The survey focused on how recent increases in the minimum wage affected restaurants of all types and sizes. In total 574 establishments responded to the survey which I would certainly say is a sufficiently large sample. The results are summarized below for full service restaurants:
76.5% of respondents reported reducing employee hours in 2018 in response to the wage hike36.3% of respondents reported cutting jobs in 2018 in response to the wage hike74.5% of respondents report that they will reduce employee hours in 2019 in response to the wage hike effective 12/31/201847.1% of respondents report that they will cut jobs in 2019 in response to the wage hike effective 12/31/201860.8% of respondents report that they will increase menu prices in 2019 as a result of the wage hike effective 12/31/201834.4% of respondents report that their repeat customers dined dined at their restaurants less frequently after the menu price increases40.2% of respondents report that they employed fewer people in 2018 vs 2017 even though their payroll costs remained about the sameLimited service restaurants saw similar results. I found this excerpt rather telling:
When the tip wage increased 50% in 2015, and since doubled, annual employment growth dropped from 6.67% to less than 1% as of November of 2018
Just a reminder…
One thing I’d like to mention with this post is that a fair number of news outlets are hailing NYC’s $15/hour program as a “success” and several news outlets have actually cited the very study I’ve linked as “evidence” of that success (I’m being serious). The lesson to be learned here is to always click through to the report and read and analyze the data for yourself.
One thing I’d like to mention with this post is that a fair number of news outlets are hailing NYC’s $15/hour program as a “success” and several news outlets have actually cited the very study I’ve linked as “evidence” of that success (I’m being serious). The lesson to be learned here is to always click through to the report and read and analyze the data for yourself.
Well, some people are making more money right? That’s all that counts. Round up one waiter that says that they can now afford cigarettes and lottery tickets, and everything is good.
And this is NYC, an already expensive cost-of-living city. How does this work across the country?
Hurts the people it’s intended to help, no different than all the federal money which has gone to higher ed.
Wait, are you suggesting that the cost of living will go up at a greater rate then the increase in earnings, providing they keep their job and dont get replaced by a computer to order food? Thats impossible, it cant be…
The people that state Restaurants would only have to increase a small percentage dont understand the economics of things. While in theory they would, but thats not taking into account that suppliers prices will increase due to increase in minimum wage as well as the restaurants wage increase. And that is assuming a steady business flow and enough business to have a small increase cover that wage increase (most dont do that much business from the numbers I have heard, which is the need to increase by like 10-20%)
One thing I (frustratingly) have to continually remind people of is that market forces are real things. The interaction between supply and demand is real and the general shape of those slopes is real (supply slopes up and demand slopes down where quantity is on the Y axis and demand is on the X axis). This leaves advocates of minimum wage in one of four groups:
Well-intentioned people who don’t understand economicsWell-intentioned people who sort-of understand economics but are desperately obsessed with “exceptions” to the shapes of supply and demand curves and supply-demand reaction functions because said exceptions give them justification for what they believe is the "right thing"Ideologues who don’t understand economics.Politicians who understand economics perfectly well and realize that increasing the minimum wage creates two groups of people who are both dependent on their policies.
IMO a good chunk of minimum wage advocates fall into group 1 and another good chunk fall into group 2. In fact, I’d argue the majority of academic economists fall into group 2 when left to their own devices. I’ve seen a lot of well-educated, intelligent people create extremely elaborate and messy economic models to justify price floors (minimum wage) only to have the predictions of their models fail repeatedly (ironically these models always show more employment as a result of raising the minimum wage because to achieve constant employment and a net surplus you have to insert a completely arbitrary and embarrassing countervailing variable). I have no patience or tolerance for group 3 so I don’t know how large that group is as I’ve developed a passive ability to completely ignore them. I used to laugh off the notion of group 4 but as time has gone on I’ve developed this sinking feeling… a terrible realization… that that group does indeed exist.
The people that state Restaurants would only have to increase a small percentage dont understand the economics of things. While in theory they would, but thats not taking into account that suppliers prices will increase due to increase in minimum wage as well as the restaurants wage increase. And that is assuming a steady business flow and enough business to have a small increase cover that wage increase (most dont do that much business from the numbers I have heard, which is the need to increase by like 10-20%)
They also don’t actually look at or understand the cost structure of most businesses, restaurants included. I have some phenomenal spreadsheets at this point that model the cost structure of a restaurant. We’re talking down to the level of the cost of napkins. Labor cost is an absolute bitch and it can turn a popular, seemingly successful restaurant into a money-loser very quickly. The biggest theme at the NRA show the last three years has been labor reduction. I don’t see that trend going away any time soon.
