About those restaurants closing in Seattle because of the looming $15 minimum wage

[Nice Squirrel]

Apparently in Seattle another big problem for small business is skyrocketing rents. Yet we don't hear about that I guess because owners of capital should get what their property is worth but owners of labor should just be happy with what they're given.

Many businesses fail and the blame is misplaced on anything but the owners. For example, one restaurant I frequented failed and the owner blamed it on the smoking ban implemented by the state. In reality it was his overly lax management style and lack of customer service that killed it.

 

[SimpleDon]

Who said that? I know I didn't.

They will become less profitable?

Depends on if the increase for the demand of their products is more than the increase of their costs. Supply and demand. Econ 101.

If so, since restaurants do often shut due to lack of profitability, how would this not result in more of them?

I will pause here until you finally stop shifting the goalposts and creating strawmen.

Let me know when you're done.

You are here but you are bobbing and weaving so much it makes little difference.

Will restaurants be able to pass this cost on to customers or not?

Most of it, all of it, some of it, a little of it, none of it. Pick one.

This a month and a half later and I guess he never did pick one.

It depends on how much price enters into the customer's decision buy restaurant food, what economists call the elasticity of the demand. I would guess that it is very elastic for high end restaurants and that they can pass most of increase on as higher prices. The demand for lower end ones would be very dependent on price and they won't be able to pass as much on in higher prices. So a single choice would be that some of the increase in costs will be passed on the entire industry.

I can't speak for anyone else but when I say that increased wages results in decreased profits I am talking about looking at the economy as a whole, the macroeconomy. Of course, prices will go up in certain industries, but remember that overall price increases are called inflation in the macroeconomy and overall inflation is controlled by adjusting interest rates. In other words, the amount of total price increases are limited and wage increases beyond that point can only decrease profits.

This might explain your confusion on this point. It can't be helped because so many branches of economics these days denies that there even is a macroeconomy that behaves differently than the microeconomy that you and I deal with everyday. That the overall economy is just the microeconomy multiplied by 330 million for the US.

This is obviously not true, in fact the macroeconomy has to behave in the exact opposite way to counter the forces built up by the sum of the microeconomies, as in the example of inflation/deflation. Or debt, the national debt isn't like the debt that you and I have. In fact, the national public debt is the private sector’s savings. Paying off the national debt will result in lower savings and lower wealth in the private sector. This is why you can't pay off the national debt.

 

[dismal]

There is no "one" answer. Some restaurants will be able to pass on most of it, some all of it, some some of it, some a little of it and some none of it.

I'm sorry that messy reality doesn't fit into your neat little boxes.

So, we can agree there are at least some restaurants that can't pass on all of it to customers. Those restaurants will see increased losses.

Given restaurants are not a monolithic entity and some restaurants are always going out of business, won't more increased losses for some restaurants mean there will be more restaurants going out of business than there would without the $15 minimum wage?

 

[Bronzeage]

Apparently in Seattle another big problem for small business is skyrocketing rents. Yet we don't hear about that I guess because owners of capital should get what their property is worth but owners of labor should just be happy with what they're given.

Many businesses fail and the blame is misplaced on anything but the owners. For example, one restaurant I frequented failed and the owner blamed it on the smoking ban implemented by the state. In reality it was his overly lax management style and lack of customer service that killed it.

I have a friend who owns a diner style restaurant. His place was too small for a separate smoking dining room, so when the first round of smoking restrictions went into effect(sometime around 1990) he had to smoke free. In the first week, receipts went up 20%. That is a huge increase in any business.

He realized that there were less people waiting for a table, and tables were turning much faster. Before the ban, smokers would light up and have another cup of coffee. Now, they paid their check and rushed out the door. More plates served and less free refills was worth 20%.

My city has one of the highest number of restaurants per person of any city in the country. The competition is fierce and the failure rate is high. More than half do not last a year. Although payroll is a major expense and a raise in the minimum wage will affect that, the real reason all these restaurants close their doors is lack of business.

 

[ksen]

There is no "one" answer. Some restaurants will be able to pass on most of it, some all of it, some some of it, some a little of it and some none of it.

I'm sorry that messy reality doesn't fit into your neat little boxes.

So, we can agree there are at least some restaurants that can't pass on all of it to customers. Those restaurants will see increased losses.

Given restaurants are not a monolithic entity and some restaurants are always going out of business, won't more increased losses for some restaurants mean there will be more restaurants going out of business than there would without the $15 minimum wage?

Econ 101 would say yes that's the case.

However the graph I posted here shows number of food business licenses has been steadily increasing since the announcement of the increased minimum wage so sometimes Econ 101 isn't robust enough to actually explain what will happen in the real economy.

 

[Nice Squirrel]

Ksen, you automatically fail in your argument because of Squirrel's Law:

Whenever the term "Econ 101" is used in an online discussion, the user's understanding of applied economics is revealed to approach zero.

This includes Economics instructors like Laughing Dog.

