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

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.
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What a waste of Harvard money. Any econ freshman could tell you this

 
Basically these arguments come down to "scraping by on 160K" means you can't live in a 1500 sq ft place in a nice neighborhood. 

We all know it is expensive as #### to live in NY or SF. 

 
Middle-range restaraunts have an uphill battle.

Its why the pizza business is booming.  Families cant afford to go out.

Quality food?  People cant afford it.  Check the price of halibut.  

I've seen it with bagel shops in my area.  They dont exist anymore.  You cant make any money charging $4-5 for a bagel and people wont pay more.

Donut shops are dwindling too.  You only make money on the coffee.  Duncan and mcdonalds make the money on the coffee.

 
Daywalker said:
Middle-range restaraunts have an uphill battle.

Its why the pizza business is booming.  Families cant afford to go out.

Quality food?  People cant afford it.  Check the price of halibut.  

I've seen it with bagel shops in my area.  They dont exist anymore.  You cant make any money charging $4-5 for a bagel and people wont pay more.

Donut shops are dwindling too.  You only make money on the coffee.  Duncan and mcdonalds make the money on the coffee.
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We will also see a huge move to kiosk style ordering in fast food and tablets in casual (aka mid tier) dinning all in an attempt to reduce the labor force and gain back some margin.    The job loss in the F&B industry on that alone will be staggering.  

 
Homer J Simpson said:
Former bartender...I wouldn't do it for $15 an hour.  And sans tipping, I'm guessing most of the good ones in the industry wouldn't either.
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$30 an hour is barely worth it for anyone decent.  Shifts are short often.  5 nights/6 hours each.  900?  That is the bare minimum.

 
TwinTurbo said:
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. 
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It wouldn't even get you that normally in SF.  His space is subsidized by his company.

 
dkp993 said:
We will also see a huge move to kiosk style ordering in fast food and tablets in casual (aka mid tier) dinning all in an attempt to reduce the labor force and gain back some margin.    The job loss in the F&B industry on that alone will be staggering.  
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Perhaps.  Wish their was a way to short automation though.

People will eventually wake up.  Doeant make sense to replace truck drivers with robots to enrich a handful of people.  The list goes on.

A backlash will happen.  Inevitable.

 
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.
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I wonder what would happen to survivability of restaurants if food ingredients or rent went up in 14% increments. Someone at Harvard should study that...

You don't find the answer to the question about societal impact of minimum wage increase by isolating one or more sectors and study that. You have to look across sectors to see what happens overall - e.g. do supermarkets, convenience stores other retail gain?. How much does the net tax income change? What about net disposable income, and are there changes to how it is used?

This study is idiotic because it is designed to present an incomplete picture.

 
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Walking Boot said:
Yeah, these stats apply to that situation, but, there are similar cliffs everywhere. Now, I don't know this source at all (it appears he's just quoting the Illinois Policy Institute, which is using publicly available numbers, but, I haven't fully backtracked the sources), but, this article specifically deals with the question of the $15/hr rate in Chicago:

So at $12/hr the single parent of two can make $63,586. At $15/hr, $60,701, and at $18/hr, $39,332.

Here's an episode of PBS's NewsHour on the topic in Colorado. I also dug up an article referencing an old (2010) analysis in Ohio showing a single parent of three has more disposable income by working minimum wage one week a month ($14,500/yr) than a similar parent working full time for $60,000/yr.
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A clear solution to this problem is to smooth out the "cliffs". Do you agree? 

 
timschochet said:
It should be obvious to anyone that the government cannot simply order wages to be raised without economic consequences, mostly negative. But apparently it isn't. 
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It is obvious to anyone who has ever actually worked in the food industry.

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

 
Walking Boot said:
Yeah, these stats apply to that situation, but, there are similar cliffs everywhere. Now, I don't know this source at all (it appears he's just quoting the Illinois Policy Institute, which is using publicly available numbers, but, I haven't fully backtracked the sources), but, this article specifically deals with the question of the $15/hr rate in Chicago:

So at $12/hr the single parent of two can make $63,586. At $15/hr, $60,701, and at $18/hr, $39,332.

