Tea Party conservatives have jumped on a story printed in Seattle Magazine like a dog on a T-bone steak. The Tea Party News Network declared that Seattle restaurants are”closing in record number.”
In the Seattle magazine story written by Sara Jones, she explores a recent splat of restaurant closings in the Seattle area. None of the closings are directly related to the minimum wage increase. They seem to have more in common with the normal reasons why many restaurants close for business, such as location, expansion, clientele, etc.
Seattle recently decided to raise the city’s minimum wage from $9.32 to 11.00 an hour starting April 1, 2015. Seattle employers with less than 500 employees have seven years to raise their wages to $15. Employer’s with more than 500 employees have 3 years.
According to Anthony Anton, president and CEO of Washington Restaurant Association, about 17 percent of restaurants go out of business or change ownership. Seattle currently has about 2300 restaurants with an average of about 400 closing every year. There is some fear that the minimum wage hike could lead to more closures due to the insanely thin margin most restaurants have for profit. Anton offers this common breakdown:
- Labor Costs = 36%
- Food Costs = 30%
- Operational Costs = 30%
- Profit Margin = 4%
Anton estimates that the average restaurateur in Seattle takes home about $28,000 a year. The biggest problem many people are concerned about is the labor cost percentage. If the labor costs exceed 40 percent, then obviously there would be little to no profit. Anton said that the labor costs could rise to 42% for quick-service restaurants and 47% for full-service restaurants. Anton goes on to say:
?Everyone is looking at the model right now, asking how do we do math? Every operator I’m talking to is in panic mode, trying to figure out what the new world will look like. Seattle is the first city in this thing and everyone’s watching, asking how is this going to change??
Michael Hiltzik wrote a more progressive reaction to this story in the Los Angeles Times today:
“There are some mild intimations in the article that Seattle restaurateurs are thinking about how to accommodate the wage increase. These come mostly from an industry lobbyist, although local reporters have been collecting expressions of concern from restaurant owners about how the wage increase will thin their profit margins.
The Seattle Magazine piece observes, on the other hand, that the market in new restaurant openings is very active. And Watkins points out that Seattle remains one of the most vibrant and competitive restaurant cities in the country; Jed Kolko of Trulia calculates that it boasts the third highest concentration of eateries in the country, at 24.9 per 10,000 households, behind only San Francisco (by a huge margin) and the New York metropolitan area.
That doesn’t mean that the minimum wage increase won’t make the Seattle restaurant business harder. But so far it doesn’t seem to have made a dent in diners’ choices.”
The Seattle Magazine article seems to have given a lot of ammunition to conservatives who are dead set against raising the minimum wage. I believe liberals will need to work more closely with the small businesses who are concerned about the wage increase, and figure out how they can make attaining a living wage work for everyone. Simply dismissing those concerns because they come from “industry lobbyists”, could be a very bad mistake. We’ve seen in this country disastrous application of some very well intended policies. I think it’s important for liberals to actively listen to concerns regarding how they set about achieving a living wage for all Americans, then take measures to address those concerns. If liberals fail to address those concerns, the Tea Party will create the narrative necessary to win more elections.
While it’s still too early to tell if the wage increases will have the effect that Anton and people in the Seattle business community fear it may have, liberals would be smart to be proactive, rather than sorry.
