OPINION:
San Francisco has long been on the cutting edge of fine cuisine, the gustatory equal of New York and New Orleans. The city sometimes calls itself “Baghdad by the Bay,” a marketing stroke obviously coined by someone who had never been east of Suez, “where the best is like the worst.” So when restaurant after restaurant started closing in recent months the foodie fashionistas in San Francisco swallowed hard and asked what happened.
The East Bay Times reports that “upward of 60” restaurants have gone dark just since September, casualties of what the newspaper describes as “a perfect storm of economic challenges that shows no sign of abating.” Owners and chefs cite such “economic challenges” as rising rents and the price of food, changing consumer tastes and the difficulty of finding and retaining good employees, as factors at the eye of that “perfect storm.” Success in the restaurant business has always been a close run thing, but there might be something unique at work.
The minimum wage in San Francisco, for example, stands at $13 an hour and is to rise again July 1 to $14 an hour. That’s even higher even than the California state minimum, which on New Year’s Day rose 50 cents to $10.50 an hour, nearly double the national minimum wage of $7.25 hourly. Other cities in the Bay Area impose minimum wages well above the state’s; notably, $12.53 in Berkeley and $12.25 in Oakland and El Cerrito.
The city doesn’t have a tip credit, either, as some other big cities do. Servers and bartenders get the minimum wage in addition to tips, unlike cities with such credit, where tips count toward the minimum wage. These wage floors were imposed by state legislators and city supervisors, most of whom had never run a business or met a payroll. It’s easy to be generous with other people’s money, but difficult to pass all increased costs of doing business to customers. A customer can always go somewhere else.
With minimum-wage increases come higher payroll taxes and higher workers’ compensation insurance premiums. So, too, health care and family-leave mandates.
Legislators with reflexive income-redistributionist impulses obviously flunked Economics 101, or never took the course at all, or they would be familiar with price elasticity of demand. That’s a measure of the inverse relationship between a change in the quantity of goods or services and changes in the prices charged. If customers can’t afford the higher prices, the store — or restaurant — has no alternative but to close the doors.
When Hillary Clinton was asked years ago about how small businesses could pay the cost of her unlamented nationalized health care plan, the precursor to Obamacare, she had a ready answer: “I can’t worry about every undercapitalized business.” Liberals love jobs, as a wise man observed, but they hate employers.
Rising costs imposed on businesses is why McDonald’s, Wendy’s and other fast-food restaurant chains are turning to automation, replacing order takers with self-service kiosks. Ed Rensi, a former president and CEO of McDonald’s USA, writing at Forbes.com in November, warned that the minimum wage — specifically the push by unions for a $15 per hour starter wage — “has negatively impacted the career prospects of employees who were just getting started in the workforce while extinguishing the businesses that employed them.” That’s the long way to say that laid-off workers might think a lower minimum wage is nevertheless better than $0.00 per hour.
Please read our comment policy before commenting.