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$15 minimum wage didn't decimate the local economy, after all
Critics would have you believe that upping the minimum wage in restaurants will lead to massive layoffs and closures. But since raising the minimum wage to $15 per hour nearly a year ago, the restaurant industry in New York City has thrived.
I'm a professor with a focus on labor and employment law. My research on the minimum wage Critics would have you believe that upping the minimum wage in restaurants will lead to massive layoffs and closures. But since raising the minimum wage to $15 per hour nearly a year ago, the restaurant industry in New York City has thrived.
I'm a professor with a focus on labor and employment law. My research on the minimum wage suggests a few reasons why this might be true.
The article goes on to explain why the rise in the minimum wage has not been as bad as had been predicted; in fact, it claims the both restaurant revenue and employment are up.
However, these claims are contradicted by 2 Anonymous Coward submissions, which could be from the same AC but we cannot tell, of the same story from the New York Post:
As predicted, the $15 wage is killing jobs all across the city
https://nypost.com/2019/09/30/as-predicted-the-15-wage-is-killing-jobs-all-across-the-city/
Just as predicted, the $15 minimum wage is killing vulnerable city small businesses, with the low-margin restaurant industry one of the hardest-hit as it also faces a separate mandatory wage hike for tipped staffers.
In Sunday's Post, Jennifer Gould Keil reported on the death of Gabriela's Restaurant and Tequila Bar — closing after 25 years. It struggled all year to find a way out, gradually laying off most non-tipped employees, including some chefs, only to find that quality suffered and customers fled. Owners Liz and Nat Milner finally hung it up.
Other eateries share the pain. In an August survey of its members, the NYC Hospitality Alliance found more than three-quarters have had to cut employee hours, more than a third eliminated jobs last year and half plan to cut staff this year.
"It's death by a thousand cuts," the Hospitality Alliance's Andrew Rigie told The Post, since "there's only so many times you can increase the price of a burger and a bowl of pasta."
Finally, there is another AC submission which claims that the minimum wage has had an effect - but that it is only part of the story. It is important to consider the increase in rents in NY City, and that there might be a shift in the entire market.
Famous Restaurant where Alexandria Ocasio-Cortez Bartended Closes Due to Rising Minimum Wage
[...] And yet, even this high level of sales wasn't enough to inoculate the business from the rising cost of rent and wages in New York. Coffee Shop co-owner and president Charlies Milite told Forbes that rent had become "unusually high," accounting for close to 27% of the restaurant's gross revenues. Add in the scheduled $2-per-hour minimum wage hike set to take place on December 31—an increase that, across Coffee Shop's 150 employees and multiple dayparts of service, would have added $46,000 to the monthly payroll—made it impossible to break even by cutting costs elsewhere.
"It's a wakeup call for our industry in general," Milite said. "When a restaurant is one of the top-ranked restaurants in America, sales-wise, and can no longer afford to operate, you have to look at that and say there's a shifting paradigm in the business."
Original Submission #1 Original Submission #2 Original Submission #3 Original Submission #4
(Score: 0) by Anonymous Coward on Thursday October 31 2019, @08:24PM (15 children)
Here is the part that caught my eye:
(Score: 4, Interesting) by isostatic on Thursday October 31 2019, @08:32PM (7 children)
$14.3 million in sales
27% is rent, so $3.86m a year in rent
Why don't they simply pay a lower rent - pay 10% less rent, and that leaves the money to pay the staff.
(Score: 0) by Anonymous Coward on Thursday October 31 2019, @09:46PM
Because the rent is too damn high! [wikipedia.org]
(Score: 2, Funny) by khallow on Friday November 01 2019, @01:43AM
And if they move out of New York City, then they wouldn't have to pay the staff either!
(Score: 2) by PiMuNu on Friday November 01 2019, @08:33AM (4 children)
Presumably _someone_ can afford to pay that rent; be it more profitable shops (clothes? electronics?) or offices. The rent matches what the market can pay...
(Score: 2) by isostatic on Friday November 01 2019, @10:54AM
You'd think that was the case. In which case it's good that shitty resturants that cant afford to pay staff or rent shut down.
(Score: 4, Interesting) by JoeMerchant on Friday November 01 2019, @01:51PM (2 children)
Actually, the landlords can afford to sit on empty properties for a long, long time - empty properties are low effort, low maintenance, and they can be milked as losses for tax purposes, used to attract "redevelopment incentives" etc. Bottom line: a lot of landlords just don't need the money, so if they want higher rent, they'll either get their higher rent, or maybe dream of the day they get bought out by a big(ger) developer for a huge lump sum profit.
We bought some land from a seller - willing to sell for $4400/acre, as evidenced by the fact that's what she eventually sold to us for, but the Real Estate broker had the idea that she "controlled" the market in her local area and no way would that kind of land EVER sell for less than $6000/acre, and she was doing a pretty good job of it, too, as evidenced by the fact this particular piece of land, and others like it, had been on the market for 10+ years with no serious offers. The broker failed to communicate our offers to the seller, and actively did everything in her power to stop the deal from coming together - only when I sat at her desk and talked the offer through with her, then stood up to walk across the street to another broker and split her commission did she finally relent and call the seller, advising her to not take the deal but grudgingly following her legal duty to present all offers.
🌻🌻 [google.com]
(Score: 2) by PiMuNu on Friday November 01 2019, @07:21PM (1 child)
> the landlords can afford to sit on empty properties
I was under the impression from TFA that these are reasonably high profile, high rent commercial properties in New York - not the sort to stay empty, like some random fields in the middle of nowhere might be.
> We bought some land from a seller
In my experience, real estate agents are quite crooked. By not passing on offers to a vendor, they artificially depress the price; then purchase the property through a third party and sell for profit. It's a well known scam (illegal in UK, but rarely prosecuted).