 

[dismal]

So, we can agree there are at least some restaurants that can't pass on all of it to customers. Those restaurants will see increased losses.

Given restaurants are not a monolithic entity and some restaurants are always going out of business, won't more increased losses for some restaurants mean there will be more restaurants going out of business than there would without the $15 minimum wage?

Econ 101 would say yes that's the case.

However the graph I posted here shows number of food business licenses has been steadily increasing since the announcement of the increased minimum wage so sometimes Econ 101 isn't robust enough to actually explain what will happen in the real economy.

Does your chart control for all other possible factors to the point where you are confident the only thing affecting it is the minimum wage increase?

Or did you identify a parallel universe where the minimum wage increase did not occur and note that the chart from that universe shows no more restaurant licenses?

 

[Jimmy Higgins]

Uh, no one at all has ever doubted that it is possible to increase employment and the minimum wage at the same time. The impact of the general economy is usually going to be larger than the impact of the minimum wage. Furthermore, restaurants can stay open but make due with fewer employees. Restaurants in Washington state (which face the second highest minimum wage in the nation, second only to Washignton DC) average 14 employees per restaurant compared to the natural average of 17.

http://www.seattlemag.com/article/why-are-so-many-seattle-restaurants-closing-lately

You are refuting a strawman.

Eh, as a Seattleite, I'd say the the adverse affect will come in slow ripples. Some of the coffee shops I frequent have already posted signs telling customers that prices are being raised in response to the minimum wage hike. $4 for a cup of drip coffee, anyone?

As opposed to $3.50 before it?

 

[Jimmy Higgins]

Apparently in Seattle another big problem for small business is skyrocketing rents. Yet we don't hear about that I guess because owners of capital should get what their property is worth but owners of labor should just be happy with what they're given.

Nope. Only outlay businesses have is wages and health care.

 

[Nice Squirrel]

Apparently in Seattle another big problem for small business is skyrocketing rents. Yet we don't hear about that I guess because owners of capital should get what their property is worth but owners of labor should just be happy with what they're given.

Nope. Only outlay businesses have is wages and health care.

Many believe it to be true even though I've known a few businesses that were closed due to the raising of rent. I've know a few unscrupulous landlords that will prey on unsuspecting businesses knowing that moving an established business' location is often prohibitive they willingly raise rents to eat up all profits.

 

[ksen]

Econ 101 would say yes that's the case.

However the graph I posted here shows number of food business licenses has been steadily increasing since the announcement of the increased minimum wage so sometimes Econ 101 isn't robust enough to actually explain what will happen in the real economy.

Does your chart control for all other possible factors to the point where you are confident the only thing affecting it is the minimum wage increase?

Where did I say the only thing affecting the increase in food service business licenses was the minimum wage increase?

Or did you identify a parallel universe where the minimum wage increase did not occur and note that the chart from that universe shows no more restaurant licenses?

I was hoping I was in the parallel universe where you address what I actually wrote.

 

[dismal]

Does your chart control for all other possible factors to the point where you are confident the only thing affecting it is the minimum wage increase?

Where did I say the only thing affecting the increase in food service business licenses was the minimum wage increase?

Or did you identify a parallel universe where the minimum wage increase did not occur and note that the chart from that universe shows no more restaurant licenses?

I was hoping I was in the parallel universe where you address what I actually wrote.

I'm sorry it was my understand that you offered the chart as an argument that the minimum wage increase did not result in fewer restaurants than there otherwise would have been without it.

Hence I was wondering how you determined how many restaurants there would have been without it.

 

[Loren Pechtel]

Many businesses fail and the blame is misplaced on anything but the owners. For example, one restaurant I frequented failed and the owner blamed it on the smoking ban implemented by the state. In reality it was his overly lax management style and lack of customer service that killed it.

I have a friend who owns a diner style restaurant. His place was too small for a separate smoking dining room, so when the first round of smoking restrictions went into effect(sometime around 1990) he had to smoke free. In the first week, receipts went up 20%. That is a huge increase in any business.

He realized that there were less people waiting for a table, and tables were turning much faster. Before the ban, smokers would light up and have another cup of coffee. Now, they paid their check and rushed out the door. More plates served and less free refills was worth 20%.

My city has one of the highest number of restaurants per person of any city in the country. The competition is fierce and the failure rate is high. More than half do not last a year. Although payroll is a major expense and a raise in the minimum wage will affect that, the real reason all these restaurants close their doors is lack of business.

The higher the payroll costs the more customers they need to stay in business.

 

[Bronzeage]

I have a friend who owns a diner style restaurant. His place was too small for a separate smoking dining room, so when the first round of smoking restrictions went into effect(sometime around 1990) he had to smoke free. In the first week, receipts went up 20%. That is a huge increase in any business.

He realized that there were less people waiting for a table, and tables were turning much faster. Before the ban, smokers would light up and have another cup of coffee. Now, they paid their check and rushed out the door. More plates served and less free refills was worth 20%.