Here's an episode of PBS's NewsHour on the topic in Colorado. I also dug up an article referencing an old (2010) analysis in Ohio showing a single parent of three has more disposable income by working minimum wage one week a month ($14,500/yr) than a similar parent working full time for $60,000/yr.
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No, no, no.

You are conflating potential with what is actually accessible. Earning $12/hr rarely, if ever (and it is far closer to never), results in a single parent taking home $63,586 in any state. It is a nonsense economic mental exercise designed to make us feel better about our disdain for the poor.

 
Chaka said:
No, no, no.

You are conflating potential with what is actually accessible. Earning $12/hr rarely, if ever (and it is far closer to never), results in a single parent taking home $63,586 in any state. It is a nonsense economic mental exercise designed to make us feel better about our disdain for the poor.
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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?

 
MarvinTScamper said:
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?
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Not everyone has the luxury of taking a job that isn't enough to live on, in the hopes that it's a stepping stone to something that pays better.   

 
MarvinTScamper said:
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?
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One reason is so that tax payers won't have to make up the difference.

 
It is very confusing. 

Minimum wage single mom is living in luxury, while 160K software engineer is just scraping by

 
MarvinTScamper said:
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?
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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.

 
MarvinTScamper said:
so, destroying the employer creating the jobs is going to make this work?
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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.

 
Chaka said:
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.
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so you're saying the only thing that will work is just to give them a lot more money and benefits, and leave everything else the same.    What does your mythical study say about the people that USED to make a little more than them, and now makes the same?  Or do you raise their pay as well.  And then the people just above them? 

You've made an excellent point about how LATER in life, when you had misfortune, or made additional poor choices, it does get tougher, and the cycle is much more difficult.  You want to give them more for the same, which is generous, even if economically not viable.   I have a harder time with that.

 
Juxtatarot said:
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.
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if we can do both, you might have me on board.

 
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.  
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IMO, this is a perfect spot and it falls right in the middle of the minimum wage spectrum over the years.   Make the minimum wage 9.25 and tag increases to the CPI, just like Social Security.  

Boom, done.  Never have to bring up this topic again.

 
Sand said:
IMO, this is a perfect spot and it falls right in the middle of the minimum wage spectrum over the years.   Make the minimum wage 9.25 and tag increases to the CPI, just like Social Security.  

Boom, done.  Never have to bring up this topic again.
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I'm more of a PCE man myself, but yeah.  If we're going to have the minimum wage, this would be the way to do it. 

Of course, I don't think either side is in a hurry to give this up as a wedge issue.

 
dkp993 said:
We will also see a huge move to kiosk style ordering in fast food and tablets in casual (aka mid tier) dinning all in an attempt to reduce the labor force and gain back some margin.    The job loss in the F&B industry on that alone will be staggering.  
Click to expand...
My local brew-pub has a counter where you place your order, get your buzzer, and pick up your food. You go to the bar for your beers and you seat yourself. No wait-staff on the floor. The food is excellent too. As someone who rarely eats out, I much prefer this format. I really dont need someone else taking my order and bringing me my food. It seems completely unnecessary and redundant.

 
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Mile High said:
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?
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Remove the idea of mandatory tipping, which is essentially what we have now. Still allow people to tip if they have very good service...like the service your daughter performs for those groups. Seems like a good idea to me.

 
E-Z Glider said:
My local brew-pub has a counter where you place your order, get your buzzer, and pick up your food. You go to the bar for your beers and you seat yourself. No wait-staff on the floor. The food is excellent too. As someone who rarely eats out, I much prefer this format. I really dont need someone else taking my order and bringing me my food. It seems completely unnecessary and redundant.
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Yea, the less human interaction the better, IMO. Wish I could pour my own damn beers too

 
Well, either their employer can pay them a better wage or we can all pay for them to get public assistance with our tax dollars.

Personally, I'd rather have the employers pay.

 
Skoo said:
Well, either their employer can pay them a better wage or we can all pay for them to get public assistance with our tax dollars.

Personally, I'd rather have the employers pay.
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wait...we're removing welfare, food stamps and healthcare if we raise the minimum wage?

 
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.  

 
Skoo said:
No, but less people will qualify and others will receive less in public assistance because they now have more income.

See how that works?
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Actually the shark move is to not work as many hours so you can still get the benefits.

 
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