Seattle $15 Minimum Wage Forcing Some Restaurants Out Of Business

Seattle’s new $15 minimum wage, although not yet in effect, is already creating heartburn for area foodies who have apparently noticed many of their favorite city eateries shutting down.

Although there are various factors in play, and the restaurant industry has a high failure rate even under the best of circumstances, the April 1 minimum wage hike appears to be one of them.

The government-imposed minimum was designed as an entry level pay grade rather than an endpoint. In the normal course of things, minimum wage employees — and this usually applies to a younger cohort — pick up new skills and get promoted to higher paying positions or land at another company that offers better opportunities.

Virtually everybody has endured a bad boss or more than one in their career. Indeed, while some unethical or unfair businesses clearly exploit their hard-working labor force with artificially low pay, a one-size-fits-all minimum wage doesn’t distinguish between employers that operate in good faith, and who may be struggling to keep the doors open, and those that do not. Restaurants in particular operate on a narrow profit margin.

On the other hand, assuming that federal, state, or local government has a role in establishing pay levels, which is debatable, the minimum wage probably has to be high enough to incentivize a segment of the population to get off welfare and enter the marketplace. Whether $15 is about right, still too low, or too high remains to be seen.

As far as some Seattle restaurants closing their doors, Seattle Magazine identified the minimum wage as a key consideration.

“Though none of our local departing/transitioning restaurateurs who announced their plans last month have elaborated on the issue, another major factor affecting restaurant futures in our city is the impending minimum wage hike to $15 per hour…[restaurant owners] may need to raise menu prices, source poorer ingredients, reduce operating hours, reduce their labor and/or more.”

According to the Washington Restaurant Association CEO, labor costs for restaurant employees, currently about 36 percent of a typcial Seattle restaurant’s budget, will rise to a range of 42 to 47 percent under the new minimum wage rate unless a business cuts corners elsewhere. “It’s not a political problem; it’s a math problem,” he added.

Commenting on the Seattle minimum wage increase, the Washington Policy Center, a free-market think tank, seemed to be suggesting that there is no use in having a living wage if the underlying business is dying.

“The [restaurant] shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help. Instead of delivering the promised ‘living wage’ of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.”

As the Inquisitr previously reported, McDonald’s, Panera Bread, and other chains are gradually rolling out touch-screen kiosks to handle the ordering and payment function, which would ultimately reduce the headcount in their franchise outlets.

“Bigger companies who can absorb the financial hit from implementing new technology have already been preparing for these changes…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,” HotAir.com opined.

Do you think that the $15 Seattle minimum wage will ultimately prove to be beneficial or detrimental to employment in the restaurant industry and area businesses in general?