Saw this article on NPR this morning on how the $15/hour minimum wage will impact Seattle's thriving restaurant industry. You can read the whole thing if you want I am going to focus on the money quotes from various restaurant owners on how it will impact their business.
In case you missed the news the impact of the law is as follows:
...in April, the city's minimum wage rose to $11 an hour, and it will keep rising every year to $15 an hour and beyond. (snip) No major city has ever seen an across-the-board 60 percent increase in its minimum wage
So no, first of all the wage hasn't already risen to $15/hour. It's $11/hour. Prior to the increase it was $9.47/hour so no that's not a 60% jump more like 18% at present. Next, it will go to $12/hour in January, still not 60% and still
below what other cities are already paying including Oakland which is currently at $12.25. As the Eater post also points out:
According to a University of Washington report prepared for the Seattle Income Inequality Advisory Committee, wage increases of about 10 percent can result in a 1- to 2-percent increase in a restaurant's operating costs, which in turn translates to "one-time" price increases of about 0.7 percent. And so because the full wage increase from $9.47 to $15.00 represents a 58 percent change, consumers could see price hikes of about 4 percent total in the coming years from the wage law
Wow... 4% increase in prices... OMG! How will I handle that? My steak dinner will cost $31.25 instead of $30.00 FOUR YEARS FROM NOW! (cue Darth Vader voice) NOOOOOOOOOOO!
So follow me below the orange croissant of $15/hour doom to see how the NPR article talks about the expected price increases.
Bob Donegan, the president of Ivar's, which runs a chain of fish and chip shops, says the company has increased its prices. At Ivar's Salmon House, for instance, one of the company's sit-down restaurants, the price for all menu items increased 21 percent in April.
"Alaska coho that's today $34, last week would have been $28," Donegan says. "So that meal that last year cost you $100, today costs you $121."
Hmmm that's sounds bad and it's way more than 4%. At last the smoking gun. STOP THE WAGE INCREASE NOW! Oh wait...
The catch is that when diners pay the bill, they are no longer expected to leave a tip: it's included. The big price increase will allow the Salmon House to start paying a $15-an-hour minimum wage immediately, three years ahead of schedule.
OOOOOOHHHHHHH! You mean my 15-20% tip is now included? So my $100 meal that really cost me $118 has gone to $121 and that because the owner decided to comply with the law early and eliminate tipping? Wow that's actually pretty cool and not bad at all. Thank goodness.
Now they did find a small business owner who is closing her shop because she doesn't want to increase her own hours. Of course no actual book numbers are included just her assurance that it's simply not feasible. No other details are given about her situation other than because she is a franchise she has to comply earlier with the law and be at $15/hour by January 2017. She employed 12 people.
Then there's Tom Douglas "Seattle's best known chef":
Tom Douglas, says he may have to close some of his 15 restaurants.
Douglas is raising menu prices 4 percent this year.
"I really don't know what your saturation point is for what you're willing to pay for chicken," he says. "That's why I say I don't know. We are going to have to wait and see. I don't know if it is worth it for you to come to our restaurants when chicken is $30 a portion compared with when it was $20 a portion."
WOW! $30 for chicken that's insane. I'm not gonna pay that. The government sucks and I'm not gonna pay your stinking insane prices for chicken, Tom. You can go fu...
Now hold on. Let's do the math here...
$20 becomes $30. That's 20+10=30. Hmmmm... 10 is 50% of 20 not 4%. 4% of 20 is $0.80 or... (drum roll please)... 80 cents... That's not even $1.00 let alone $10.
Of course Tom kind of redeems himself with the final quote from the article:
But Douglas says if higher prices force diners to cut back on eating out, that's OK. He'd rather have people make a living wage instead of selling more chicken.
So well done, Tom. Glad to see you are keeping a level head in this matter. Wish I could say the same about NPR. Heck, wish they'd focused more on the fact that Tom owns 15 freaking restaurants which probably means he is personally worth well into the 8-figure range and takes home income in excess of 7-figures each and every year. So even if he did have to close a few restaurants, I'm not gonna cry any tears for him.
The simple fact is, every single restaurant will be in the same boat. Some sooner than others, but all prices are going to go up. Of course there's going to be a LOT more money flowing around too as all those $15/hour wage earners start spending their new found cash. That includes all those minimum wage earners at the retail stores too. There's a real good chance that most of these businesses are going to see more people walking through their doors as people who could never afford to eat out before suddenly find the means to eat out a few times a year or even monthly. Remember, a three-person household in Seattle making minimum wage and working full time is going to see a gross income of $60,000/year. That's going to be a $22,000 per year increase when all is said and done. Some of that money (most likely) is going to find its way into the hands of the restauranteurs.
So don't freak out, don't raise your prices by 50% when 4% will do. It's going to be okay. Really.. it is...