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Thread: minimum wage hikes cause restaurants to shut down and deter new ones from entering

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    minimum wage hikes cause restaurants to shut down and deter new ones from entering

    “Local minimum wage hikes cause restaurants to leave or shut down and deter new ones from entering, according to a new Harvard Business School study”

    By Nick Sorrentino on April 20, 2017


    Last year we discussed why a significant rise in the minimum wage in places like Seattle and San Francisco was “good” for wealthy urbanites (you know, it pushes out the undesirables [some might call them “deplorables”] in the name of “social justice”) but was actually bad for those who worked for minimum wage.

    Fast forward to now.

    (From The American Interest)
    More interesting, though, are the study’s findings about which restaurants are forced to leave by the higher wage floors. The authors compared rates of departure of restaurants across different Yelp ratings, and found that the policy hit low and mid-quality restaurants much harder than top-tier restaurants. “Our point estimates suggest that a $1 increase in the minimum wage leads to an approximate 14 percent increase in the likelihood of exit for the median 3.5-star restaurant but the impact falls to zero for five-star restaurants.”

    While a restaurant’s Yelp rating doesn’t correlate directly with its price range, this differential effect suggests that it’s easier for rich people to ignore the deleterious effects of minimum wage hikes. Virtually all of the most expensive restaurants in San Francisco have four or more stars; the city’s business and professional elite are unlikely to see many of their favorite high-end destinations pushed out of the city. Poor or middle-income workers are less likely to have the luxury of only frequenting top-rated establishments, not to mention that they are more likely to work at the restaurants that the hikes put out of business.
    Click here for the article.

    http://www.againstcronycapitalism.or...-school-study/

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    Did they really need a study to figure that out?

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    Increasing minimum wage will reduce profits. It will increase prices. However, neither of these things is necessarily bad. Higher prices, inflation makes debt eiter to pay. That benefits a large percentage of the population directly. It impacts everyone favorably because the state and federal debt is easier to pay. Bank savers are likely to receive a higher rate of interest. Gold bugs see an increase in value.

    Now, I'd rather see wages pushed up by strong unions as this would work better on a regional basis, but we don't have strong unions.

    The negatives of the current situation are obvious. More and more people end up on welfare, because workers have to be subsidized in order to survive. Not much can be done about this because the current minimum wage is high enough to make auromation profitable. Cutting it would require larger government subsidies to business in the form of more welfare spending.

    The argument against a higher minimum wage is more unemployment. This is not a bogus argument. However it assumes that automation will mafically stop if we force people to work at starvation wages. It will not. We currently have about 60% of available workers, working. This is slightly down from the norm of 65%. We can expect to see that percentage continue to go down as automation continues. It is not economical to train someone over 55 to do a high tech job. The available skill sets are not their for others. We need a lower retirement age and a guaranteed income to take care of these people. Yes, that is socialism. The big problem here is the work ethic.

    Is dog walking a job? The service industries have been very creative. In large cities at least there are people who make their money walking dogs. I would guess most of that income is received under the table and not taxed. Some libertarian types would consider that a good thing. But the flip side is that is you're taxable income is zero then you get welfare. So we live in a society that has more and more undisclosed income. Services like this are likely to continue growing. But this does promote an elitist society.

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    Another lib policy that eliminates completion so the rich can get richer.

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    Quote Originally Posted by Slayer98_l View Post
    Another lib policy that eliminates completion so the rich can get richer.
    The rich always get richer. Money spawns money. We have had massive wealth redistribution since 1980. We need to swing the pendulum back for a bit.

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    The poor always make decisions to be poor.

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    Quote Originally Posted by Katzndogz View Post
    The poor always make decisions to be poor.
    While that is true. It is also true that big business together with government work to limit competition by enacting laws and regulations that price small businesses out of the picture. Crony capitalism is why big business will always love big government.

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    Perhaps studying in school would have been a good idea, then they could have gotten a decent job somewhere else. These kind of jobs are for high school and college kids to halp pay their way thru school. Yes, there are professional waiters, but they rely on the tips, not the salary. A real pro waiter can pull down anywhere from 2 grand a week to 4 grand.
    Get your facts first, then you can distort them as you please.
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    Quote Originally Posted by RobertLafollet View Post
    The rich always get richer. Money spawns money. We have had massive wealth redistribution since 1980. We need to swing the pendulum back for a bit.
    "Massive wealth redistribution" is the government, by use of force taking money from those who earn it, then giving it away to people who won't/don't work.

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    Quote Originally Posted by Slayer98_l View Post
    "Massive wealth redistribution" is the government, by use of force taking money from those who earn it, then giving it away to people who won't/don't work.
    I challenge that idea. Is a pizza cooking over a hot oven, getting burned regularly, and having to deal with abusive customers not working? Is someone spending 6 or 8 hours a day making beds and cleaning rooms not working? Is checkout person spending 6 or 8 hours standing in front of a register not working?

    Since uniforms are expected to be clean and usually only one or two are provided where do they get the money to do daily wash or the time if they have tow work 2 jobs to survive?

    The problem is that big business owns the pizza place. The franchise gets to pay 5% of the revenue to the home office and so can't make money Probably has to buy supplies from an authorized seller and has to have the equipment that the home office mandates. The home office probably gets a kick back on all that. I've see some of the contracts they are not nice. If wages go up it squeezes the franchise.

    I really don't think it is the government that is taking the money.

    Back when I was growing up in the 50's and 60's there were lots of hamburger stands. Usually with names like Big Jims or the Charcoal inn Big Jim's had cheap food that was good. The Charcoal in had the best steak sandwiches I ever tasted. I still miss it. You got your fish fry at the local tavern. No brand name there either. There were brands A&W. Dairy Queen and the like. My senior year in high school we got a McDonalds. Women stayed home and worked in the house. Those are what we called the good old days. You worked in a factory you joined the union and either were active or complained about it. I was an active teamster.

    Yes, things were better then. Big business was rare. Small factories were profitable. Real wages were a lot higher. You could work your way through college because 17 credits cost a lot less then a thousand a semester.

    We aren't going back to those days. There were no drones. Long distance was expensive. Automated tellers weren't even in science fiction. Robots broke down all the time. The desk top computer was just science fiction. The dollar had declined massively in value from 1920.

    I'm a realist. I like automation. Back then we watched the Jetsons and wished it was like that now. Now we are almost in the world of the Jetsons and scared of it. I look forward to it still.

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