In a few weeks, Seattle’s new, highest in the country, $15 per hour minimum wage will go into effect. Like many liberal policies, it was passed by City Hall with the best of intentions. The only problem is, in the end, it may do more harm than good for many.
Private businesses, unlike government entities (which, in theory, can always raise taxes or borrow), must make more than they spend in order to pay the rent, make payroll, keep the lights on, pay their business taxes, and, heaven forbid, have some left over for the owners and investors who are taking the risk and putting in the long hours.
Earlier this month, Seattle Magazine asked, Why Are So Many Seattle Restaurants Closing Lately?:
Last month—and particularly last week— Seattle foodies were downcast as the blows kept coming: Queen Anne’s Grub closed February 15. Pioneer Square’s Little Uncle shut down February 25. Shanik’s Meeru Dhalwala announced that it will close March 21. Renée Erickson’s Boat Street Café will shutter May 30 after 17 years with her at the helm…What the #*%&$* is going on? A variety of things, probably—and a good chance there is more change to come.
The magazine went on to report that one “major factor affecting restaurant futures in our city is the impending minimum wage hike.” Anthony Anton, president and CEO of Washington Restaurant Association, told the magazine, “It’s not a political problem; it’s a math problem.” He estimates that restaurants usually have a budget breakdown of about 36 percent for labor, 30 percent for food costs, and 30 percent to cover other operational costs. That leaves 4 percent for a profit margin. When labor costs shoot up to say 42 percent, something has to give.
Restaurants can take actions to adjust, such as raise their prices, acquire cheaper ingredients, and cut their operating hours and labor force. However, all those actions generate reactions from the public which can still lead to lower revenues for the restaurant and, for some, the decision to close their doors.