Michigan’s minimum wage rose in September to $8.15 an hour from $7.40 (the minimum wage for tipped employees rose 17%, to $3.10 an hour). The wage will rise to $9.25 by January 2018. The law was enacted by a Republican legislature, and signed by a Republican governor to head off a more draconian proposal that left-wing activists were attempting to place on the November ballot.
But the good intentions behind these political machinations didn’t make a difference to Jack Mosley, a pastor who until this fall operated a restaurant in Hillsdale called Tastes of Life. The increased minimum wage, he told me, was “the straw that broke that camel’s back,” forcing him to close his doors and lay off his 12-person staff.
Mr. Mosley’s popular restaurant was a nonprofit and served as a training tool for participants in Life Challenge of Michigan, a nondenominational, faith-based organization he directs. Life Challenge, Mr. Mosley told me, is a refuge for people who have “bottomed out,” often due to alcohol and substance abuse. After a six-month period of detox and spiritual education, the program shifts to focus on practical skills, like building a budget, finding a job, and keeping a daily routine.
That’s what the restaurant helped provide. The staff at Tastes of Life was made up of recovering addicts, recently incarcerated individuals and others who would have a hard time landing a job elsewhere. Mr. Mosley explained that on-the-job offenses for which an employee would have been “gone that day” in a traditional work setting were instead used as training opportunities at Tastes of Life.
One former employee, Makenzie Wirick, had serious balance problems following an auto accident. She eventually gained the confidence to wait tables and carry trays—first a “small tray of drinks,” she told me, and later full trays of food. This was thanks to a work environment where spills and accidents were tolerated and even expected.
Mr. Mosley’s financial goal was to break even and use any excess funds to subsidize Life Challenge participants. After more than two years of operation on Beck Road, 2½ miles from the center of town, Tastes of Life had a steady flow of loyal customers, but rising food costs presented a challenge. Terri Tucker, who handled the restaurant’s finances, said the price of beef was up 40% in 2014.
Mr. Mosley and Ms. Tucker had planned to print new menus with higher prices to cover the food costs, but the September wage hike complicated those plans, in particular because the increase covered both tipped and non-tipped employees.
Handling this one-two punch of new costs presented Mr. Mosley with conflicting goals: raising prices and boosting customer traffic. “If we had a $10 menu item, it would have to be $14,” Mr. Mosley said. The restaurant’s customer base of seniors on a fixed income and Hillsdale locals made this option a nonstarter. The restaurant also had to find roughly 250 new customers a month, unrealistic in a small town of about 8,300.
The restaurant had lost money in the past, and Mr. Mosley subsidized the operation through Life Challenge. But with the higher wage costs, the arrangement was no longer feasible, and Tastes of Life closed on Sept. 28. (The news was first reported in the Hillsdale Collegian.)
Four former employees have been able to leverage their restaurant experience to find new employment, but Mr. Mosley told me that eight are still out of work. One of the still unemployed told me that Tastes of Life was his first job out of prison, and he wasn’t sure he’d have a job at all if Mr. Mosley hadn’t given him a chance.
Tim Ritchey, a former program participant who is now the men’s director for Life Challenge, said this was a reality for many participants. “Working in the restaurant gave them a sense of belonging to something again,” he told me. Today that’s mostly gone: “Without the restaurant here, they don’t really have a place they can go to every single day.”
Life Challenge continues; Mr. Mosley and Terri Tucker are planning to use the now-empty restaurant space as a recovery home for women. Mr. Mosley isn’t harboring an antigovernment grudge and embraces the substantial benefit that participants in Life Challenge will receive from the state’s Medicaid expansion through the Affordable Care Act.
Still, the loss of Tastes of Life cuts deep, because the benefit for Life Challenge participants was both valuable and is not easily attained elsewhere. These unintended consequences of a minimum wage hike aren’t unique to small towns in south-central Michigan. Tragically, they repeat themselves in locales small and large each time legislators heed the populist call to “raise the wage.”