(Score: 2) by JoeMerchant on Friday November 01 2019, @08:12PM
Oh, don't get me started (well, you already have, but I'll try to be brief...)
We made an offer on a "bank held" property that had been on the market with no apparent action other than periodic price drops for about 8 months. We offered asking, cash. Our offer was not acknowledged by the selling broker until 4 days later when they informed us, as circumspectly as possible, that another party had recently made an offer exceeding our own and the property was now under contract. This kind of thing has happened more than once, and the scam I think is happening there is: bank requires periodic price drops on the listed price of the property, buyer gets in bed with the broker and obtains some kind of defacto right of first refusal when any legitimate offers come in, then the legitimate buyers are frozen out of the market while the incestuous local industry snaps up the properties as cheaply as possible. Same property was rehab-ed and turned for roughly 100% profit within a year, but that's not an opportunity that's actually available to the public.
🌻🌻 [google.com]
(Score: 3, Insightful) by Codesmith on Thursday October 31 2019, @08:32PM (2 children)
That's a really interesting number that they bring up:
150 employees x 38 hours per week x 4 weeks x $2.00 per hour = $45,600.00
That's a lot of staff to have at minumum wage. I would have expected that key holders and shift managers would already be getting paid more.
Pro utilitate hominum.
(Score: 3, Informative) by JoeMerchant on Friday November 01 2019, @02:04PM (1 child)
There's a little bit of "it's not fair" handwringing going on with the minimum wage increase - sure, key holders and shift managers _were_ getting paid more than fresh hires, but with the minimum wage increase, they all got raises - and the ones that had worked their way up are, in a relative sense, right back at entry level, even though entry level is now higher than what they were being paid before.
When the .com boom hit, we had a similar situation with tech employees. Back in the early 1990s entry level BS degrees were typically $30K/yr, Masters' $36K, with the usual insulting COL raises that brought most people up around $45-50K/yr by the end of the decade, but with the .com boom, our interns fresh out of school were getting offers for $70K+. So, everybody got a bump up around $70K, just to make sure that we didn't lose a bunch of people to better money across town, and... those $10-20K differentials that had built up over the years due to experience, meritorious service, etc. were mostly erased.
🌻🌻 [google.com]
(Score: 2) by Codesmith on Friday November 01 2019, @02:47PM
'd suggest the DotCom boom was rather different in its drivers of wage increase.
I can see what you're saying about raises all the way up, but there is no requirement to give everybody a $2/hr raise. It finally brings base wage up to a reasonable standard, and if you've been relying on a low base wage to underpay your low and mid-level managers it will cost you. If a shift manager is making $20/hr, offering them a $1 premium would probably fly. Office staff at the $25/$30 level can probaly be offered a couple of percentage points over they annual wage discussions.
A commenter above point out $14 million a year revenue. By my numbers the 150 employees would cost $5.3 million. That's a pretty low percentage for service industry operations; wages costing over 50% are not uncommon.
150 employees x 50 weeks x 38 hours x $15 / hour x 125% (payroll expenses) = $5.3 mil
(I work in a manufacturing facility, 38 employees and $8.5 million revenue. Last year we managed about 8% profit.)
Pro utilitate hominum.
(Score: 3, Interesting) by Mykl on Friday November 01 2019, @02:45AM (3 children)
It's very simple. The most important dollar figure for the customer, when it comes to it, is the final amount of money they end up spending at the restaurant. Let's say that I bought a $20 meal and tipped $3 - I'm up for $23. Now instead, let's charge the customer $23 but explain that tips are not required - the customer still only pays $23. The waiter gets no tips, but has a higher base wage and ends up with about the same amount of take home pay.
Total cost to customer remains steady. Business cost remains steady. Waiter income remains steady (but predictable). Fast food workers and behind-the-scenes workers (e.g. dishwashers) end up with better conditions. This actually benefits the small restaurant/diner, because their food becomes better value versus fast-food chains (who have to pay their workers more and therefore increase the cost of food, meaning the customer pays relatively more to visit McDonalds etc).
(Score: 2) by JoeMerchant on Friday November 01 2019, @02:07PM (2 children)
The European way (and, better, IMO...) Here in 'murica, you got the power when you sit down to a meal, staff don't kiss your ass and properly, it's entirely your option to walk out on 'em without pay - not the restaurant owner, now, you don't pay him and you end up in jail, but the ones you see face to face, for that 40 minutes you're sitting at the table, you OWN them.
🌻🌻 [google.com]
(Score: 2) by Mykl on Sunday November 03 2019, @11:55PM (1 child)
Socially, Americans will almost never stiff the waiter a tip, even if they weren't that happy with the service, because "it's expected". It somewhat reduces the leverage that the diner has when it's assumed that a tip will be coming almost regardless of service level.
Diners in non-tipping countries still have a way to register their disgust with poor service - complain to the manager.
(Score: 2) by JoeMerchant on Monday November 04 2019, @12:34AM
Economically, American service staff will almost never do something worthy of a tip stiffing... maybe one time in a thousand have I been served by a waiter/waitress who was so blatantly bad that they deserved nothing for their service, but, it does happen, and more often than actually receiving bad service I have had the manager replace our wait-person with another who could do the job better.
Now, in St. Maarten, we had a bartender come, take our order, forget about us for 90 minutes, laugh about roaches crawling around on the table, and finally when we managed to grab him and remind him, rush our food out with some parts cold (like ice crystals from the freezer) and other parts having been retrieved from an extended stay under the heat lamp. There is a man who gets no tip from us, I'm sure he was getting plenty of tips from his alcohol drinking customers.
🌻🌻 [google.com]