Last summer we talked about the rather faint hopes that some Seattle businesses were clinging to as the city moved toward jacking up their minimum wage (for some jobs) to $15.00 per hour. Employers – particularly in the restaurant industry – were asking the city council to reconsider as they evaluated their options in the face of labor costs which were about to rise to between 42 and 47 percent of their operating expenses. It all fell on deaf ears, unfortunately, and the plan is moving forward. And rather than waiting for the roof to come crashing down, some owners are preemptively closing their doors.
Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.” ..,
“Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”
In reference to that last quote, it’s certainly a math problem for the restaurant owners, but that doesn’t eliminate the fact that it’s a political problem for the social justice warriors who shoved this initiative through. Of course, the problems in question are all too real for the workers who are now “benefiting” from having their wages bumped up by more than 50% in some cases, and it involves some calculating as well. Our friend Bruce McQuain asks the question which puts this whole math issue in focus. What’s $15 times zero again?
Are there alternatives to closing? Sure. But they’re the same ones we’ve talked about for years:
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine. As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.”
Welcome to the land of $17 dollar cheeseburgers. And, as you can figure out fairly quickly, everything else will be more expensive too … which, of course, erodes the purchasing power of that $15 wage. More importantly, if you work for one of those establishments that is closing, your wage is $15 times zero hours, isn’t it?
Bigger companies who can absorb the financial hit from implementing new technology have already been preparing for these changes. McDonald’s has been experimenting with point of sale automation for taking orders and Applebee’s rolled out smart tablets at tables in multiple locations last year. The latter solution is the most interesting to me because it seems like the easiest for younger consumers to adapt to. Most of the people going out to eat in such places are already familiar with laptops, tablets and smart phones anyway. Having one waiting at the table which takes the place of not only the menu, but the waitress as well, isn’t going to come as much of a shock to the system.
I ran into one of these setups at the Philadelphia airport this winter and they work surprisingly well. If you plan to pay by credit or debit card (which is the only option in some cases) you barely interact with a human at all. You browse the drinks and food on the touch screen, place your order, swipe your card, and a short while later somebody strolls up with your food and beverage, says hello and drops them off. It’s a terribly impersonal service as compared to a bartender or waitress who stops to chat with you, but it gets the job done.
Of course, that last phrase is the big issue here, isn’t it? It gets the job done. That job used to be done by a person. Now it’s essentially a robot. So those workers are no longer on the payroll, but hopefully they’ll catch on someplace else. Unfortunately, as Seattle is finding out, employers who run single outlets and don’t have the backing and buffer range of a major chain often won’t be able to make the shift in technological infrastructure required to cut back on staffing while staying open. Those folks will shut down, and it’s apparently already beginning in Washington state.
You know… if only somebody had tried to warn them.