them to the Obamacare exchanges instead.
“So that’d be a terrible result. I’d be saying, ‘Hey, here’s a raise, but now you’re on your own,’ ” Platt said.
While we’re on the subject, Robert Samuelson takes a look at last week’s CBO report and some of the responses it’s received. It’s another good read.
Concerning the minimum wage, [the White House] predictably assailed the estimated job losses. These don’t reflect the “consensus view of economists . . . that raising the minimum wage has little or no negative effect on employment,” wrote Jason Furman and Betsey Stevenson of the White House Council of Economic Advisers.
How convenient. Conflicts vanish. The decision is a no-brainer. So say the studies.
This is fairy-tale economics. Many studies find negative job effects. The CBO didn’t make them up. As important, the CBO shows — and this is its real contribution — why many recent studies may not be relevant to today’s proposal. The reason: The proposed increase is much “larger than most of the increases that have been studied.” Even after inflation, it would likely be about a third. Moreover, the minimum would be indexed to inflation, rising automatically with prices. This, too, is new.
All these differences suggest larger job effects, says the CBO.
What’s true of a phased-in increase in the federal minimum to $10.10 can only be an understatement of the effect of a hike to $15 in Seattle … or $12 statewide.