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The Unappetizing Effect of Minimum-Wage Hikes

http://www.wsj.com/articles/michael-saltsman-the-unappetizing-effect-of-minimum-wage-hikes-1427240817
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1310633 tn?1430224091
Can someone post the article, please?

I don't have a subscription to WSJ.

Thanks!
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649848 tn?1534633700
Looks like WSJ is going to have to be an "off limits" source, unless you can/will copy/paste the entire article, because we can't require everyone to have a subscription to it in order to read the articles.

El - I tried to locate the article via other sources and every one linked back to WSJ ... I don't have a subscription to it either or I'd post the article for you.
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Avatar universal
Just Google "minimum wage WSJ" and limit time to one week. You'll get access to the article.

You're  welcome.
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Avatar universal
No one was going to thank you
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1310633 tn?1430224091
So I read (2) different articles on the same topic... the effects of a raise to minimum-wage. One CLEARLY has an agenda. One does not. If you have the time to read, go and check them out, and you be the judge.

I know what side of the fence I fall on, and these articles confirm my original thoughts on the matter... low wages for low/no education workers.

I don't believe in paying someone a 'living-wage' or higher wages, simply because they "work hard".  
*****
1) http://www.forbes.com/sites/mikepatton/2014/11/26/the-facts-on-the-minimum-wage-increase/

2) http://www.brookings.edu/blogs/up-front/posts/2014/01/10-ripple-effect-of-increasing-the-minimum-wage-kearney-harris
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1310633 tn?1430224091
Looks like the article is 'unlocked' now. Just looked again, and found it. Posting it before it locks up again...
******

The Unappetizing Effect of Minimum-Wage Hikes
By MICHAEL SALTSMAN
March 24, 2015 7:46 p.m. ET

Last fall, voters in the Bay Area cities of San Francisco and Oakland followed Seattle’s lead and approved costly new minimum-wage mandates ($15 an hour and $12.25 an hour, respectively) for most businesses in the city boundaries. Now the bills have begun arriving, and some businesses can’t pay them.

The consequences of minimum-wage increases, at the historical levels studied in the U.S., are well known to labor economists. A summary of the research published last year by the Institute for the Study of Labor, and authored by University of California-Irvine economist David Neumark, found that each 10% hike in the minimum wage on the state and federal level has caused a 1% to 2% drop in youth employment. Similarly, researchers at the Federal Reserve Bank of Chicago found an increase in fast-food prices associated with the same wage change.

Given the scope and schedule of these new minimum-wage increases, the impact on prices and employment may be even steeper this time. The current federal minimum wage is $7.25, half of what San Francisco’s wage floor will be set at by 2018 after a series of increases that begin in May. Nationally, Congress phased in the last 40% increase to $7.25 over a three-year period; in Oakland, an almost-identical 36% increase happened overnight on March 1.

Businesses’ first line of defense against these labor-cost increases is an offsetting increase in prices. The magnitude is staggering: In Oakland, local restaurants are raising prices by as much as 20%, with the San Francisco Chronicle reporting that “some of the city’s top restaurateurs fear they will lose customers to higher prices.” Thanks to a quirk in California law that prohibits full-service restaurants from counting tips as income, other operators—who were forced to give their best-paid employees a raise—are rethinking their business model by eliminating tips as they raise prices.

Ironically, this change in compensation practices has reduced the take-home pay for some of the employees it was supposed to help: At the Oakland restaurant Homestead, the East Bay Express reported that servers are taking “a substantial pay cut,” earning a flat wage of $18 to $24 an hour and no tips instead of the $35 to $55 an hour they were accustomed to earning when tips were included.

Though higher prices are a risk that some businesses were able to take, others haven’t had the option. The San Francisco retailer Borderlands Books made national news in February when the owner announced that the city’s $15 minimum wage would put him out of business, in part because the prices of his products were already printed on the covers. (A unique customer fundraiser gave Borderlands a stay of execution until at least March of 2016.)

One block away from Borderlands, a fine-dining establishment called The Abbot’s Cellar—twice selected as one of the city’s top-100 restaurants—wasn’t so lucky. The forthcoming $15 minimum wage, combined with a series of factors like the city’s soaring rents, put the business over the edge and compelled its owners to close. One of the partners told me the restaurant had no ability to absorb the added cost, and neither a miraculous increase in sales volume nor higher prices were viable options.

These aren’t isolated anecdotes. In the city’s popular SoMa neighborhood, a vegetarian diner called The Source closed in January, again citing the higher minimum wage as a factor. Back across the Bay in Oakland, the Chronicle reported that some of the city’s businesses have been similarly affected. According to a board member of the Oakland Chinatown Chamber of Commerce, 10 restaurants or grocery stores opted to permanently close this year alone as a partial consequence of the wage hike. Even the Salvation Army’s child-care facility is “scrambling to find ways to keep the doors open” in response to labor cost increases, according to the organization’s county coordinator.