My city has one of the highest number of restaurants per person of any city in the country. The competition is fierce and the failure rate is high. More than half do not last a year. Although payroll is a major expense and a raise in the minimum wage will affect that, the real reason all these restaurants close their doors is lack of business.

The higher the payroll costs the more customers they need to stay in business.

And when people lose jobs, unemployment rises.

The restaurants of which I speak closed there doors while paying the current minimum wage. If we could have kept a few of them in business by dropping the min wage, would you be in favor of that?

 

[KeepTalking]

The owner of this pizza joint was apparently not even paying herself before the min wage hike went into effect. It sounds like she did not have a very profitable business, nor a good business model to begin with. It probably started with her deciding to name her restaurant "Z". That name invokes images of zombies for me, which is not exactly something that gets my mouth watering. I think I would have gone with A Pizza, or even better, AAA Pizza. AA Pizza might not work unless you wanted a bunch of recovering alcoholics showing up and chastising you for serving beer at their meetings.

 

[Trausti]

The owner of this pizza joint was apparently not even paying herself before the min wage hike went into effect. It sounds like she did not have a very profitable business, nor a good business model to begin with. It probably started with her deciding to name her restaurant "Z". That name invokes images of zombies for me, which is not exactly something that gets my mouth watering. I think I would have gone with A Pizza, or even better, AAA Pizza. AA Pizza might not work unless you wanted a bunch of recovering alcoholics showing up and chastising you for serving beer at their meetings.

Actually, her issue was the way the law characterized franchises as a nationwide business instead of the small businesses that they actually are. She said that in the video. National businesses, like Target (which has a big store downtown), have an accelerated time table to meet the wage regulation. But a nationwide store is better able to take the hit of a spike in labor costs (as it's not nationwide, just one locality) than a small business with eleven employees. There's actually a lawsuit about that. Not sure of status.

 

[Tom Sawyer]

The owner of this pizza joint was apparently not even paying herself before the min wage hike went into effect. It sounds like she did not have a very profitable business, nor a good business model to begin with. It probably started with her deciding to name her restaurant "Z". That name invokes images of zombies for me, which is not exactly something that gets my mouth watering. I think I would have gone with A Pizza, or even better, AAA Pizza. AA Pizza might not work unless you wanted a bunch of recovering alcoholics showing up and chastising you for serving beer at their meetings.

Which is too bad. She was avoiding taking a salary herself in order to pay her employees and then she raised the minimum wage she was paying them before she had to. She sounds like a nice lady and it's too bad that her business didn't work out.

 

[KeepTalking]

The owner of this pizza joint was apparently not even paying herself before the min wage hike went into effect. It sounds like she did not have a very profitable business, nor a good business model to begin with. It probably started with her deciding to name her restaurant "Z". That name invokes images of zombies for me, which is not exactly something that gets my mouth watering. I think I would have gone with A Pizza, or even better, AAA Pizza. AA Pizza might not work unless you wanted a bunch of recovering alcoholics showing up and chastising you for serving beer at their meetings.

Actually, her issue was the way the law characterized franchises as a nationwide business instead of the small businesses that they actually are. She said that in the video. National businesses, like Target (which has a big store downtown), have an accelerated time table to meet the wage regulation. But a nationwide store is better able to take the hit of a spike in labor costs (as it's not nationwide, just one locality) than a small business with eleven employees. There's actually a lawsuit about that. Not sure of status.

Yeah, I caught that in the article as well. I only brought up the part about her not paying herself so that I could segue into a commentary about the name of restaurant.

 

[Axulus]

The owner of this pizza joint was apparently not even paying herself before the min wage hike went into effect. It sounds like she did not have a very profitable business, nor a good business model to begin with. It probably started with her deciding to name her restaurant "Z". That name invokes images of zombies for me, which is not exactly something that gets my mouth watering. I think I would have gone with A Pizza, or even better, AAA Pizza. AA Pizza might not work unless you wanted a bunch of recovering alcoholics showing up and chastising you for serving beer at their meetings.

Actually, her issue was the way the law characterized franchises as a nationwide business instead of the small businesses that they actually are. She said that in the video. National businesses, like Target (which has a big store downtown), have an accelerated time table to meet the wage regulation. But a nationwide store is better able to take the hit of a spike in labor costs (as it's not nationwide, just one locality) than a small business with eleven employees. There's actually a lawsuit about that. Not sure of status.

It's mostly a product of the "big = evil" mindset of the left. Big doesn't automatically mean more profitable.

 

[Nice Squirrel]

Actually, her issue was the way the law characterized franchises as a nationwide business instead of the small businesses that they actually are. She said that in the video. National businesses, like Target (which has a big store downtown), have an accelerated time table to meet the wage regulation. But a nationwide store is better able to take the hit of a spike in labor costs (as it's not nationwide, just one locality) than a small business with eleven employees. There's actually a lawsuit about that. Not sure of status.

It's mostly a product of the "big = evil" mindset of the left. Big doesn't automatically mean more profitable.

I think it has more to do with the fact that larger companies have more resources and resilience.