So weird that minimum wage has existed for over a century. There are plenty of economic arguments that a minimum wage increases social mobility, reduces government subsidies for the working poor, increases economic activity, and has minimal negative effects in a low unemployment/low inflation/high wealth disparity environment. This survey may or may not play out in reality. There certainly may be a level at which the negative impacts outweigh the positive effects, but the last century has not supported your arguments very well.
36.3% of respondents reported cutting jobs in 2018 in response to the wage hike74.5% of respondents report that they will reduce employee hours in 2019 in response to the wage hike effective 12/31/201847.1% of respondents report that they will cut jobs in 2019 in response to the wage hike effective 12/31/2018
Gotta wonder how the work is getting done with so much job and hour cutting…
Or are they reducing sales as well?
I do know how small businesses are run, and if a wage increase forced me (and all my competitors!) to raise wages, then I’d raise prices to compensate… and all would be the same as before. If you believe sales would decline, then you are forgetting that the increased expense comes directly from an increase in wages. And at the low end, wages tend to be spent.
36.3% of respondents reported cutting jobs in 2018 in response to the wage hike74.5% of respondents report that they will reduce employee hours in 2019 in response to the wage hike effective 12/31/201847.1% of respondents report that they will cut jobs in 2019 in response to the wage hike effective 12/31/2018
Gotta wonder how the work is getting done with so much job and hour cutting…
Or are they reducing sales as well?
I do know how small businesses are run, and if a wage increase forced me (and all my competitors!) to raise wages, then I’d raise prices to compensate… and all would be the same as before. If you believe sales would decline, then you are forgetting that the increased expense comes directly from an increase in wages. And at the low end, wages tend to be spent.
One explanation here:
“Many people working in the restaurant industry wanted to work overtime hours, but due to the increase, many restaurants have cut back or totally eliminated any overtime work,†Andrew Riggie, executive director of the New York City Hospitality Alliance, told Fox News. “There’s only so much consumers are willing to pay for a burger or a bowl of pasta.â€
. . . “What it really forces you to do is make sure that nobody works more than 40 hours,†Susannah Koteen, owner of Lido Restaurant in Harlem, told Fox News. “You can only cut back so many people before the service starts to suffer.â€
36.3% of respondents reported cutting jobs in 2018 in response to the wage hike74.5% of respondents report that they will reduce employee hours in 2019 in response to the wage hike effective 12/31/201847.1% of respondents report that they will cut jobs in 2019 in response to the wage hike effective 12/31/2018
Gotta wonder how the work is getting done with so much job and hour cutting…
Or are they reducing sales as well?
I do know how small businesses are run, and if a wage increase forced me (and all my competitors!) to raise wages, then I’d raise prices to compensate… and all would be the same as before. If you believe sales would decline, then you are forgetting that the increased expense comes directly from an increase in wages. And at the low end, wages tend to be spent.
I suspect that survey skews at least a little toward exaggerations of what business will actually do. That said, a business (especially a small business) may not be able to simply raise prices to compensate for increased labor costs. While there certainly will be pressure to do that, the mere fact that there’s such pressure may not automatically translate into increased prices, at least in the short term, as there may be other factors placing an opposite pressure on prices to keep them low.
In many industries and especially with small business, there is very little flexibility in what you can charge for your product. They are essentially price takes in that the price of their products largely set by the market and other forces that are beyond their control.
One thing I (frustratingly) have to continually remind people of is that market forces are real things. The interaction between supply and demand is real and the general shape of those slopes is real (supply slopes up and demand slopes down where quantity is on the Y axis and demand is on the X axis). This leaves advocates of minimum wage in one of four groups:
Well-intentioned people who don’t understand economicsWell-intentioned people who sort-of understand economics but are desperately obsessed with “exceptions” to the shapes of supply and demand curves and supply-demand reaction functions because said exceptions give them justification for what they believe is the "right thing"Ideologues who don’t understand economics.Politicians who understand economics perfectly well and realize that increasing the minimum wage creates two groups of people who are both dependent on their policies.
IMO a good chunk of minimum wage advocates fall into group 1 and another good chunk fall into group 2. In fact, I’d argue the majority of academic economists fall into group 2 when left to their own devices. I’ve seen a lot of well-educated, intelligent people create extremely elaborate and messy economic models to justify price floors (minimum wage) only to have the predictions of their models fail repeatedly (ironically these models always show more employment as a result of raising the minimum wage because to achieve constant employment and a net surplus you have to insert a completely arbitrary and embarrassing countervailing variable). I have no patience or tolerance for group 3 so I don’t know how large that group is as I’ve developed a passive ability to completely ignore them. I used to laugh off the notion of group 4 but as time has gone on I’ve developed this sinking feeling… a terrible realization… that that group does indeed exist.