Faced with convincing evidence of the policy’s failures, you’d think advocates would be chastened or apologetic. You’d be wrong: Ken Jacobs, who runs the University of California-Berkeley’s labor-backed Center for Labor Research and Education, chalked up possible consequences of new mandates to labor-market “churn.” Research that Mr. Jacobs co-authored predicted that the Bay Area hikes would be mostly cost-free. At a forum earlier this month where dozens of Oakland business owners fretted about their viability, representatives of Lift Up Oakland—the labor union-backed coalition that advocated for the wage hike—were not in attendance.

It’s probably too late to save other Oakland and San Francisco businesses. But it’s not too late for cities like New York and Los Angeles to heed the evidence before following their footsteps.
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Avatar universal
Sorry Barb, I don't have a subscription to WSJ. The article was free to ready when I posted the link.

Welcome back Mike.
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649848 tn?1534633700
That's okay - tried getting into via numerous other sources and every one took me back to the same place... guess I missed the one week thing...

It's always good to post the article with the link when possible.  

I don't have time to read the whole article right now, but this jumped out and slapped me in the face, so I have to comment:

"I don't believe in paying someone a 'living-wage' or higher wages, simply because they "work hard"."   I do believe people should earn a living or higher wage for working hard... Not everyone has the opportunity to get a college education (trust me, I know) and if that person is willing to work hard, learn the ropes, maybe take a few relevant courses along the way or do other things that are necessary to advance and keep bettering themselves, they should be rewarded for it.  That's what this country is all about - I taught my children that hard work pays off.  I have a son that was not able to to go college, either, but he's been able to work himself into a position in which his hard work is paying off.  I have a daughter who has decided that she'd rather sit on her duff and do nothing...

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1310633 tn?1430224091
(I think there's been a misunderstanding...)

I agree with you 100%...

What I'm saying is, just because someone get's hired at McDonald's and works hard, doesn't mean they should get paid a living-wage or $25/hr.

Now, that said, if they work hard at the lower wage, and demonstrate that they're promotable, and are recognized as such, and get promoted into a managerial position, then they should get paid accordingly (a higher wage for a higher position).

I worked my way up from the bottom of the manufacturing/production (oi & gas) industry. I started in the warehouse picking orders. Then went onto shipping & receiving. Then on to the shop-floor to manufacture components. Then on to the estimation department. Then on to accounting. Then on to purchasing. Then on to planning. Then on to materials & warehouse management.

All along the way, i received raises. When I changed companies, I got larger raises.

My degree is in marketing. What I've done with my career has ZERO to do with my education.

I worked hard, and was consequently rewarded.

THAT, i believe in.

What I DO NOT believe in, is someone walking into McDonald's and demanding they get paid a living wage, or $15.00/hr for a job that a brainless monkey could do.

Did all that make sense?

We're on the same page, I think (for the most part anyway)
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148588 tn?1465778809
The Bay Area has worse problems than a couple restaurants and a bookstore closing down. (Seriously, a bookstore? There's been a decrease in blacksmithing and candlemaking too.)
Because of the wash of high  end tech cash, rents have gone out of reach of anyone in the service industry. Until you manage to automate everything including restaurants and remove those pesky, hardworking humans completely from the equation, you'll have to figure out a way to pay people on the lower end of the pay spectrum more. Or you can do like Texas, where some industries like building construction hire over 50% undocumented, and thump your chest about being 'tough on immigration' while reaping the benefits of cheap labor.
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649848 tn?1534633700
I'm with you now, and hopefully, as you were clawing your way up the food chain you were taking relevant courses that would make you more promotable, so you deserved more for every hour of hard work... that's what I'm talking about...

There are people working at Mickey's who deserve a living wage because they do the work to earn it... I'm talking about the managers, buyers, etc; if they've worked up to that point, they deserve it... Do they deserve $15/hr to flip a burger, drop the salt shaker on my fries or get my order wrong?   Nope, don't think so...

I understand there may be a decrease in demand for basket weavers, potters and fabric weavers, as well, but if they were willing to relocate and put in a little effort, they could make a tidy living running their own business, producing their products and selling at high end arts and crafts fairs, as well as out of their stores or homes, online, etc.  

I have a good friend who does fabric weaving in her spare time... a small  table runner will bring her $200.  Of course, I realize that's pocket change for some people, but if she sold 2-3 of those in a week - not bad...
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Avatar universal
Ill gladly pay and promote a hard worker, especially if they are trainable in the next level.  its what this country used to be all about.  that being said, I make a good wage and work additional part time jobs to make ends meet.  Im a product of my education and I kind of expected that I'd have to work harder or more in order to squeak by.  

I don't have a problem with that.  Because of my work ethic/experience and brand loyalty (only 2 full time employers since 88) I am employable and people recognize that.
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Avatar universal
Welcome back mike!
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649848 tn?1534633700
Hope all is well with you, Mike - good to see you back.
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Avatar universal
Thanks Brice & Barb.
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