A new year is fast approaching and 2020 could be a painful one for our nation's restaurants: 24 states and the District of Columbia will raise their minimum wages effective New Year’s Eve or New Year’s Day.
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Labor unions and their allies are cheering the policy change, but the evidence shows unreasonable wage floors are no cause for celebration -- they are, in fact, destroying restaurant scenes in some of the best-known dining towns from coast to coast.
The cost of a $15 minimum wage
Rather than give employees a raise, [$15 minimum wages] leave them without a paycheck, period.
Raising the minimum wage is a classic case of good intentions gone awry.
Proponents offer a “free lunch” of higher pay to employees without any offsetting costs; in reality, the costs of a $15 minimum wage are real -- and they destroy businesses and jobs. Rather than give employees a raise, they leave them without a paycheck, period.
The Employment Policies Institute has documented dozens of examples from coast to coast at Faces of $15. The ongoing project shows the human toll of the Fight for $15, giving the victims of these reckless policies a voice in the hope that politicians, community leaders and the public will see the real outcome of these well-intentioned yet destructive laws.
"The [$15] minimum wage, that’s what broke the camel’s back. It killed us.”
The stories are heartbreaking. In New York City, Larry Georgeton, the former owner of the now-closed Del Rio Diner in Brooklyn, was frank: "The [$15] minimum wage, that’s what broke the camel’s back. It killed us.”
He explained that his working-class clientele could not shoulder the price hikes necessary to offset the minimum wage increase.
His customers aren’t the only ones. Across the country, small business owners in locales with high labor costs have found that price hikes are no panacea to offset a rising minimum wage.
Just this week in Sacramento, popular Greek restaurant Opa! Opa! announced it would close its doors after 14 years in business, citing the city's rapidly-rising minimum wage as the determining factor. More than a dozen employees will lose jobs right before Christmas. The owner explained that prices were up 53 percent since he opened his door, and all it did was reduce his customer counts.
In San Francisco, the city’s hostile business environment has small businesses “at a breaking point."
Golden Gate Restaurant Association member Laurie Thomas points to data from YELP that shows "restaurant closures [in the city] have begun to outpace openings by nine percent." One business owner was blunt: "Just opening or trying to adapt your business [in San Francisco] … it puts the Soviet Union to shame."
Even at restaurants that remain open, a hostile environment can force them to trim staff to stay afloat.
Seattle Subway franchisee Heidi Mann let four staffers go to keep the doors open at her business; she and her husband work long weeks to pick up the slack.
One New York-based franchisee of a casual dining chain reduced his staff count by 1,000 through attrition, using tabletop tablets to replace tasks once performed by an employee.
And more workplace automation is likely coming soon to a restaurant near you: A new study from economists at Miami and Trinity Universities finds that full-service restaurants staff nearly 20 percent fewer tipped workers (as a share of employment) in markets with high labor costs.
These damning data haven't kept proponents from misleading the public about the consequences of wage hikes and pushing to expand it. Every major 2020 Democratic contender for the U.S. presidency supports a $15 federal minimum wage.
San Francisco is squeezing its famous restaurant scene with this approach, and New York City is following suit: According to a survey from the New York City Hospitality Alliance, the city’s full-service restaurant employment has slowed to a crawl and it lost full-service restaurant jobs in 2018 for the first time in nearly two decades.
We know the outcome of raising the minimum wage: fewer restaurants and jobs. That's one recipe the American people could do without.
Michael Saltsman is managing director at the Employment Policies Institute.