Wow- really with that arrogant of a presentation people arn’t Immediately converting to your thinking and you have to continually remind them? Shocking.
Do you have other opinions that people seem to blow off continually? I’m curious to hear them too!
One thing I (frustratingly) have to continually remind people of is that market forces are real things. The interaction between supply and demand is real and the general shape of those slopes is real (supply slopes up and demand slopes down where quantity is on the Y axis and demand is on the X axis). This leaves advocates of minimum wage in one of four groups:
Well-intentioned people who don’t understand economicsWell-intentioned people who sort-of understand economics but are desperately obsessed with “exceptions” to the shapes of supply and demand curves and supply-demand reaction functions because said exceptions give them justification for what they believe is the "right thing"Ideologues who don’t understand economics.Politicians who understand economics perfectly well and realize that increasing the minimum wage creates two groups of people who are both dependent on their policies.
IMO a good chunk of minimum wage advocates fall into group 1 and another good chunk fall into group 2. In fact, I’d argue the majority of academic economists fall into group 2 when left to their own devices. I’ve seen a lot of well-educated, intelligent people create extremely elaborate and messy economic models to justify price floors (minimum wage) only to have the predictions of their models fail repeatedly (ironically these models always show more employment as a result of raising the minimum wage because to achieve constant employment and a net surplus you have to insert a completely arbitrary and embarrassing countervailing variable). I have no patience or tolerance for group 3 so I don’t know how large that group is as I’ve developed a passive ability to completely ignore them. I used to laugh off the notion of group 4 but as time has gone on I’ve developed this sinking feeling… a terrible realization… that that group does indeed exist.
Wow- really with that arrogant of a presentation people arn’t Immediately converting to your thinking and you have to continually remind them? Shocking.
Do you have other opinions that people seem to blow off continually? I’m curious to hear them too!
“Many people working in the restaurant industry wanted to work overtime hours, but due to the increase, many restaurants have cut back or totally eliminated any overtime work,†Andrew Riggie, executive director of the New York City Hospitality Alliance, told Fox News. “There’s only so much consumers are willing to pay for a burger or a bowl of pasta.â€
That doesn’t explain how the work is getting done with fewer hours. And the logic of having people work overtime is the same as before. Is it better to pay extra and have a smaller staff or hire more people? If the same work needs doing and they eliminate overtime, then they need to hire more people.
In many industries and especially with small business, there is very little flexibility in what you can charge for your product. They are essentially price takes in that the price of their products largely set by the market and other forces that are beyond their control.
Of course the market controls what you can do. But your expenses didn’t increase in isolation… **all your competitors saw the same increase in expenses. **Sure you could take a hit to profit, but then I’d have to wonder why the market allowed for higher profits before but no longer does. The same forces would be at play.
In aggregate all the low wage people would experience a real increase in income and high income people would experience a decline (due to a slight increase in real prices). Isn’t this the point?
“Many people working in the restaurant industry wanted to work overtime hours, but due to the increase, many restaurants have cut back or totally eliminated any overtime work,†Andrew Riggie, executive director of the New York City Hospitality Alliance, told Fox News. “There’s only so much consumers are willing to pay for a burger or a bowl of pasta.â€
That doesn’t explain how the work is getting done with fewer hours. .
I think the point is that the same amount of work is NOT getting done. Employers cut back on overtime hours or possibly on employees, and other employees either have to pick up the extra work inside their 40 hrs per week, or things don’t get done that used to get done. For example, you have one less server or hostess per shift, requiring your normal servers to cover more patrons, resulting in some amount of decline in customer service - less work getting done.
So you opt to reduce service to slightly lower expenses. That’s not a “new” thing, either.
Note that the businesses that will be impacted the most by a MW increase are the ones that hire lots of cheap labor but cater to higher income customers… who are not very price sensitive. Cutting service is typically not a good strategy. Businesses that cater to lower income customers will likely see an increase in overall sales, even if prices are increased enough to cover the wage increase.
So you opt to reduce service to slightly lower expenses. That’s not a “new” thing, either.
Note that the businesses that will be impacted the most by a MW increase are the ones that hire lots of cheap labor but cater to higher income customers… who are not very price sensitive. Cutting service is typically not a good strategy. Businesses that cater to lower income customers will likely see an increase in overall sales, even if prices are increased enough to cover the wage increase.
You have any citation to anything you wrote or are you just a 3?
