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

[MarvinTScamper]

Actually the shark move is to not work as many hours so you can still get the benefits.

have feds declare everything is free...boom, you keep all your income, and everyone gets what they want!!!!!

 

[Skoo]

Another factor that folks are overlooking is that a lot of minimum wage earners aren't heads of households.  They're teenagers who are working for gas money.  Driving firms out of business so that single moms can put food on the table is an argument that is at least worth having.  Driving firms out of business so an upper middle class kid can buy another video game console isn't.  

I would contend that if you can't afford to pay your workers $10 an hour, you probably don't have a successful business model.

 

[IvanKaramazov]

I would contend that if you can't afford to pay your workers $10 an hour, you probably don't have a successful business model.

You can contend that, but of course you would be wrong.  Some industries employ unskilled labor and also have thin profit margins.  That's life.  

 

[Skoo]

You can contend that, but of course you would be wrong.  Some industries employ unskilled labor and also have thin profit margins.  That's life.  

And some of those companies fail.

That's life.

 

[BassNBrew]

I would contend that if you can't afford to pay your workers $10 an hour, you probably don't have a successful business model.

Just ship the jobs to Mexico and pay $3-$4 per hour.

 

[IvanKaramazov]

And some of those companies fail.

That's life.

Yes, you are right.  That's what started this thread, of course.  

 

[fatguyinalittlecoat]

Another factor that folks are overlooking is that a lot of minimum wage earners aren't heads of households.  They're teenagers who are working for gas money.  Driving firms out of business so that single moms can put food on the table is an argument that is at least worth having.  Driving firms out of business so an upper middle class kid can buy another video game console isn't.  

Do you have any data on upper middle class kids working minimum wage jobs?  Anecdotally it seems that at least where I live it is incredibly rare to see what you are describing.  There are teenagers working in fast food/retail/etc., but they aren't teens from well-off families.  The rich teens are doing unpaid internships and other things they can put on their college applications.

 

[humpback]

And now with the myths.

Virtually everyone who has any degree of economic success in this life on some level (sometimes overt, sometimes subtly) believes that they are entirely self made and did not experience any form of luck or assistance on the way.

The assistance pointed to in the study above is effectively a myth. It isn't assistance if a person cannot take advantage of it and frankly it isn't even there when they need it most.

How much more should a single parent have to work to get out of they cycle of poverty, than a person who had far more advantages in life to help them be successful? Is working multiple jobs while having to take public transportation to work and day care twice a day (point being what could be a 20-40 minute commute in a car can easily turn into a 3 hour commute if you have to rely on public transportation) while relying on their employer to be understanding of their life constraints. What happens when one of the children gets sick? Where does the money come from to pay for that or cover lost wages (opportunity costs)? Where does the lost time at work get made up, if they are not fired because they had to miss a day, or several, to care for a sick child? If they are lucky enough to have a car what happens when it breaks down?  The vast majority of the poor are hard working people trying to care for their families just like the rest of us. But one negative life event, like an illness or broken down vehicle, that many of us view as an inconvenience can be insurmountable for them. Public assistance isn't fixing their car, it isn't providing in home care for sick family, so the parent can continue to work the social safety net, that people like to tout in the study referenced above is a myth.

I'm not following- are you saying the bolded is a myth, or do you actually believe that?

 

[Juxtatarot]

Another factor that folks are overlooking is that a lot of minimum wage earners aren't heads of households.  They're teenagers who are working for gas money.  Driving firms out of business so that single moms can put food on the table is an argument that is at least worth having.  Driving firms out of business so an upper middle class kid can buy another video game console isn't.  

If I figured this out right (questionable), it looks like 21% of minimum wage (or below) workers in 2014 were 16-19 years old.  This article from 2013 states that 88% of people making under $10.10 an hour are older than 20.  I share your apprehension about teenagers being paid more money.   I'm just not convinced that teenagers are enough of an issue to drive policy.

 

[msommer]

If I figured this out right (questionable), it looks like 21% of minimum wage (or below) workers in 2014 were 16-19 years old.  This article from 2013 states that 88% of people making under $10.10 an hour are older than 20.  I share your apprehension about teenagers being paid more money.   I'm just not convinced that teenagers are enough of an issue to drive policy.

What if they are poor teenagers helping their poor families (as opposed to IK's assertation of affluence)

 

[MarvinTScamper]

it's ok to be cavalier about a business owner's failure, but not about the lifestyle of the uneducated or the underachieving, ok guys?  You know, the income of the employee is far more important than the income of the employer.

