Rising minimum wage hurts more than it helps
Author: Michael Saltsman
Publication Date: November 2019
Newspaper: Tri-City Herald
Just because an idea is politically popular doesn’t mean it’s a good idea.
Someone should tell that to the 2020 Democratic presidential candidates, most of whom have come out in support of a $15 federal minimum wage. The evidence coming out of Washington State suggests such a policy is bad news for employers and employees alike.
Washington considers itself a leader on mandated wage rates. Seattle was the first large city in the country to adopt a $15 minimum wage. Several years later, voters passed a ballot measure raising the minimum wage to $13.50 statewide and requiring additional paid benefits.
The state’s aggressive wage rates are magnified for tipped employers such as full-service restaurants; Washington is one of a handful of states in the country that doesn’t count tips towards an employee’s income.
West Seattle restaurateur Dan Austin, the owner of Peel and Press, explained the math: “Most small owners are faced with a $1.50 wage increase both in 2020 and 2021. For many small restaurants that will be around $75-150k in added cost.” To offset this cost, many Seattle restaurateurs have adopted a mandatory service charge of 18-20 percent in lieu of a tip. (On a recent trip to the city, a colleague of mine observed these charges at every sit-down restaurant he visited.)
These charges can mean a severe loss of income for tipped workers. Simone Barron, a server in Seattle, testified before Congress earlier this year that her restaurant was forced to adopt a service charge in response to the city’s rising minimum wage. Her income dropped dramatically, and she was forced to take on a different job.
Other restaurants have looked at automated alternatives such as tabletop ordering devices. A new report published by the Employment Policies Institute — with analysis from economists at Miami University and Trinity University — found that restaurants tend to hire fewer tipped workers in high-cost environments such as Washington State.
Some restaurants can’t make the math work and close down. Matt Dillon, award-winning chef and owner of Sitka & Spruce, announced this fall that his restaurant will close at the end of the year due to the rising costs of doing business in Seattle. Dillon cited the city’s rising minimum wage among other factors that make it difficult to survive in Seattle. He warned: “There’s gonna be a reckoning, big-time.”
That reckoning has already arrived, and not just for restaurants. The Yakima Bindery, Kid’s World Childcare in Pasco, O’Doherty’s Pub in Spokane, and Walker’s Healthy Pet in Mount Vernon are just a few of the businesses forced to close because of Washington’s rising minimum wage. My organization has collected their stories and others at FacesOf15.com.
As Congress considers whether to embrace a national minimum wage policy that matches Washington State’s, they’d be wise to consult with the small business owners who’ve become collateral damage from its minimum wage experiment.