Is the Minimum Wage Increase Hurting Small Businesses?

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Yes! That’s the end of the article…

This article comes from The Gazette, who covered the closing of a staple of Colorado Springs dining – Sonterra Innovative Southwest Grill.

Why did the restaurant close you may ask, well the owners cited “rising labor costs”:

Owners cited rising labor costs as one factor in the closure of the restaurant that was honored as a top spot for business lunches earlier this year.

The Gazette, August 20, 2019

Now, your first question is, could they run a business or was this just a flop? The restaurant had been open for 16 YEARS! Plus, they run ten other restaurants, so they do know what they’re doing.

Artificial wage inflation, like raising the minimum wage, just doesn’t work. Businesses must have the flexibility to pay what the market will bear, and what will fit within their financial constraints. Having the government set the minimum wage hurts small business (well all business), and those that stay open pass the cost to the consumer.

We know this was a disaster in Seattle after the minimum wage increased to $15 (Colorado’s is $11.10 per hour). It led to bankruptcies, fewer hours for workers, and surcharges to customers. We found this quote rather funny:

Restaurants Unlimited raised their menu prices and added a living wage surcharge to bills, but as Michael Saltsman of the Employment Policies Institute said, “people can stay home [or] opt to eat out less often,” implying that the company “can’t pass along the full impact of that labor cost increase to their customers through higher prices.”

Hayley Reiman, Fox Business, July 19, 2019

Saltsman of the Employment Policies Institute (liberal) clearly doesn’t understand basic economics or business. Well, that’s why he’s liberal. But what he doesn’t get is if people opt out of going out to eat, that cuts into the revenue to pay the employees. No customers = no sales = no revenue = no money to pay employees = business closing. So everyone, including owners, employees, and customers, suffers from a minimum wage hike. What’s the point of running a business?

More on Seattle, and we’re using them as an example as Colorado’s minimum wage will increase. Seattle is a preview of what’s to come. The Foundation for Economic Freedom (FEE) reported on Seattle’s own government study of the minimum wage impact. Here are some of the things that stand out:

– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
– The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.” On average, low-wage workers *lost* $125 per month. The minimum wage has always been a lousy income transfer program, but at this level you’d come out ahead just setting a hundred million dollars a year on fire. And that’s before we get into who kept vs lost their jobs.

FEE, June 27, 2017

So, the increase directly and negatively impacted workers. Shocking! Losing $125 per month for an hourly worker is REAL MONEY. But the liberal elites remain happily in their ivory towers when policies like this are instituted. Both Forbes and USA Today covered this as well.

So, if you’re an hourly worker who is happy to see the minimum wage increase in Colorado, expect to be making less money. If you like to go out to eat or shop anywhere that has hourly workers (pretty much anywhere), expect prices to go up and service to go down.

Liberals and economics don’t mix.

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