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Harvard Study: raising minimum wage makes restaurants more likely to fail (1 Viewer)

timschochet

timschochet

Footballguy
http://sanfrancisco.cbslocal.com/2017/04/23/minimum-wage-hurting-restaurants/

SAN FRANCISCO (CBS SF) — Preliminary results of a new study based on data on San Francisco Bay Area restaurants suggest that higher minimum wages at restaurants increases the chance that an eatery of average quality will close.

The study titled “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit,” has not been published but is part of research being conducted at Harvard Business School.

The results show that when the minimum wage increases by a dollar the chance an average quality restaurant will go out of business increases by 14 percent.

High quality restaurants did not appear to be affected by a one-dollar increase in the minimum wage, according to the study.

Average quality restaurants in the study had a 3.5-star Yelp rating on a scale from one to five, while the high quality restaurants had a 5-star Yelp rating.

Concerns have been raised recently as Yelp and other consumer review sites have grown in popularity because some claim the reviews are false.

The Bay Area was selected for the study because 15 of the 41 cities and counties that have changed their minimum wage since 2012 are here, according to the study’s authors Dara Lee Luca of Mathematica Policy Research and Michael Luca of Harvard.

The study contributes to the exiting research on the minimum wage, according to the two Lucas. Some of the existing research suggests that higher minimum wages reduce the number of jobs, especially among people who have fewer skills.

 
Its been over a decade since the federal minimum wage has been increased. Why are people so against raising it? I think it should be 9.25 at least. 

As far as sit down restaurants are concerned, I think tipping should stop and waiters/waitresses should get $15 an hour. Just raise the food prices. 

 
"An eatery of average quality" isn't exactly making my mouth drool anyways.

PS. wan't it your guy that was running or raising the minimum wage?

 
Walking Boot said:
Page 8 of this PDF by the Pennsylvania Secretary of Public Welfare shows that a single mother earning $29,000 a year takes in a total of $57,327 in total income and entitlement benefits (childcare credits, welfare services, housing credits, etc.), while a single mother earning $69,000 gets no government assistance and only takes in a total of $57,045 after taxes.
Click to expand...
Seems like this is more of an argument to reform the way benefits are distributed, rather than an argument against raising minimum wage.

 
Walking Boot said:
Page 8 of this PDF by the Pennsylvania Secretary of Public Welfare shows that a single mother earning $29,000 a year takes in a total of $57,327 in total income and entitlement benefits (childcare credits, welfare services, housing credits, etc.), while a single mother earning $69,000 gets no government assistance and only takes in a total of $57,045 after taxes.
Click to expand...
Mind boggling.  

 
Walking Boot said:
Page 8 of this PDF by the Pennsylvania Secretary of Public Welfare shows that a single mother earning $29,000 a year takes in a total of $57,327 in total income and entitlement benefits (childcare credits, welfare services, housing credits, etc.), while a single mother earning $69,000 gets no government assistance and only takes in a total of $57,045 after taxes.
Click to expand...
That's interesting.  It's pretty clear that they are cherry picking some data though.  Like, for instance, kids aged 1 and 4 in daycare.  Once those kids are in school, the $69K mother would be significantly better off.  Some of those "cliffs" are crazy though.  Phasing them out over higher incomes makes more sense to me.

 
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drummer said:
I still can get a good inexpensive burger combo at In and Out. They always have paid well about the minimum wage in California. Go figure that.
Click to expand...
They have paid about three dollars above minimum wage for over 25 years, their prices are competitive and they do a booming business.

The secret for In-N-Out is because of the better pay they have lower employee turnover. Years ago I saw a study that the average length of employment for most fast food restaurants here in L.A. was six months, while the average for IN-N-Out was 2 years. So what they lose in paying higher wages is offset by less training costs, plus increased customer satisfaction dealing with more experienced employees.

 
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Gachi said:
Its been over a decade since the federal minimum wage has been increased. Why are people so against raising it? I think it should be 9.25 at least. 

As far as sit down restaurants are concerned, I think tipping should stop and waiters/waitresses should get $15 an hour. Just raise the food prices. 
Click to expand...
A restaurant tried a variation of this in my city. Unmitigated failure. 

