Acton Institute Powerblog

Will Seattle’s New Minimum Wage Law Cause Restaurants to Be Replaced by Soup Kitchens?

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men-waiting-outside-soup-kitchenThe people of Seattle recently voted to put their poorest residents out of work by increasing the minimum wage to $15 over the next seven years. But wealthier residents may soon find out just how quickly it will affect them too. A number of area restaurants are already shutting down, and many others will soon closing their doors. As Anthony Anton, president and CEO of Washington Restaurant Association, says, “It’s not a political problem; it’s a math problem.”

[Anton] 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 restaurateur 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.

“Everyone is looking at the model right now, asking how do we do math?” he says. “Every operator I’m talking to is in panic mode, trying to figure out what the new world will look like.” Regarding amount of labor, at 14 employees, a Washington restaurant already averages three fewer workers than the national restaurant average (17 employees). Anton anticipates customers will definitely be tested with new menu prices and more. “Seattle is the first city in this thing and everyone’s watching, asking how is this going to change?”

You may have the smartest lawyers on retainer, the most-connected lobbyists on your payroll, and the most powerful politicians in your pocket, but it won’t help you change the law of unintended consequences. When you muck around and make changes to a complex system—such as labor pricing—you’re bound to create problems like the one’s Seattle’s restaurateurs will be facing. The law of unintended consequences always gets the final say.

If it were a matter of mere ignorance this new law might be excusable. If the supporters of the $15 minimum wage were able to honestly say, “We couldn’t have known raising the wage would put people out of work” we could let them off the hook. But they knew—or should have known—because it has been pointed out to them time and time again.

But the wealthy won’t suffer for long. What will happen is that the activists who pushed so hard for wage increases will simply leave the city. Once their favorite bars and restaurants shut down, they’ll move to another city where the cost of living isn’t inflated by absurd wage floors. The people who will be left behind to suffer the consequences will be the working poor—many of whom were priced out of their jobs.

When the wage increase is modest (around 20 percent), debates about the minimum wage remain in the realm of political debate. But when the increase is a 61 percent increase over seven years (just enough time for the businesses to flee the city), it becomes a moral issue. We shouldn’t stand by and let the poor suffer because the economic illiteracy of people who have “good intentions”; we have a duty to speak up on behalf of the urban poor. We should be clamoring for this minimum wage law to be repealed before the law of unintended consequences takes goes into effect. If we wait too long the only restaurants left in Seattle may be soup kitchens.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

Comments

  • polly

    HA this is a joke. I will not be longing to go to SEATTLE, anytime soon.
    Way
    to go DEMOCRAT DO GOODERS! Now, there will be a lot more people without
    a job, do to businesses closing down, because they can not stay in
    business due to the minimum wage. ALL of you should be ashamed of
    yourselves.
    Since
    when was a minimum paying job suppose to a major bread winner job? GO
    TO SCHOOL, LEARN A TRADE and become self sufficient, not a drain on
    society. LORD, have mercy on all of us!

  • makeyourcase.org

    The argument over minumum wage, whether there should be one and how to set it, has been raging for perhaps a century or more. But all sides have good points (see http://makeyourcase.org/topic/national-governments-should-set-a-minimum-wage-that-is-enough-for-a-family-to-live-on ), so we should figure out which concerns are legit, and how to solve as many of the problems as possible logically, without all the rhetoric.

  • Savant

    Most businesses operate on an annual lease. They can close within six months on average. The franchises and big businesses may need more time. This will ruin Seattle’s tax base, tourist trade. The welfare case load will increase. Look at Detroit for what over priced labor does to a city. The only good thing is housing prices will fall and rental vacancies will increase.

  • howiem

    The law needs a name change to the Law of Foreseeable, Intended Consequences, as I will never be convinced that the politicians don’t understand the consequences. They just don’t care, as they pay no price for failure of their policies that manifest themselves over a longer period of time than the memory span of the voters.

    One more point: What about the possibility that seeing a higher wage, workers will flood into Seattle from other cities, towns and states and leave the locals without jobs?