Here’s a photo of a sign that’s hanging in a Seattle Subway that lays out the problems faced by both consumers and business owners in the city:
The sign reads:
Unfortunately, we are not participating in the $4.99 footlong promotion. The cost of [doing] business in the City of Seattle is very high. We are balancing the highest minimum wage in the nation, paid sick leave, ACA, secure scheduling, soda tax, and much more.
As this Subway business owner helpfully makes clear to his customers, there are a lot of extra costs for anyone operating a business in Seattle. And these costs are hurting restaurants, small businesses, and ultimately the public at large. Everyone has to pay for Seattle’s progressive policies—and all the costs outlined above—through dramatically higher prices.
Just as is often the case, the good intentions of bureaucrats and progressive politics notwithstanding, these policies have created absolutely horrible practical outcomes. Seattle’s $15 an hour minimum wage has hurt the low-income workers that it was supposed to help. Not just hurt—but devastated.
“The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one,” according to a study conducted by a group of economists at the University of Washington commissioned by the city, reports The Washington Post. “On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum.”
A cost-benefit ratio of 3:1 and a loss of $125 a month are quite massive, as anyone living paycheck to paycheck knows. And this is a problem for low-wage workers in other cities, too, with food, service, and retail employees usually the most affected.
The $15 minimum wage hike in California, for instance, will cost the state 400,000 jobs by the time it is fully implemented, as a study by economists from Miami University and Trinity University found.
“Studies consistently show that raising the minimum wage leads to job losses for less-skilled individuals,” Michael Saltsman, managing director of the Employment Policies Institute, told Red Alert Politics.
Nowhere is the negative impact of these policies more clear than in the restaurant business, in part because on average restaurant spend about one-third of their revenue on labor costs. Working with narrow margins, restaurants have little wiggle room to cope with rising labor costs, which one-quarter of restaurants in the California Bay Area cited as a reason for shuttering.
Thanks to the wave of minimum wage hikes across the country, restaurant chains are seeking to recover losses however they can. One way to do that is to cut low-wage restaurant jobs like that of busboy. The restaurant chain Red Robin, located mostly in Western states, estimates it will save approximately $8 million this year by eliminating busboys at 570 restaurants. The company already axed “so-called expediters—who plate the food in the kitchen—and realized a cost savings of nearly $10 million last year,” reports the New York Post.
Soaring wages incentivize businesses, especially those with already narrow margins such as the restaurant and fast food industries, to cut jobs and resort to automation. In the end, this disproportionately hurts young people aged 16-34, who were approximately 68 percent of the workers receiving minimum wage pay in 2015.
The income and job loss suffered by low-wage workers thanks to progressive policies should have been foreseen—if one relies on the advice of economists, as opposed to politicians, that is.