 

[Nick Vermeil]

My problem with this study is it it set in the #1 or #2 (depending on where you look) most expensive commercial real estate city in the country.  Failure rates for restaurants are already astronomical due to that one expense. The tipping point is so minuscule failure could be triggered by the slightest construction overruns, the price of food delivery or oil removal (fuel surcharge anyone?). Pinning it on increase on minimum wage seems convenient. But I only went to BU, not Harvard.      

 

[IC FBGCav]

So if we cut minimum wage in half it would be much better?   More restaurants?

 

[IC FBGCav]

it's ok to be cavalier about a business owner's failure, but not about the lifestyle of the uneducated or the underachieving, ok guys?  You know, the income of the employee is far more important than the income of the employer.

HEY!  That name is trademarked here and I did not give you permission to use it. 

 

[MarvinTScamper]

HEY!  That name is trademarked here and I did not give you permission to use it. 

is he still around?  Is that you?  Bhanned?

 

[IC FBGCav]

is he still around?  Is that you?  Bhanned?

It's me, it and IC Alikes are "retired"

 

[Chaka]

I'm not following- are you saying the bolded is a myth, or do you actually believe that?

I am saying that when telling the story of their success people emphasize (exaggerate) their personal accomplishments and understate, or completely ignore, all the help and luck they had along the way.

Don't take that to mean that successful people don't work hard to achieve, of course many (most) do, or that hard work won't lead to success. It's just that is not the only factor and may not be the most important one. If it only took hard work then a lot of the working poor would not be working poor. Look into the stories of some of the working poor they put in an insane amount of work and more often than not they are not rewarded for it. You need help and luck along the way.

 

[MarvinTScamper]

It's me, it and IC Alikes are "retired"

I was gone over a decade...I missed a lot

 

[Nick Vermeil]

A restaurant tried a variation of this in my city. Unmitigated failure. 

Tipless restaurants are on the rise in NY.  2 of the last 3 I've eaten at don't allow it (disclaimer, I never go out anymore). It feels weird to me, but the waiters I asked about it said it's working ok for them.  

 

[IvanKaramazov]

Do you have any data on upper middle class kids working minimum wage jobs?  Anecdotally it seems that at least where I live it is incredibly rare to see what you are describing.  There are teenagers working in fast food/retail/etc., but they aren't teens from well-off families.  The rich teens are doing unpaid internships and other things they can put on their college applications.

Not at my finger tips, but it's very common in my part of the country.  My daughter spent all weekend working at our local greenhouse toting stuff around.  My colleagues' kids work at the grocery store.  We don't live in New York where our kids are interning at investment banks.

 

[jonessed]

Tipless restaurants are on the rise in NY.  2 of the last 3 I've eaten at don't allow it (disclaimer, I never go out anymore). It feels weird to me, but the waiters I asked about it said it's working ok for them.  

Aren't they always going to say that?  I can't imagine too many of them would tell a customer that the policy was terrible.  Friends or co-workers maybe, but not a customer.

 

[Nick Vermeil]

Aren't they always going to say that?  I can't imagine too many of them would tell a customer that the policy was terrible.  Friends or co-workers maybe, but not a customer.

Possibly.  One is a server who I've known and tipped well for years.  I got no sense of them walking a party line when they answered.  The overall check total was in line with what I would have expected to pay historically for a meal for four with drinks including tip.  I have no idea what the deal is for their employees, but here is their website explaining the setup.  

 

[jonessed]

Not at my finger tips, but it's very common in my part of the country.  My daughter spent all weekend working at our local greenhouse toting stuff around.  My colleagues' kids work at the grocery store.  We don't live in New York where our kids are interning at investment banks.

I see it a lot where I live as well.  I think the teen interning at an investment bank would definitely be out of the norm.

I live in a well-off area where a lot of people are mortgaged pretty heavily though.  There's money, but the spending habits tend to be middle class to upper middle class even though the incomes are high.

 

[Koya]

I view it as society subsidizing companies by allowing them to pay workers below a livable wage.  If a company can't afford to appropriately pay it's employees, yes, I think they should go out of business.  The challenge for our society should be to create/maintain livable wage jobs.  Not to enable this cycle of dependency on government.

This is a valid point and what I came in to post, essentially.

