Florida should heed California’s problems in raising the minimum wage
Author: Michael Saltsman
Publication Date: August 2018
Newspaper: Tallahassee Democrat
Topics: Minimum Wage
Should Florida join California in its embrace of a $15 minimum wage?
Orlando attorney John Morgan wants to put the question to Florida voters on the 2020 ballot, and he’s made a $1 million funding commitment to the make it happen. (Recent campaign finance filings show that half this money has already been donated.)
Before voters embrace the “Fight for $15” — indeed, before they even sign a petition to put the question on the ballot — they should consider the Golden State’s not-too-golden experience with a wage mandate of this magnitude.
Start with San Francisco, which this July became the first major city in California to reach the $15 threshold. Economists from Harvard and Mathematica Policy Research identified a 14-percent increase in median-rated (3.5 stars) business closures following each previous $1 increase in the minimum wage. The Bay Area experienced so many restaurant closures that one food industry writer called it a “death march.”
The economics of the owners’ decisions are straightforward. Restaurants keep just a few cents of each sales dollar in profit; if customers won’t pay for the higher labor costs through higher prices, the business owner may have no choice but to close up — or opt for a business model that requires fewer employees.
To survive, some San Francisco restaurants have been doing just that. A recent New York Times article outlined the “fine casual” trend, where customers seat themselves, refill their own water glass, and pick their food up at the counter. One chef explained that her labor costs rose from 27 percent of her budget to 43 percent of her budget in a 20-year period; customers compensated by ordering less. To cut down on costs, she’s moved to a lunchtime counter service model at some of her restaurants.
It’s not just the Bay Area where businesses are struggling. The state’s wave of wage increases — 10 localities raised wages on July 1 alone — have hit local businesses like a tsunami. Cafe Chloe, a San Diego restaurant, blamed its closure on the rising minimum wage in an announcement that went viral. In Los Angeles, popular restaurateur George Abou-Daoud closed one of his restaurants this spring, noting that he would be losing money just by keeping his doors open.
A recent report from economists David McPherson (Trinity University) and Bill Even (Miami University) estimated that California will lose 400,000 jobs by the time $15 minimum wage is fully phased in.
A similar fate awaits Florida employees should John Morgan’s ballot measure succeed. A survey of several hundred state businesses, released by my organization late last year, found that nearly one in five would be very likely to close should the policy be enacted. Roughly half expect to cut employees’ hours or jobs, and one-third would opt for high-tech alternatives to hiring employees.
California is no example for Florida to follow. Rather, it’s a warning of the dark future to come should the state embrace the Fight for $15.