SAN FRANCISCO RESTAURANTS CLOSE AT "UNPRECEDENTED" RATE AFTER CITY BEGINS STEEP MINIMUM WAGE RATE HIKES
by Kevin Ryan
Restaurant owners in San Francisco are blaming a spate of restaurant closings in part on the city's highest-in-the-nation minimum wage hikes. Over 60 top restaurants around the Bay Area closed between September and January alone, and it's expected to get much worse as the pace of minimum wage step-ups accelerates, prompting one local restaurant publication to call it a “death march.”
San Francisco’s minimum wage was increased to $13/hr last July, will step up to $14/hr this July, and $15/hr in July 2018. And California is one of just 8 states that does not allow businesses to include tips in their calculation of minimum wage, meaning wait staff receive even more than the high minimum wage.
Well, those that keep their jobs do. Year-over-year employment growth in the restaurant industry has slowed, and is now falling in San Francisco. And many owners blame the wage hikes, saying their profit margins have fallen to near zero and they've been forced to layoff staff and curtail hiring to stay profitable.
And it's not just restaurant workers being impacted. Since San Francisco added its own municipal minimum wage in 2004—one of the first in the country—menu prices have jumped 52%, twice the rate of inflation.
The be fair, owners cite other factors contributing to the cost increases, including rising rents, new requirements for providing health care, and new sick leave mandates. But they all have one thing in common with higher minimum wages: they make it more expensive to do business, and in a rising number of instances, are making it impossible to stay in business.
And this is happening in one of the biggest tourist destinations in the world, with very high per capita incomes. Imagine the effect a $15 per hour minimum wage would have in rural areas, or poor cities where people don't have the disposable income to be able to afford the high prices that minimum wage leads too. It would be a disaster.
In fact, you don't have to imagine the effect. Just look at Puerto Rico and the other American territories to see the effect of minimum wage on a poor area. The last time the U.S. federal minimum wage was increased, Puerto Rican income was so low that the new minimum wage amounted to 75% of median income. Unemployment on the island surged and its GDP per capita declined by 7%. Working age Puerto Ricans fled to the U.S. mainland, leaving the island with less tax revenues and a growing debt crisis that has culminated in the territory declaring bankruptcy this year.
Likewise, according to researchers Paul Kupiec and Ryan Nabil, "The impact on the economies of American Samoa and the Northern Mariana Islands was devastating."
In American Samoa, after only 3 of the 10 scheduled minimum-wage increases, overall employment dropped 30%. And real per capita GDP fell nearly 10%.
In the Northern Mariana Islands, employment was down by 35%, and real per capita GDP fell by 23%. The governor of American Samoa testified before the U.S. Congress that the new minimum wage policy created, “the real possibility that American Samoa could be left substantially without a private-sector economic base except for some limited visitor industry and fisheries activities. American Samoa’s economic base would then essentially be based solely on federal-government expenditures in the territory.”
That's because national minimum wages ignore the fact that there are widespread geographic disparities in income, prices, and cost of living. Wealthy areas might be able to sustain a minimum wage that would cripple less prosperous locations.
And if a city like San Francisco, which is one of the wealthiest in the country, can't support a $15/hr minimum wage, imagine what would happen if Bernie and others got their way and it became effective everywhere. The inflation and job losses would be staggering.
found @ 1911 likes ON 2017-05-22 22:57:17 BY ME.ME