Thats not to say there should not be any rolempf the govt in setting a minimum wage - it should an issue I've always been torn on. My libertarian leanings say govt hands off. My soft middle realized it ain't as simple as that... and of course wages are but one lever that relates to housing and transportation costs, taxation and a whole bunch of other very much related issues. As such, it's impossible to look at only wage regulation as any true solution.

Thst said, the point of having a minimum wage is not to ensure businesses that can only survive by paying less than subsistence wages stay afloat.  I generally agree that it's neither moral nor does it promote freedom overall to have a system whereby an entire permanent underclass helps businssss accumulate wealth while the underpaid then have to love off the rest of us via tax dollars going toward programs which even a reasonable salary would be able to afford.

How much public money is WalMart absorbing by its employees needing various forms of government assistance? If a business only succeeds because it needs me and you to give up OUR financial freedom through taxation needed to cover the other life necessities of Walmart employees, that business is a negative force in our nation economically, socially and - my personal guiding framework - in terms of taking away more freedoms than it promotes.

That said, I don't have a simple answer.  The simplest may be a higher minimum wage and with it, failures of enterprises that can no longer compete without the government subsidising the costs of their workforce. That said, we need to focus on the underlying ill, not the symptom. The symptom being someone has neither the education and/or access to opportunity which relegated them to Labor with such little skill it's a lowest common denominator commodity. We also have to find what are actually simple solutions to reduce the basic cost of living for most of our country... 

i.e. Housing policy and transportation. if someone is making minimum wage but still needs to own a car, drive 10-20-30 miles to work etc the wage is only half the battle. But the physical environment we build and the policies we have to keep sprawling against all economic and social logic in terms of desired outcomes are antithetical to addressing the cost of living crisis. 

I use this to demonstrate that yes, wages play a key role, and perhaps the private employment sector needs to pay more... but we can't then burden a business owner with providing a living wage that enables someone to not only make ends meet, but do so in an expensive and utterly inefficient manner (cost of car ownership has maintenance and time of travel - PLUS the huge infrastructure costs associated with maintaining said miles of road ... another tax on all of us, decreasing our economic freedom) is neither smart, fair nor economically sustainable. 

As a colleague of mine says, and something I believe in as a master developer of real estate and someone who does wife range as long term development and economic development strategies - sometimes the best, or only, way to solve a problem is to first make it bigger.

In this case that means the problem is not only low wages. It's the business taxation and regulatory environment, housing and transportation policy, social assistance policy, education and provisions of skills, just to begin. To solve one, you MUST consider and rejigger the others.

 

[Doug B]

Another factor that folks are overlooking is that a lot of minimum wage earners aren't heads of households.  They're teenagers who are working for gas money.  Driving firms out of business so that single moms can put food on the table is an argument that is at least worth having.  Driving firms out of business so an upper middle class kid can buy another video game console isn't.  

This might vary regionally.

Around here, for instance, very few fast food jobs are held by teenagers. Almost all are young twenty-somethings, most often single women with children. Typically, they are not in any kind of school -- they're "at work" making money for their household. There may or may not be other wage-earners in their households.

Where you might see teenagers working around here is in the mall or similar retail. Generally, though, a lot fewer teenagers seem to have jobs now then when I was coming up in the 1980s. It looks like they've been pushed out of those jobs by young adults who had kids young and stopped education after high school.

 

[jonessed]

Possibly.  One is a server who I've known and tipped well for years.  I got no sense of them walking a party line when they answered.  The overall check total was in line with what I would have expected to pay historically for a meal for four with drinks including tip.  I have no idea what the deal is for their employees, but here is their website explaining the setup.  

Oakland and SF did that as well.  I know in Oakland it was hit or miss.  The best waitstaff are career people and they don't like getting their tips spread out all over the restaurant.  They won't say that to the owner or the customer, but a few businesses had to stop because all of their best people left for other restaurants. The SF Chronicle had an article on it.

I'm agnostic on it.  If it works, it works.  Seems like it's really about the location and business model.

I spent a lot of years in the restaurant business.  Good waitstaff are hard to find and they take their tips seriously.  I think making this the norm would be tough.

 

[Doug B]

Do you have any data on upper middle class kids working minimum wage jobs?  Anecdotally it seems that at least where I live it is incredibly rare to see what you are describing.  There are teenagers working in fast food/retail/etc., but they aren't teens from well-off families.  The rich teens are doing unpaid internships and other things they can put on their college applications.