 
Gachi said:
Its been over a decade since the federal minimum wage has been increased. Why are people so against raising it? I think it should be 9.25 at least. 

As far as sit down restaurants are concerned, I think tipping should stop and waiters/waitresses should get $15 an hour. Just raise the food prices. 
Click to expand...
My daughter works at a very popular local brewpub and routinely has huge groups who tip very well. Why should she have to make $15 an hour if they want to give her $100 an hour?

 
timschochet said:
Average quality restaurants in the study had a 3.5-star Yelp rating on a scale from one to five, while the high quality restaurants had a 5-star Yelp rating.
Click to expand...
A brief search on yelp only yielded 2 5-star restaurants. Does the study think there are only 2 high quality restaurants in SF?

 
Walking Boot said:
Juxtatarot said:
Walking Boot said:
A single parent earning $29,000/yr gets more money than a single parent earning $69,000.
Click to expand...
Could you show your work on this one?
Click to expand...
Page 8 of this PDF by the Pennsylvania Secretary of Public Welfare shows that a single mother earning $29,000 a year takes in a total of $57,327 in total income and entitlement benefits (childcare credits, welfare services, housing credits, etc.), while a single mother earning $69,000 gets no government assistance and only takes in a total of $57,045 after taxes.
Click to expand...
I don't think that takes into account about $15,000 in healthcare subsidies or potential college grants of $10,000-$15,000 per child.

 
Juxtatarot said:
That's interesting.  It's pretty clear that they are cherry picking some data though.  Like, for instance, kids aged 1 and 4 in daycare.  Once those kids are in school, the $69K mother would be significantly better off.  Some of those "cliffs" are crazy though.  Phasing them out over higher incomes makes more sense to me.
Click to expand...
Yeah, but when they get to college age there's huge amounts of grant money that comes into play.

 
San Francisco has the highest cost of living in the continental US. There is no way in hell anyone can come remotely close to surviving on minimum wage.

 
DallasDMac said:
San Francisco has the highest cost of living in the continental US. There is no way in hell anyone can come remotely close to surviving on minimum wage.
Click to expand...
http://finance.yahoo.com/news/twitter-employee-making-160-000-123000991.html

it's expensive to live in San Francisco — even if you make six figures.

In an article published earlier this year, The Guardian reported on an anonymous Twitter employee in his 40s who says that, even on a $160,000 annual salary, he's barely scraping by in Silicon Valley.

"I didn't become a software engineer to be trying to make ends meet," he told The Guardian.

The employee's biggest expense is the $3,000 monthly rent he pays on a two-bedroom house where he lives with his wife and two kids, which he describes as "ultra cheap."

"Families are priced out of the market," he says, explaining that it's hard to compete with the hordes of 20-somethings willing to pile into a shared house — and still pay $2,000 per person for a room.

The employee's grievances are echoed by many of his fellow tech workers in the Bay Area.

Another woman who spoke to The Guardian says that although she and her partner make a combined salary of over $1 million, they can't afford a house. "This is part of where the American dream is not working out here," she says.

 
fatguyinalittlecoat said:
Walking Boot said:
Page 8 of this PDF by the Pennsylvania Secretary of Public Welfare shows that a single mother earning $29,000 a year takes in a total of $57,327 in total income and entitlement benefits (childcare credits, welfare services, housing credits, etc.), while a single mother earning $69,000 gets no government assistance and only takes in a total of $57,045 after taxes.
Click to expand...
Seems like this is more of an argument to reform the way benefits are distributed, rather than an argument against raising minimum wage.
Click to expand...
Considering that running all these welfare programs through the tax code was the conservative alternative to direct welfare or raising the minimum wage over the last few decades, the point being made here is a little unclear to me.

 
drummer said:
http://finance.yahoo.com/news/twitter-employee-making-160-000-123000991.html

it's expensive to live in San Francisco — even if you make six figures.

In an article published earlier this year, The Guardian reported on an anonymous Twitter employee in his 40s who says that, even on a $160,000 annual salary, he's barely scraping by in Silicon Valley.

"I didn't become a software engineer to be trying to make ends meet," he told The Guardian.

