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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: 5, Insightful) by ilsa on Thursday October 31 2019, @08:14PM (32 children)
So here's the part that caught my eye: "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."
So they had a rent that was so high, they had to choose between that or giving their employees a living wage. I think it should be pretty obvious where the problem is, and the minimum wage isn't it.
(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.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(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.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(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.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(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.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(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.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 2) by JoeMerchant on Thursday October 31 2019, @11:26PM (15 children)
No, minimum wage isn't the problem. Inability to charge for their products might be a problem, but once all the cheap shops go out of business, you're left with the ones that have a working business model, and if higher prices are a part of the formula, then that's the way it is.
Tellingly, even with sky high rent AND higher labor costs, the market is doing just fine, thank you very much. People aren't going to quit eating burgers just because the cost goes up 10%.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Friday November 01 2019, @01:45AM (14 children)
We didn't need those jobs anyway. I sense a pattern here.
(Score: 2) by JoeMerchant on Friday November 01 2019, @01:21PM (13 children)
Actually, yes, that's the point. We don't need tannery apprentices with ~5 year life expectancy, we don't need sharecroppers who get deeper in debt to the company store each year just for rent and food, and we don't need pizza delivery drivers who net-lose money if they don't consistently break traffic laws while making their deliveries.
If you don't need the money to live, get a hobby. If that hobby is taking food orders and delivering plates of food to strangers, more power to you, maybe if there are enough people like that then there can be business models built on them.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Saturday November 02 2019, @12:46AM (12 children)
Obvious rebuttal: You nostalgically lauded [soylentnews.org] your 100 productive acres (from last century) which implicitly require sharecroppers. We don't need sharecroppers, but your business model does.
And if you do need that money to live, then well, we didn't need that hobby anyway - by definition!
(Score: 2) by JoeMerchant on Saturday November 02 2019, @02:38AM (11 children)
I get it now, even though you can troll through the archives for "supporting evidence" for your point, you just don't have basic reading comprehension. Nowhere in that statement of 100 productive acres on which to provide for your family was it intended, implied, or stated that sharecroppers were required, desired, or even considered - the sharecroppers are just a projection from your imagination to support your own world view.
If I had free and clear access, quiet enjoyment of 100 productive acres, why the fuck would I invite sharecroppers to come onto my land? So I can feed them too? Not my style, thank you. Far easier to hunt and gather from the woods, with a small plot in a small clearing to grow starches to cover for when the hunting isn't so good, and maybe the women would take an interest in growing vegetables and salads.
Pretty much agree there, unless I am not understanding you. I bring up the hobby thing because I've been in a number of small companies when the shit hit the fan and all the paychecks stopped. At that point, it becomes crystal clear who needs the money and who is just there because they like the place for whatever reason (often not much more than because it has become familiar and comfortable) - it's actually shocking how many people in those places _don't_ need the money and do continue without pay or good chance of future pay - close to 20% in my experience - not that that is representative of the larger population in general, but in those small high risk enterprises they tend to concentrate because the risk of loss of income isn't a risk for them.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Saturday November 02 2019, @05:28AM (10 children)
The part where you were renting that land out to someone else. Those are the sharecroppers.
(Score: 2) by JoeMerchant on Saturday November 02 2019, @04:50PM (2 children)
If you've got more land than you need, why not? Depend on transients to provide your livelihood? Sounds like a fool's game.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Monday November 04 2019, @03:38AM (1 child)
Or the standard rent model for the lodging and residential rental industries. Somehow they get by.
(Score: 2) by JoeMerchant on Monday November 04 2019, @02:21PM
Key word: industries.
I believe the short analysis is: they have adequate resources to spread the risk so than when they to connect with a (minority, but far from rare) deadbeat tenant, they can absorb the loss and take it out of their paying tenants.
Individuals renting a single property that they need the income from? That is the fool's game, and for every 3 or 4 rosy stories of great tenants, best thing we ever did, the money is really great, there's one or two stories of: deadbeats trashed my house, never paid rent after the first month, took almost a year to evict them, I lost half the value of the property and have no hope of ever collecting on my legal judgement against them.
It's back to: it's good to be King - if you don't need the income, take the risk and it usually pays off. For serfs who have just what they need and not much more, attempting to act like a King is a good way to get yourself worse off than you already are.
Oh, and circling back to OP - if there's a minimum wage that's high enough for your tenants to actually pay rent and have enough left over to live, at least the ones who have a job aren't as likely to stiff you.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 2) by JoeMerchant on Saturday November 02 2019, @04:56PM (6 children)
Where, in this comment you linked, is the word rent, or concept of renting your family's land? Having - simple ownership - not some government based rent seeking structure.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Sunday November 03 2019, @01:51AM (5 children)
Like say UBI, minimum wage, etc?