Agreed. Richer teens around here either don't work at all, do something in the family business (e.g. get paid to surf the Net at Dad's law firm), or they work in jobs set up by family or other connections (e.g. a sideline clothes boutique, something cushy at the country club, etc.).

 

[Homer J Simpson]

it's ok to be cavalier about a business owner's failure, but not about the lifestyle of the uneducated or the underachieving, ok guys?  You know, the income of the employee is far more important than the income of the employer.

As far as the larger benefit to the economy as whole, employee income is a lot more important than employer income.

 

[IvanKaramazov]

This might vary regionally.

Around here, for instance, very few fast food jobs are held by teenagers. Almost all are young twenty-somethings, most often single women with children. Typically, they are not in any kind of school -- they're "at work" making money for their household. There may or may not be other wage-earners in their households.

Where you might see teenagers working around here is in the mall or similar retail. Generally, though, a lot fewer teenagers seem to have jobs now then when I was coming up in the 1980s. It looks like they've been pushed out of those jobs by young adults who had kids young and stopped education after high school.

I'm sure it does.  The federal minimum wage affects different parts of the country differently, and this is one reason why.

 

[humpback]

I am saying that when telling the story of their success people emphasize (exaggerate) their personal accomplishments and understate, or completely ignore, all the help and luck they had along the way.

Don't take that to mean that successful people don't work hard to achieve, of course many (most) do, or that hard work won't lead to success. It's just that is not the only factor and may not be the most important one. If it only took hard work then a lot of the working poor would not be working poor. Look into the stories of some of the working poor they put in an insane amount of work and more often than not they are not rewarded for it. You need help and luck along the way.

Sure, but this is very different from what you wrote in the post I quoted- I'll chalk it up to hyperbole.

 

[MarvinTScamper]

As far as the larger benefit to the economy as whole, employee income is a lot more important than employer income.

unless there's no employer.   

 

[MarvinTScamper]

maybe these people should just stop applying for jobs where they don't pay enough to make a "living wage" and let the kids out of school or kids IN school take them....you know, the lucky ones getting help.

Then, those other folks can go get living wage jobs.

(ooof, I'm still an #######)

 

[Statorama]

I am saying that when telling the story of their success people emphasize (exaggerate) their personal accomplishments and understate, or completely ignore, all the help and luck they had along the way.

"If you've got a business, you didn't build that"

 

[Homer J Simpson]

"If you've got a business, you didn't build that"

Correct. 

 

[MarvinTScamper]

Correct. 

god she was a #####

 

[Wrigley]

god she was a #####

speaking of, my SIL received a $780 tip from a drunk at her bar the other night.

 

[Gachi]

I don't feel like researching and doing the math, but how much benefits would a working poor family lose if they went from making $7.25/hr to $9.25/hr?

I couldn't imagine them getting kicked off WIC, Medicaid, SNAP or section 8 making $2 more per hour. 

(Cash assistance/Welfare is a thing of the past. Nobody is getting that these days thanks to Bill Clinton, so that's not even worth mentioning in this debate.)

 

[drummer]

If you make a combined salary of over 1M and complain that you can't afford a house, you're doing something wrong.

In SF, a 4 bedroom fixer upper crappy Excelsior or Visitacion Valley districts that are really worth $350,000 grand are now over $1 million or more. Even Hunters Point - which back then when I lived there you didn't want to ever wind up in if you fell asleep on the bus at night - has higher housing prices now. You can't compete with a young techie willing to throw their $$ away to live in the city, and they don't need to be closer to work since they are bussed in free by Google and other Big Tech companies. It really started during the Dot Com boom. I read a small story in the SF Chronicle during the Dot Com boom where a bartender in the Lombard district has this 21 year old kind come in on a skateboard, pulled out an AMEX gold card, and said to him "all the ladies drink free in here tonight". Even after the bust, the housing prices didn't correct itself to it's values before it. Most of the districts were already gentrified, and now SF is nothing like it was in the 1990's. 

One can blame the old mayor Slick Willie Brown for being a catalyst for selling out SF by the pound, but as mayor he did his job by making the city itself more valuable than most other cities. AT&T Park transformed the whole 3rd Street corridor into luxury condos and high rises. What sucks is that Oakland is way overpriced now too. OAKLAND. 

 

[Juxtatarot]

I don't feel like researching and doing the math, but how much benefits would a working poor family lose if they went from making $7.25/hr to $9.25/hr?

