Published on The Weekly Standard (http://www.weeklystandard.com)
What Is Killing the Restaurants of Seattle?
The Scrapbook
March 30, 2015, Vol. 20, No. 28
"Why Are So Many Seattle Restaurants Closing Lately?” asks a recent Seattle
magazine headline. The Scrapbook is no restaurateur, let alone
knowledgeable about the local economy, but we’ll guess it has something
to do with the fact that Seattle’s new $15 minimum wage starts phasing
in on April 1. However, the first rule of liberals confronting the laws
of basic economics is deny, deny, deny.
A feature in the Seattle Times called the “Truth Needle” (we’re guessing the Times
didn’t want to pony up to license PolitiFact’s logo) declares the claim
that minimum wage has anything to do with the undeniably large number
of restaurant closings is “false.”
Now, it’s certainly the case that restaurant operators in liberal Seattle are claiming
a higher minimum wage has nothing to do with their business decisions.
This is likely somewhere between a delusion and a lie, so let’s split
the difference and call it public relations. Again, basic economics
tells us that the typical restaurant operates on a slim profit margin,
and wages typically run about 35 percent of operating costs.
Nonetheless, in very liberal and very wealthy Seattle,
angering your customer base by proclaiming your opposition to
redistributive social justice would be foolish. It would also be foolish
to anger the local regulatory czars in a city that has proclaimed the
new wage law a political triumph. “Restaurateurs are business people,
not politicians, and angering the mayor over the law he signed is not a
smart business move,” notes the Washington Policy Center.
However, there’s little doubt that the city’s heralded
food scene is running scared. A spokesman for the Washington Restaurant
Association told the Washington Policy Center, “Every [restaurant]
operator I’m talking to is in panic mode, trying to figure out what the
new world will look like.” We’re fairly certain it will be a Brave New
Seattle, where there are fewer great restaurants, to say nothing of all
the other labor-intensive businesses that will be shutting down.
Naturally, this means fewer jobs for the poor. Worse, the
increased wages will also amount to a regressive tax. Economist Tyler
Cowen flags a new study in the Journal of Political Economy by
Stanford’s Thomas MaCurdy, concluding an increase in the “minimum wage
produces a value-added tax effect on consumer prices that is more
regressive than a typical state sales tax.”
The study also points to another reason why cash-strapped
municipal governments like artificially raising wages. “Unlike most
public income support programs, increased earnings from the minimum wage
are taxable,” MaCurdy writes. “Over 25 percent of the increased
earnings are collected back as income and payroll taxes. . . . Even
after taxes, 27.6 percent of increased earnings go to families in the
top 40 percent of the income distribution.”
So minimum wage increases grow government, make the rich
richer, and still allow liberal politicians to demagogue the hell out of
poor voters by falsely claiming they’re putting more money in their
pockets. In the longer term, living wage laws and other en vogue
liberal policies are likely to transform one of America’s best cities
into Detroit on the Puget Sound. It would be nice if there were a
stronger political counterweight in our overwhelmingly Democratic
cities, but the best hope for conservatives regaining a foothold in
urban America might be simply to stand back and let liberal economic
policies work their magic.
No comments:
Post a Comment