The employee's biggest expense is the $3,000 monthly rent he pays on a two-bedroom house where he lives with his wife and two kids, which he describes as "ultra cheap."

"Families are priced out of the market," he says, explaining that it's hard to compete with the hordes of 20-somethings willing to pile into a shared house — and still pay $2,000 per person for a room.

The employee's grievances are echoed by many of his fellow tech workers in the Bay Area.

Another woman who spoke to The Guardian says that although she and her partner make a combined salary of over $1 million, they can't afford a house. "This is part of where the American dream is not working out here," she says.
Click to expand...
Yes its the same story in NYC and price per square foot is even higher than in SF. I have no idea how someone can live in either city on minimum wage unless they have rent controlled housing or multiple roommates in a very small space. Even if you made $30/hr, it would be completely unaffordable.

 
TwinTurbo said:
Yes its the same story in NYC and price per square foot is even higher than in SF. I have no idea how someone can live in either city on minimum wage unless they have rent controlled housing or multiple roommates in a very small space. Even if you made $30/hr, it would be completely unaffordable.
Click to expand...
Both cities would benefit from getting rid of bad policies like rent control and reforming their building regulations to foster more density.  Increasing minimum wage within a city further hurts job opportunities for a lot of the people it is intended to help.

Remember that SF already has a tax meant to provide health insurance for uninsured citizens that restaurants frequently pass on to the their customers. 

 
Slapdash said:
Both cities would benefit from getting rid of bad policies like rent control and reforming their building regulations to foster more density.  Increasing minimum wage within a city further hurts job opportunities for a lot of the people it is intended to help.

Remember that SF already has a tax meant to provide health insurance for uninsured citizens that restaurants frequently pass on to the their customers. 
Click to expand...
I actually don't agree for NYC. I understand the arguments against rent controls, and in many other cities, it makes sense to get rid of it. But in NYC there is nowhere left to build but up, even if you streamline building regulations. And this place has some of the most heinous landlords that ever walked the earth. They already break every law and cut every corner in the book including illegal contruction and using existing housing stock for illegal hotels. Without rent stabilization, rent controls and tenant laws, only the affluent could afford to live here. Almost nobody would be left to work the middle class and entry level jobs.

 
Gachi said:
Its been over a decade since the federal minimum wage has been increased. Why are people so against raising it? I think it should be 9.25 at least. 

As far as sit down restaurants are concerned, I think tipping should stop and waiters/waitresses should get $15 an hour. Just raise the food prices. 
Click to expand...
This might cause some restaurants to fail  :wall: .

 
drummer said:
In an article published earlier this year, The Guardian reported on an anonymous Twitter employee in his 40s who says that, even on a $160,000 annual salary, he's barely scraping by in Silicon Valley.

"I didn't become a software engineer to be trying to make ends meet," he told The Guardian.

The employee's biggest expense is the $3,000 monthly rent he pays on a two-bedroom house where he lives with his wife and two kids, which he describes as "ultra cheap."
Click to expand...
There articles and arguments are getting tired. Yes, it is expensive to live in SF and NYC. If you are still struggling to get by on 160K you are doing something wrong though. A $3000 a month, 2BR apartment is a bit ridiculous, but still man, you are pulling in 160K a year. People that are truly scraping by are paying upwards of 50% of their income in rent, and at much lower levels, so that other 50% is only a grand or so, and not the 5K+ this guy has.

 
the moops said:
There articles and arguments are getting tired. Yes, it is expensive to live in SF and NYC. If you are still struggling to get by on 160K you are doing something wrong though. A $3000 a month, 2BR apartment is a bit ridiculous, but still man, you are pulling in 160K a year. People that are truly scraping by are paying upwards of 50% of their income in rent, and at much lower levels, so that other 50% is only a grand or so, and not the 5K+ this guy has.
Click to expand...
Well the article says he is raising a family of four and it's not only rent that is expensive in SF. Parking and food is expensive there as well. But yeah, if I was living back there and made $160,000, I would be comfy being a single man who wouldn't need a 2 bedroom apartment since I would be out all the time or going to watch the Giants at AT&T. 