I couldn't imagine them getting kicked off WIC, Medicaid, SNAP or section 8 making $2 more per hour. 

(Cash assistance/Welfare is a thing of the past. Nobody is getting that these days thanks to Bill Clinton, so that's not even worth mentioning in this debate.)

I suppose this could vary state to state, but, as an example, if you look at the chart Walking Boot posted on page 1 of this thread, there wouldn't be a significant change in benefits in Pennsylvania. 

 

[timschochet]

I posted that article because I thought it was interesting and that it would lead to a good discussion. I think the points about how expensive it is to live in San Francisco are good ones. And I'm not necessarily opposed to minimum wage hikes in all cases. 

Still it seems pretty clear that when we do this we negatively impact small businesses. That needs to be taken into account. 

 

[drummer]

I posted that article because I thought it was interesting and that it would lead to a good discussion. I think the points about how expensive it is to live in San Francisco are good ones. And I'm not necessarily opposed to minimum wage hikes in all cases. 

Still it seems pretty clear that when we do this we negatively impact small businesses. That needs to be taken into account. 

It's better to have at least ten years worth of data to really weigh this though. 

 

[Chaka]

"If you've got a business, you didn't build that"

The machinery of capitalism is oiled with the blood of the laborers.

 

[the moops]

In SF, a 4 bedroom fixer upper crappy Excelsior or Visitacion Valley districts that are really worth $350,000 grand are now over $1 million or more.

OK. Are you suggesting that someone who makes over a million a year can't afford a million dollar house?

 

[Chaka]

Sure, but this is very different from what you wrote in the post I quoted- I'll chalk it up to hyperbole.

Not at all.  Any level on which you want to point differences by parsing language is merely a distraction from the point.

 

[Koya]

OK. Are you suggesting that someone who makes over a million a year can't afford a million dollar house?

There is a legitimate issue here, but it's not a federal issue nearly so much as local and state.

Housing / life affordability is a huge issue in many places. In the Bay Area, engineers making close to 200k are bused in from an hour away because they can't afford even rentals (what rentals exist) near employment... but this is a land use and transportation issue. Namely, not enough people living and working close to one another with mobility options including public transportation connections for those who don't.

but it's not a place that needs a federal solution (some valuable tools are there on a federal level but they must be leveraged by local and state programs and, moreso, better land use/transportation decisions).

 

[Koya]

BTW, with the ongoing retail apocalypse, we aren't going to need an increased minimum wage to lose millions of jobs to businesses going under. While you have an ok share of middle class salaries (managers, regional managers and corporate), a vast majority of those employees are at or near minimum wage. 

And they will soon be gone. 

 

[Chaka]

at what point should we expect those working min wage to improve enough to exit minimum wage jobs?   Never?  Why must the goal be to make minimum wage be enough live on, rather than as a means to an improvement in your position through effort and time and move up?

How about we help them improve to the point that they no longer need to get all that sweet and easy free government money? Which would allow them to contribute fully to the tax base at the same time.

Seems like a solid benchmark to reach before evaluating the success/failure of such a program.

 

[massraider]

Oakland and SF did that as well.  I know in Oakland it was hit or miss.  The best waitstaff are career people and they don't like getting their tips spread out all over the restaurant.  They won't say that to the owner or the customer, but a few businesses had to stop because all of their best people left for other restaurants. The SF Chronicle had an article on it.

I'm agnostic on it.  If it works, it works.  Seems like it's really about the location and business model.

I spent a lot of years in the restaurant business.  Good waitstaff are hard to find and they take their tips seriously.  I think making this the norm would be tough.

Just to be crystal clear on why this is a thing:

This is only a way for restaurants to take tips out of the server's pockets.  That is the only direct result that is sure to happen with something like this.  Will some restaurants create a nice work environment, and everyone will receive pay they are happy with?  Perhaps.

Will some restaurants suddenly find reason to cut labor on certain days, when that labor suddenly all costs a higher hourly wage?  You bet.  

Personally, I think the American people will reject it, mainly because they are so used to getting good service.  Once you stop paying for service, you stop getting it.  

 

[drummer]

OK. Are you suggesting that someone who makes over a million a year can't afford a million dollar house?

What I am saying is the price of housing in SF is way over valued IMO, and maybe she would should think about not buying into that market. 

Professional athletes complain about the price of housing there. It's just the way it is in the Bay Area

 

[drummer]

It's not like restaurants are the best investments anyway, so there is that.