It is fascinating to see brilliant people belatedly discover the obvious — and to see an even larger number of brilliant people never discover the obvious.
A recent story in a San Francisco newspaper says that some restaurants and grocery stores in Oakland’s Chinatown have closed after the city’s minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.
At an angry meeting between local small business owners and city officials, the local organization that had campaigned for the higher minimum wage was absent. They were probably some place congratulating themselves on having passed a humane “living wage” law. The group most affected was also absent — inexperienced and unskilled young people, who need a job to get some experience, even more than they need the money.
It is not a breakthrough on the frontiers of knowledge that minimum wage laws reduce employment opportunities for the young and the unskilled of any age. It has been happening around the world, for generation after generation, and in the most diverse countries.
It is not just the young who are affected when minimum wage rates are set according to the fashionable notions of third parties, with little or no regard for whether everyone is productive enough to be worth paying the minimum wage they set. (thomas Sowell)
Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” ..,
“Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”
In reference to that last quote, it’s certainly a math problem for the restaurant owners, but that doesn’t eliminate the fact that it’s a political problem for the social justice warriors who shoved this initiative through. Of course, the problems in question are all too real for the workers who are now “benefiting” from having their wages bumped up by more than 50% in some cases, and it involves some calculating as well. Our friend Bruce McQuain asks the question which puts this whole math issue in focus. What’s $15 times zero again?
Are there alternatives to closing? Sure. But they’re the same ones we’ve talked about for years:
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine. As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.”
Welcome to the land of $17 dollar cheeseburgers. And, as you can figure out fairly quickly, everything else will be more expensive too … which, of course, erodes the purchasing power of that $15 wage. More importantly, if you work for one of those establishments that is closing, your wage is $15 times zero hours, isn’t it?
Bigger companies who can absorb the financial hit from implementing new technology have already been preparing for these changes. McDonald’s has been experimenting with point of sale automation for taking orders and Applebee’s rolled out smart tablets at tables in multiple locations last year. The latter solution is the most interesting to me because it seems like the easiest for younger consumers to adapt to. Most of the people going out to eat in such places are already familiar with laptops, tablets and smart phones anyway. Having one waiting at the table which takes the place of not only the menu, but the waitress as well, isn’t going to come as much of a shock to the system.
I ran into one of these setups at the Philadelphia airport this winter and they work surprisingly well. If you plan to pay by credit or debit card (which is the only option in some cases) you barely interact with a human at all. You browse the drinks and food on the touch screen, place your order, swipe your card, and a short while later somebody strolls up with your food and beverage, says hello and drops them off. It’s a terribly impersonal service as compared to a bartender or waitress who stops to chat with you, but it gets the job done.
Of course, that last phrase is the big issue here, isn’t it? It gets the job done. That job used to be done by a person. Now it’s essentially a robot. So those workers are no longer on the payroll, but hopefully they’ll catch on someplace else. Unfortunately, as Seattle is finding out, employers who run single outlets and don’t have the backing and buffer range of a major chain often won’t be able to make the shift in technological infrastructure required to cut back on staffing while staying open. Those folks will shut down, and it’s apparently already beginning in Washington state. (hot air)
Back to Mr Sowell:
Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.
The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).
Looking back over my own life, I realize now how lucky I was when I left home in 1948, at the age of 17, to become self-supporting. The unemployment rate for 16- and 17-year-old blacks at that time was under 10 percent. Inflation had made the minimum wage law, passed ten years earlier, irrelevant.
But it was only a matter of time before liberal compassion led to repeated increases in the minimum wage, to keep up with inflation. The annual unemployment rate for black teenagers has never been less than 20 percent in the past 50 years, and has ranged as high as over 50 percent.
You can check these numbers in a table of official government statistics on page 42 of Professor Walter Williams’ book “Race and Economics.”
Incidentally, the black-white gap in unemployment rates for 16-year-olds and 17-year-olds was virtually non-existent back in 1948. But the black teenage unemployment rate has been more than double that for white teenagers for every year since 1971.
This is just one of many policies that allow liberals to go around feeling good about themselves, while leaving havoc in their wake.
But they “feel” so good about themselves and you’re so “greedy” if you disagree.