(Score: 2) by JoeMerchant on Sunday November 03 2019, @01:32PM (4 children)
No, not lauding Feudalism - maybe it was good to be King, do you identify with Medieval Kings in your current living circumstance? I was saying the Kings and their Courts might have comprised 2% or so of the population, but from my perspective what's good for the top 2% of the population is largely irrelevant to the remaining 98%.
What was "better" in that model was that the serfs had relative autonomy and control of their productive land. Sure, they paid taxes to the Lords (landlords?), but we can romanticize at least that they were reasonable, on the order of a tithe to the Church and another tithe to those who "protected" them - no doubt often in the way that the Mob families "protect" local businesses, and no doubt some Lords took quite a bit more than a tithe, in all manner of types of payment. A tithe to the 2% would fall into the (now long defunct) Ben & Jerry's ideal of no more than a 5x pay differential across all employees of the company.
Compare to the modern "serf" who lives in a landlord's building but has no access to productive land, only the option to labor for money in other landlord's businesses - money which they cannot eat, but only exchange for food in yet other landlord's businesses. They still pay taxes at every turn, often higher taxes than the landlords do, and their labor comes with pre-requisites of training for which they usually pay, transportation which they must purchase, etc.
Now, in the more populous regions of the middle ages, the landlords would place restrictions on hunting in "their" land, harvesting of trees, and other less than ideal restrictions - agrarian feudalism breaks down under population pressure fairly quickly - but, so does the entire planet with modern population pressure.
I see those as "rent seeking" by the 98%, not the 2%, and I would call that positive progress.
There's nothing bad, and quite a bit good actually, about stratification of income and wealth, up to a point. Whether that point is Ben & Jerry's 5x income differential, or a 100x wealth differential, or some other limit - at some point excessive income/wealth differential devolves into tragic nepotism, you get idiot children taking control of empires.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Monday November 04 2019, @03:40AM (3 children)
Food which they can eat. There's not much point to the argument when that money buys a lot of food, shelter, etc.
(Score: 2) by JoeMerchant on Monday November 04 2019, @02:33PM (2 children)
Does it, though?
Florida minimum wage: 8.46 USD per hour
Minimum rent in Jacksonville seems to be around $500 per month, or ~60 hours of work (neglecting taxes): https://www.trulia.com/for_rent/Jacksonville,FL/0-500_price/ [trulia.com]
Cost of food for 1, top Google result: $250 per month, or ~30 hours of work. https://www.google.com/search?q=average+grocery+bill+for+1&ie=UTF-8 [google.com]
So, if you're lucky enough to get full time employment, that's ~$1350 per month, with $750 right off the top for minimal food and shelter - $600 left over to handle transportation, clothing, emergency expenses. To secure that full time employment, and be able to shop for economical food and clothing, you're either going to need a car, or spend the remainder of your non-working waking hours on public transit, going with the car option, top Google result is $2500 per year in Florida, or another $210 per month.
Down to $390 per month now, revisiting taxes, just FICA is 7.65% (quite the bargain, considering you'll probably be needing social services multiple times before retirement), there's $100 per month gone, down to $290 now - and you're still naked.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 1) by khallow on Tuesday November 05 2019, @02:37AM (1 child)
So even at minimum wage - which most people are earning more than, that's pretty damn good.
Or split the rent and food costs with other people and drive a used car. It's not rocket surgery.
(Score: 2) by JoeMerchant on Tuesday November 05 2019, @02:30PM
No, what it is is scraping bottom. Some wizard somewhere came up with a "minimum emergency fund" figure of $2200ish. Without that much cash cushion, you can expect to encounter typical, probable emergency situations which require that much money, and will be a whole lot more expensive if you don't have that much money readily accessible somehow. The above analysis, neglecting clothing or any other "unnecessary" expenses, would require 10+ months of savings to build up such a princely emergency fund.
Sure, we can shack up with other working poor, 4 to a bedroom - no chaos or added risk / expense in doing that, is there? Your idea of sharing transportation sounds good, but that's the dopeler effect - it only sounds good coming at you real fast, once you look at the overall expense profile, owning your own transportation is a very cheap thing compared to the risks to employment and time costs of not having control of your own transportation, plus - you can work Uber/Lyft in your spare time for that awesome extra $30 per month of net income - assuming you're immortal and $1.25 net profit per hour is worth more than the risk of injury while driving to you - you did get comprehensive health coverage in that minimum wage job, didn't you?
By the way, $2500 per year is the net expense of a used car, not a new one. Little things like legally required insurance take up almost half of that, fuel and maintenance costs of driving 100 miles a week eat up the rest. New cars have lower maintenance and sometimes lower fuel costs, but way more than make up for that in depreciation.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end