BY Josiah Bartlett Center for Public Policy
This month the minimum wage in Emeryville, Calif., hit $16.30 an hour, the highest in the nation. Predictably, it is killing restaurant jobs.
Patatas Neighborhood Kitchen just eliminated the dinner shift and laid off six of its 10 workers, The Wall Street Journal reported this week.
“I just didn’t see how I was going to survive it,” the kitchen’s owner said of the wage mandate.
Marilyn Boucher, owner of the Broken Rack, had planned to add hours for her workers until the minimum wage rose this month. Instead, she cut hours, the Journal reported.
To survive, Rudy’s Can’t Fail Cafe raised the price of its Crunchy Asian Salad by more than 50%, from $10 to $15.50.
This is how an absurdly high wage floor affects small businesses, particularly restaurants, their employees and their patrons.
Someone has to pay the higher wages. It won’t be some Wall Street tycoon twirling his mustache while burning $100 bills in front of homeless children for amusement. Community members and laid-off employees pay in higher prices and lost jobs. Small business owners and their families pay in lower incomes and, sometimes, closed businesses.
Closer to home, in Connecticut, restaurant owners say they face closure because the governor vetoed a bill allowing them to continue paying tipped employees at the lower minimum for all hours worked. The bill stemmed from lawsuits challenging wait staff pay practices. The suits threaten to bankrupt many restaurants in the state, owners say.
These local issues will become national ones if the Raise the Wage Act approved in the U.S. House last week becomes law. It would mandate a $15 national minimum wage by 2025 (a 107% increase) by 2025, and eliminate lower minimum for tipped employees, forcing a 562% increase in wait staff labor costs by 2026.
New Hampshire’s U.S. Reps. Chris Pappas and Annie Kuster voted for the bill. (Pappas’ own restaurant hires experienced employees for less than $15 an hour.)
To help Granite Staters understand the impact such a law would have on the state, we highlighted five ways a $15 minimum wage would be bad for New Hampshire.
It would:
- Reduce job opportunities for Granite Staters;
Extensive research has shown that minimum wage increases disproportionately hurt the lowest-skilled Americans by eliminating low-skill jobs. Roughly 163,000 Granite Staters work at jobs that pay less than $15 an hour, according to state Employment Security data. About 11,000 of them earn the minimum wage. Those in the lowest-paid jobs would see the biggest job losses. For example, federal Bureau of Labor Statistics data show that the average wage in New Hampshire for ushers, lobby attendants and ticket takers is $9.43 an hour. These are entry-level jobs for high school students. Forcing employers to raise the hourly rate by 60 percent would prompt theater owners to accelerate the transition to automated ticket kiosks.
- Pressure local governments to raise property taxes;
New Hampshire municipalities and school districts pay less than $15 an hour for many positions. A few job openings posted this July include: Department of Public Works laborer, Manchester, $13.25 an hour; lifeguard, City of Claremont, $7.25-$15 an hour; library page, Nashua, $10.08 an hour; lunch/recess assistant, North Salem Elementary School, $12.21 an hour. In fiscal year 2018, Manchester Public Schools spent $10.7 million in salary for paraprofessionals, tutors, certified instructors, food service workers and support staff. Mandating a $15 minimum wage for all government employees will force a large increase in government labor costs, which will lead to budget cuts elsewhere, job losses, tax increases or all three.
- Reduce entrepreneurship;
New Hampshire’s business-friendly economic climate is less friendly for startups, according to several national measurements. The latest Kaufmann State Report on Early Stage Entrepreneurship ranks New Hampshire below its neighbors and the national average on three of four metrics: rate of new entrepreneurs, early stage job creation, and startup early survival rate. WalletHub just ranked New Hampshire 48th in Best & Worst States to Start A New Business. Would-be entrepreneurs calculate anticipated profits before deciding to risk their capital on a new venture. Artificially inflating labor costs for the lowest-skilled, least-productive employees by more than 50% would make that math even more challenging, resulting in fewer new businesses — and fewer new jobs.
- Make native businesses less competitive;
New Hampshire’s business-friendly economic climate is less friendly for startups, according to several national measurements. The latest Kaufmann State Report on Early Stage Entrepreneurship ranks New Hampshire below its neighbors and the national average on three of four metrics: rate of new entrepreneurs, early stage job creation, and startup early survival rate. WalletHub just ranked New Hampshire 48th in Best & Worst States to Start A New Business. Would-be entrepreneurs calculate anticipated profits before deciding to risk their capital on a new venture. Artificially inflating labor costs for the lowest-skilled, least-productive employees by more than 50% would make that math even more challenging, resulting in fewer new businesses — and fewer new jobs.
- Make New Hampshire less competitive.
Employers can locate anywhere in the world. They tend to prefer places that have a large talent pool, low costs, high quality of life, and a favorable business climate. New Hampshire is highly competitive on quality of life and general business climate. Though energy costs are extremely high here, lower labor costs help us compete against Massachusetts, where the average wage is $5 per hour higher, according to BLS data. Artificially inflating labor costs reduces the incentive for employers to locate in more remote areas.
For more detail, take a minute to read the whole thing on our website here.
In the meantime, be thankful you don’t own a restaurant in Emeryville, Calif.