 
TwinTurbo said:
I actually don't agree for NYC. I understand the arguments against rent controls, and in many other cities, it makes sense to get rid of it. But in NYC there is nowhere left to build but up, even if you streamline building regulations. And this place has some of the most heinous landlords that ever walked the earth. They already break every law and cut every corner in the book including illegal contruction and using existing housing stock for illegal hotels. Without rent stabilization, rent controls and tenant laws, only the affluent could afford to live here. Almost nobody would be left to work the middle class and entry level jobs.
Click to expand...


Either way, there can be reasons to support inefficient policies that somehwat make the problems they support to solve worse.  We're never going to be able to measure the ultimate impacts in the long run of these things in every scenario.  We know the primary impact of raising the minimum wage is to reduce employment despite raising the wages of many (which has other secondary effects). We know that rent control makes rent more affordable for many while making housing, in aggregate, less affordable.  As long as we're honest about the evidence and real world trade-offs, we can debate the policy solutions.

I certainly don't think NYC is as dense as possible, but I've never lived there (primarily because of the inordinate cost). I'd like to see more supply come online to meet the demand.  If not, eventually, I think job growth and migrations will slow enough so that prices stagnate.  Too many industries, like finance, can save by paying people less in lower cost of living environments. So much corporate work can be done remote. When that offsets the very many positive impacts of agglomeration is hard to say...Interested to hear more about what you think about NYC

 
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the moops said:
There articles and arguments are getting tired. Yes, it is expensive to live in SF and NYC. If you are still struggling to get by on 160K you are doing something wrong though. A $3000 a month, 2BR apartment is a bit ridiculous, but still man, you are pulling in 160K a year. People that are truly scraping by are paying upwards of 50% of their income in rent, and at much lower levels, so that other 50% is only a grand or so, and not the 5K+ this guy has.
Click to expand...
Just to put it in perspective, $3k/month only gets you a small 1 bedroom or large studio in NYC (Manhattan). The family with two kids making $160k certainly can afford to live in NYC or SF, but they will be paying 50% or more of their after tax income in rent or mortgage because they can't live in a studio. 

 
timschochet said:
http://sanfrancisco.cbslocal.com/2017/04/23/minimum-wage-hurting-restaurants/

SAN FRANCISCO (CBS SF) — Preliminary results of a new study based on data on San Francisco Bay Area restaurants suggest that higher minimum wages at restaurants increases the chance that an eatery of average quality will close.

The study titled “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit,” has not been published but is part of research being conducted at Harvard Business School.

The results show that when the minimum wage increases by a dollar the chance an average quality restaurant will go out of business increases by 14 percent.

High quality restaurants did not appear to be affected by a one-dollar increase in the minimum wage, according to the study.

Average quality restaurants in the study had a 3.5-star Yelp rating on a scale from one to five, while the high quality restaurants had a 5-star Yelp rating.

Concerns have been raised recently as Yelp and other consumer review sites have grown in popularity because some claim the reviews are false.

The Bay Area was selected for the study because 15 of the 41 cities and counties that have changed their minimum wage since 2012 are here, according to the study’s authors Dara Lee Luca of Mathematica Policy Research and Michael Luca of Harvard.

The study contributes to the exiting research on the minimum wage, according to the two Lucas. Some of the existing research suggests that higher minimum wages reduce the number of jobs, especially among people who have fewer skills.
Click to expand...
Having run and owned restaurants my whole adult life this on falls under the sky is blue category.  

 
I don't know how anyone on Earth can survive in Brooklyn Heights or Cobble Hill as a family of 4 on $160k.

I mean, I'm not oblivious and understand how it could be possible, but that family is far from living the life of luxury, not saving enough for retirement, & not vacationing frequently.

& $3k for a 2BR is bit ridiculous @the moops? StreetEasy.com - go search those two neighborhoods and find me anything close to that, a ####### bargain around here. What's even crazier is they've prob built more units per square foot in this neighborhood than anywhere in the country in the last 2 years - I stand on my roof and the area is covered by cranes everywhere building 50 story high rises, mostly rental buildings. The average 2BR 900 square foot rental in any of these buildings in Downtown Brooklyn is $4500-$5k a month, and the Downtown area has much ####tier schools than the aforementioned neighborhoods. 

 
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