This article was published at The McAlvany Intelligence Advisor on Friday, August 14, 2015:
By changing the meaning of the word “flowers” to “businesses,” the lyrics from Peter, Paul & Mary’s anti-war song applies perfectly to the new Seattle under its new minimum wage mandates: Where have all the businesses gone?
Where have all the flowers gone, long time passing?”
Where have all the flowers gone, long time ago?
Where have all the flowers gone?
Young girls have picked them everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?
And when will Mayor Ed Murray and his gaggle of progressives who unanimously passed the anti-business, anti-employment minimum wage law last summer ever learn: you cannot fool Mother Nature, and you cannot repeal economic laws.
In Murray’s case the economic law still to be learned is: when the price of something is increased (labor, for instance), less of it will be demanded. In Seattle’s case, observers now know exactly how much less is demanded: from the first of the year through the end of June, 1,300 restaurant workers have lost their jobs.
This is of course exactly the opposite of what was predicted: the new law was intended to “benefit more than 100,000 workers.” Whenever progressives offer such benefits, it’s always good to ask: at whose expense?
Devin Jeran, a worker at Z Pizza in downtown Seattle, knows. When the new mandate hit, raising his wage to $11 an hour the first of April, he considered it good news. Right up until his boss, owner Shah Burnham, told him the bad news: she was closing the place down in August.
Jeran thought the increase was going to be good for him, but reality has set in: “If that’s the truth, I don’t think it’s very apparent. People like me are finding themselves in a tougher situation than ever.”
Burnham was faced with economic reality:
I’ve let one person go since April 1. I’ve cut hours since April 1. I’ve taken [those hours] myself because I don’t pay myself.
I’ve also raised prices a little bit. There’s no other way to do it….
Cascade Designs, an outdoor gear maker, has already made the decision to move at least part of its Seattle operation to lower cost Nevada. Martin Maisonpierre, a company spokesman, said it was the one-two punch of costly rents in Seattle along with increased labor costs, thanks to the city council’s mandate. The company, which makes sleeping mattresses and other equipment under brand names like Therm-a-Rest, MSR, and Platypus, is moving about 100 jobs, or one-fifth of its workforce, to Nevada by the end of the year.
The day before the mandated increase took place, Seattle’s iconic Ivar’s Salmon House raised its menu prices by 21 percent while asking its customers to refrain from tipping, all in order to stay in business under the new mandates. This will have another unintended consequence: there will be little incentive to provide excellent service in hopes of receiving a TIP (To Insure Promptness) when the bill is presented.
The owner of Icon Grill in downtown Seattle, Nick Musser, cut paid time off to just one week a year for most of his employees, while those who have worked for him for more than 10 years will lose three weeks. And even that may not be enough for him to stay in business: “We’re evaluating [the] potential to do things like … price increases.”
Even progressives who own businesses didn’t learn, until after the mandates started to bite. Jody Hall, the owner of Cupcake Royale, a company with seven neighborhood coffee shops that sell artisan cupcakes and ice cream and employs about 100 people, is well-known in Seattle for her support of progressive causes, and an early supporter of Seattle Mayor Ed Murray’s plan to raise the minimum wage.
But now, after the reality of the impact of the mandate is beginning to settle into her consciousness, she is having second thoughts:
I really have a hard time. Even though I signed support [for the mandate], this is keeping me up at night like nothing ever has.
There is no example, ever, where one city would more than double the national minimum wage.
She had been planning an expansion and was getting ready to sign a letter of intent, but decided to hold off: “I just felt that I don’t want to invest in more expense at this point, to kind of hold it and see what happens.” She is now considering expanding, but outside the city limits.
The net effect of the Seattle experiment? Not only the loss of jobs by those who can least afford to lose them, but the new jobs not created, the new businesses not started, the new investments not made.
There’s another consequence, too: as the cost of labor increases, alternatives come into play, such as electronic order pads replacing servers and kiosks taking orders instead of people.
Where has common sense gone? When will they ever learn?
A graduate of an Ivy League school and a former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently atwww.LightFromTheRight.com, primarily on economics and politics. He can be reached firstname.lastname@example.org.
American Enterprise Institute: Minimum wage effect? January to June job losses for Seattle area restaurants (-1,300) largest since Great Recession
Seattle Times: Ivar’s to raise restaurant workers’ wages to $15 right away