Seattle and its $15 minimum wage - the aftermath is arriving - Granite Grok

Seattle and its $15 minimum wage – the aftermath is arriving

Pho soupWe’ve been blogging about the extremely Liberal city of Seattle and its misguided attempt to suspend the economic laws of Supply and Demand in order to feel good about themselves “Hey!  We’re HELPING!” the poorer amongst us.  They’ll have more money, they’ll have better lives, they’ll be happier”!  ON the conservative side, we all went “this is not going to end well, but even as we’ll be sorry for the victims-to-be, you will hear we told you so”.  Profit margins (or lack there of), artificially inflated labor costs by government fiat, downgrade of materials – there are consequences to be paid.  Problem is, while the Left blithely said “So?  Just raise prices”, consumers aren’t following the plan and are going elsewhere (or not going period, emphasis mine, reformatted):

If you want to gauge the impact of Seattle’s new $15 minimum wage in the coming months, follow the pho.

Hundreds of restaurants throughout the area now serve Vietnam’s most popular comfort food. For less than $10, the average pho connoisseur can slurp on rice noodles soaked in some mama’s supersecret beef broth. I like my pho with rare steak, tripe, meatballs, basil and fresh-squeezed lime — no bean sprouts. As the meat cooks in piping hot soup, I add a wallop of sweet hoisin sauce. Spicy Sriracha sauce is a must.  Pho is best experienced fresh, in a dining room that’s synonymous with the small immigrant-run family business. That means an auntie cooks, and the server or dishwasher is often the owner’s kid or nephew.

Like any other business, these mom-and-pop shops are contending with an initial wage adjustment per employee, from $9.47 an hour to $11 an hour as of last week. Businesses with 500 or fewer workers must pay either $11 an hour or $10 an hour with an additional $1 made up by tips or payment toward an employee’s medical benefits.  Some restaurants might respond by adding service fees and increasing menu prices. Ivar’s recently announced plans to end tipping and pay all employees $15 an hour. A seafood mainstay can do that. Pho is different. It exists to be large, tasty and cheap.

Quynh-Vy Pham’s family owns four Pho Bac restaurants in the city. Her parents opened the original shop at the corner of South Jackson Street and Rainier Avenue South in 1982.  Pham says they will hold on to current prices — $7.75 for a small bowl, according to the restaurant’s website — as long as possible. Like so many others pho proprietors, their restaurant is not designed to be an Ethan Stowell or Tom Douglas establishment where customers expect to pay premium prices. “It’s hard for people to pay $15 for a ‘to pho,’?” Pham says, referring to the Vietnamese translation of a bowl of soup. “The culture of Vietnamese restaurants means we have to be price aggressive.”

Pham says they are considering scaling down employment, possibly ending sit-down service and transitioning to a “fast-casual” concept to cut down on labor costs.

Mayor Ed Murray says employees of the city’s Office of Labor Standards will work “vigorously” with businesses on implementation and outreach, “particularly to minority communities.”  They’d better. As Murray’s Income Inequality Advisory Committee formed the new rules last year, it largely ignored the concerns of an ethnic coalition of business owners. Taylor Hoang, owner of five Pho Cyclo Cafe restaurants, says the coalition requested a training wage or an exemption for microbusinesses with fewer than 10 employees.

They got nothing.

Nope, they got nothing.  And won’t.  After all, Socialism is ALL about “The Plan” and “The Plan” MUST succeed by any means possible.  Including suspending the belief that suspending economics is possible.  But you can see that the in-the-trenches biz owner HAS to pinch every nickel – been there, done that.  Every uptick in costs is painful especially at the low end with constraints – consumers will pay what they will pay or will go elsewhere or they won’t pay at all.  And unlike Socialists paid on the taxpayer dime in government who are protected against the vagarities of the open marketplace, folks like these small entrepreneurs live it every day. And when your Government turns on you and makes it hurt even more…

Anxiety is widespread, Hoang says, because the city is still releasing and translating information for non-English-speaking communities. For her, increasing the price on a product like pho is harder than it seems.  “Pho is not categorized as fine dining. People who eat this type of food have a certain expectation in their mind, so they are very price sensitive,” she warns. “ If they have to pay more than $10 plus gratuity and tax, it’s no longer an affordable luxury for customers who are used to eating with us a few times a week.”

And then they won’t be “eating with us a few times a week”.  No sales, means no profit, means no biz, means no job – and those $15/hour employees aren’t getting what Government promised them.  Entrepreneurs will do what’s necessary to stay in business – after all, their job is NOT to provide jobs (as many on the Left believe it to be) but to make a profit.  Jobs are merely a side effect of that;  that is the purpose of employees – make a profit.  So, what will she do?

 To reduce expenses, Hoang is considering making their meatballs in-house using machinery rather than the handcrafted meatballs they commission from a local producer. Same goes for the tofu and hand-sliced rare steak.  “There are different ways we can cut our costs. At the same time, that’s going to trickle down to supporting businesses,” she says.

Yet, what does the Government say?  Still waving a magical wand and throwing pixie dust:

Murray says it will take some time to understand the effects of the city’s new floor wage, which remains far below the estimated living wage of $21 an hour in Seattle.   “By moving to $11, the folks who are serving [customers] and washing dishes have a little better chance of feeding their families and keeping a roof over their head,” he reasons.

Blindness, simply blindness.  There’s gonna be a whole lot of hurt about to happen, and this moron has a smile on his face.  It has nothing to do with “understanding” – biz owners already “understand” costs – they HAVE to, but this guy thinks that “happy talk” is going to make it all better.  The Same Way, over and over again, Democrats keep thinking that when they lose, it is because they haven’t explained it well enough (re: messaging) instead of actually looking at their policies (and the Rs are prone to the same thing).  And then reality crowds in:

True, but think about that bowl of pho. It can’t make itself. What happens if it can get to the customer for a fraction of current costs and with fewer people in the kitchen?

Is that efficiency or an unintended consequence of Seattle’s $15 experiment?

And that is it – biz owners, when higher costs are laid on them, have to figure out how to be more productive per employee used at the low end of the retail world.  And as we saw during the recession, employees were let go and the remaining ones had to pick up the slack – that’s one way to raise productivity.  and in some businesses, that is the only way.

Don Boudreaux add:

The minimum-wage debate in economics is rather like the reverse of the debate that took place centuries ago among astronomers.  In astronomy, the standard, mistaken geocentric theory of the solar system was defended with ever-greater cleverness and desperation by thinkers eager to explain how the apparently inexplicable movements of the planets in fact are consistent with Ptolemaic theory.

In economics, in contrast, the standard textbook theory works remarkably well, without any desperate tweaking, to explain observed patterns of activity following increases in the minimum wage.  The clever and desperate tweaking of theory is done instead by those economists whose faith in the politics-centric view of the economy refuses to be shaken by reason or observed empirical reality.  These faith-guided economists just know that minimum-wage legislation helps the poorest of poor workers, and to ‘prove’ the validity of their faith they concoct and deploy all manner of contorted theoretical explanations to explain why the market for low-skilled workers is, among all markets in creation, the one in which the standard law of demand is suspended whenever the great hand of Government-the-Creator is waved and a prayer is muttered by the congregation about how this waving hand will by Will (back by Force) enrich poor workers.

(H/T: Café Hayek)

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