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What is the impact on workers when minimum wage hikes put them out of work?

Recently, I wrote rebutting the common internet argument that ‘If you can’t pay $15 an hour you should go out of business‘. This is easy to type. But what it means exactly becomes clear when you read a recent op ed in the Wall Street Journal from Simone Barron, who worked in one of Seattle’s best known restaurants. I say ‘worked’ because Ms. Barron is now out of a job. As she explains,

This city’s minimum wage is rising to $16.39 an hour on Jan. 1. Instead of receiving a bigger paycheck, I’m left without any pay at all due to the policy change. That’s because the restaurant where I’ve worked for six years is closing as a consequence of the city’s harmful minimum-wage experiment.

In many cases, hiking a minimum wage to, say, $15 an hour results in workers earning $0 an hour.

As in Minneapolis, Seattle does not allow a ‘tip credit’ – a separate rate for workers who earn tips.

In Washington and a handful of other states, tips aren’t counted as income earned on the job. That means restaurateurs are expected to pay servers like me the full minimum wage in addition to our considerable tip income.

That has risen steeply in Seattle and is set to rise steeply in Minneapolis also, by 36% by 2024 for the city’s small businesses.

But what of the impact on the ex-employees? Ms. Barron writes

As a worker, you’re attracted to restaurateurs like Messrs. Douglas and Dillon because they offer job security and you know you’ll make money. That’s no longer the case here with a high minimum wage that ignores tip income. I often hear people in Seattle lament that it’s becoming “more corporate.” The truth is that the city has made it nearly impossible for many small businesses to survive.

Mr. Douglas is trying to find a role for my co-workers and me at another restaurant in his group, but I’ve started applying for other open positions around town. I landed an interview at a restaurant called Super Bueno, owned by another established chef, Ethan Stowell. Before I could even confirm the interview, Mr. Stowell announced that he will close down Super Bueno at the end of the year. He’s also closing or restructuring two other restaurants.

I’ve lived in this city for almost 20 years, supporting my family thanks to the full-service-restaurant industry. Today I’m struggling because of a policy meant to help me. I’m proudly progressive in my politics, but my experience shows that progressives should reconsider minimum-wage laws that hurt the very workers they’re trying to protect.

It is very easy to signal virtue by sounding off online about how everyone should just suck it up when their lives are impacted by your policy preferences being imposed upon them. It is people like Ms. Barron who bear the costs.

John Phelan is an economist at the Center of the American Experiment. 




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