Thursday, March 26, 2015

Why Conservatives Who Say $15 Minimum Wage Kills Businesses Are Wrong

The $15 minimum wage has not been hurting small businesses. (photo: AP)
The $15 minimum wage has not been hurting small businesses. (photo: AP)

By Alan Pyke, Think Progress

23 March 15
s Seattle prepares for the April launch of the highest minimum wage law in America, conservatives are warning that businesses are already shuttering under the pressure of higher labor costs and pointing to a recent report of a rash of restaurant closures as evidence. The problem is, the actual owners of those restaurants say that they’re not closing because of wages, and the city seems to be enjoying robust growth in that industry.

The New York Post editorial board, American Enterprise Institute scholar Mark Perry, Forbes contributor Tim Worstall, and Rush Limbaugh all cited a Seattle Magazine article from March 4 that claimed a “rash of shutterings” was afoot in the Seattle restaurant world. The magazine suggested that the minimum wage law might be a contributing factor in the closures of the Boat Street Cafe, Little Uncle, Grub, and Shanik.

“That’s weird,” Boat Street Cafe owner Renee Erickson told the Seattle Times when fact-checkers emailed to confirm the Seattle Magazine story. “No, that’s not why I’m closing Boat Street.” Erickson’s three other restaurants remain open, and two brand new ones are in the works in Seattle. “Opening more businesses would not be smart if I felt it was going to hinder my success,” said Erickson, who described herself as “totally on board with the $15 min.”

Poncharee Koungpunchart and Wiley Frank of Little Uncle “were never interviewed for these articles,” they told the paper. They are closing one of their two locations, “but pre-emptively closing a restaurant seven years before the full effect of the law takes place seems preposterous to us.” Frank reportedly asked one conservative writer who had picked up the wage-menace red herring to “not make assumptions about our business to promote your political values.”

The owner of Shanik told the Times that closing has “nothing to do with wages,” and Grub’s owner explained that they’re being bought out and rebranded by new ownership because the breakfast and sandwich bistro has been “a huge success.”

The Seattle Magazine article itself notes that new restaurants are opening at a healthy clip around the city, and that the Capitol Hill neighborhood is in the middle of “an unprecedented dining boom.” And while numbers compiled by data wonk Evan Soltas offer only an imprecise snapshot of restaurant employment in the Seattle area, the empirical evidence shows “no sign of a minimum-wage hit to employment.” These details did not make it into the punditry that initially swirled around the article’s suggestion that some closures might relate to the wage law. Forbes’ Worstall published a follow-up piece insisting that his point stands despite the crumbling narrative of specific Seattle restaurant closures. AEI’s Price has not yet responded to an request for comment.

Worstall, Price, and the other conservative economists and pundits who latched onto the overblown narrative from Seattle Magazine argue that minimum wage hikes reduce job growth, but many other studies and analysts have challenged the assumptions about business behavior that underlie the opponents’ claims. A recent academic analysis of how fast food companies would adapt to a law very similar to Seattle’s found that the industry would not have to fire anyone to cover the jump to $15. And states that increased their minimum wages in 2014 experienced faster overall job growth than states that did not.

All of this is happening weeks before anyone in Seattle has been forced to change anything about how they pay workers, and about six years before small restaurants like these will have to pay $15 per hour. The first tier of the city’s wage increase law goes active on April 1. From there, businesses will have between three and seven years to gradually step up to $15, depending on both the total number of people a firm employs and the health care benefits they offer workers.

Seattle’s business community was heavily involved in crafting graduated wage hike schedules that provide deferential treatment to employers who are already offering workers some non-cash compensation. The law’s complexity and flexibility owes in large part to the business community’s fierce negotiating in months of meetings with labor officials and local politicians. All sides left “a little bit of blood on the floor and some deeply held principles,” the business community’s lead negotiator told ThinkProgress last summer.

With time and data on what Seattle’s economy actually experiences as the wage hike phases in, the spread of the $15 idea seems almost inevitable to another key negotiator. “When we enact this law and our state does not slide into the ocean,” venture capitalist Nick Hanauer told ThinkProgress in the summer, “that will make it easier for people to be like, ‘well, fuck, why shouldn’t we do that?'”


+14 # caphillprof 2015-03-23 09:45
The opening and closing of restaurants is a fact of life in dynamic urban environments.

Some folk never let the facts get in the way of any political argument.

+4 # ronnewmexico 2015-03-23 09:58
Hey birdbrains…we did this more than ten years ago in Santa Fe, Albuquerque followed about 5 or so years later…..

why did they follow…nothing bad happened.

A quote on it, Wash Post….…"Since the rollout of a living wage in The City Different, not a whole lot is. At least not in the big picture. The unemployment rate stays where it always stays, lower than the rest of New Mexico. Gross sales tax receipts have climbed back out of the trough of recession. The number of new business licenses issued rises and falls, rises and falls, never far from about 600 a year. The number of people working in the area’s leisure and hospitality sector, where the bulk of low-wage workers are employed, remains steady. No one has done a recent study to see what’s happened with food stamp and public assistance caseloads, but early data seemed to indicate mixed results — none of which could be directly tied to an increase in minimum wage."

Santa Fe was one of three cities nationwide at the time to initiate this. The wage is not up to 15 per hour but this is after all New Mexico. It is ited to the cost of living index last I checked.

Really it is old news on this not workng Studies were produced right after it clearly showing it did not work….know what….the actuality of it proved them absolutely completely wrong….nothing bad happened. It was junk science based on junk statistics..

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