Category Archives: jobs

A Number of People Predicted This

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The first stage of the Seattle-mandated $15/hr minimum wage, to $11/hr, takes effect next month, but already Seattle’s low wage workers are feeling the pain of their pay “raise.”

…the city is experiencing a rising trend in restaurant closures.

The closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.

The shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help. Instead of delivering the promised “living wage” of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.

After all,

About 36% of restaurant earnings go to paying labor costs.

Restaurants operate on thin margins, though, with average profits of 4% or less….

The Seattle Eater offered a more itemized breakout [emphasis added]:

Bottom line, labor can only be a function of sales. If a busy restaurant at lunch serves 150 eaters during the lunch hour, and each person spends $15, the restaurant just grossed $2,250. If labor comprises significantly more than 30%, the restaurant won’t be in business for long. So that allows $675 total for labor for the day, and before the employer taxes we pay that allows $550 or so. At $15 an hour, that allows 36 labor hours, which means four people can work a full day. This assumes that everyone is making the new minimum. Now look around in a busy restaurant serving 150 people—do you see more than 4 employees? Of course you do.

The 16.2% increase in labor cost that first stage represents over Seattle’s current $9.47/hr minimum wage represents a total cost increase of nearly 6%—turning that 4% profit margin into a loss. Even taking Brendan McGill’s (Chef/Owner, Hitchcock, Hitchcock Deli and the gentleman quoted just above by the Seattle Eater) estimate of 30% labor costs, that spike in the minimum wage coming in a week or so works out to just under a 5% increase in total costs, still wiping out that 4% margin. No wonder restaurants are closing.

The question remains: are the targeted low-wage folks better off for being out of an $11-$15/hr job than they are for having a $9.47/hr job? Really?

Another question: how many other low-wage industries besides the food services one are getting hammered by this minimum wage law?

A final thought: maybe next, to cover Seattle’s minimum wage requirement, Seattle will impose a minimum business profit requirement on Seattle’s taxpayers.

 

…including AEI‘s Mark Perry, to whom h/t

Of Course They Did

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Several unions filed a lawsuit Tuesday challenging the constitutionality of a recent Wisconsin law which bans mandatory union dues as a condition of employment.

Because they claim a higher right to the fruits of a man’s labor—his wages—than the man earning those wages has.

According to The Associated Press the unions are arguing that the law violates their constitutional rights because it requires unions to act on behalf of workers who are no longer required to pay union dues.

Of course, this is nonsense. Nothing in the law prevents unions and employers from negotiating contracts exclusively for union members. Nothing in the law requires employers and non-union members to use the unions’ contracts as their own. That employers and non-union members might find the shortcut handy is irrelevant. The employers and non-union members may very well negotiate better contracts than the unions did.

And, of course, the unions have no claim on non-union members’ wages, or anything else of theirs, from those non-members’ negotiations on their own behalf. Federal law, as well as Wisconsin’s law, makes this clear. James Sherk, The Heritage Foundation Senior Policy Analyst in Labor Economics:

Federal law [the National Labor Relations Act ] does not require a union to act as an Exclusive Representative. The choice of whether to be an Exclusive Representative or Member Only remains with the union.

Jeh Johnson and Terrorism

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Homeland Security Secretary Jeh Johnson said allowing the agency to lose its federal funding after Friday could jeopardize the US efforts to thwart a domestic terror attack by the Islamic State and will result in 30,000 employees being furloughed.

“It[‘s] including people I depend on every day to stay one step ahead of” the Islamic State, he told NBC’s Meet the Press.

Johnson carefully elided the small detail that 200,000 DHS employees—including all of his security forces—would remain on the job. More importantly, he would do well to direct his concern to his fellow Democrats in the Senate. Those worthies are busily filibustering a bill that fully funds Johnson’s DHS.

Separately, but relatedly, Johnson, in the course of making his Sunday talk show rounds, said this on Fox News Sunday:

The thing I hear from leaders in the Muslim community in this country is ISIL is attempting to hijack my religion[.]

So he says. The only leaders in the Muslim community that are getting any press are from CAIR and the Muslim Brotherhood in President Barack Obama’s “Conference on Violent Extremism” coffee klatch a week or so ago. Where are the serious Muslim leaders? I actually agree with the thrust of Johnson’s claim, but if these guys really are upset, they need to speak up. At least as loudly and publicly as are these religion hijackers.

And this on the same show:

Whether it’s referred to as Islamic extremism or violent extremism, what it comes down to is ISIL is a terrorist organization that represents a serious potential threat to our homeland, which has to be addressed. I’m more concerned about that frankly than I am about what two words we use to refer to them.

If that’s the case, if “two words” are such a trivial matter, then why are you so absolutely resistant to using them out loud? Why not just do so and rid yourself of this turbulent distraction?

Another Perspective on Minimum Wage

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Mark Perry has one in his Carpe Diem column for AEIdeas.

In a recent post, I posed the question: rather than calling it “an increase in the minimum wage from $7.25 to $10.10 (or $15) per hour,” if we instead called it “imposing a $2.85 (or $7.75) per hour tax on employers who employ or hire unskilled workers,” would it make any difference to those who support “an increase in the minimum wage”? Maybe not for some of the strongest advocates of a higher minimum wage, but perhaps it would make a difference for some weaker advocates who were never challenged to think of it that way?

He then calculates the associated payroll taxes (a tax on the tax, or a surtax, in his construction) based on full time work (i.e., 40-hour work weeks) and the larger minimum wage increment, but what would that surtax work out to for the typical minimum wage worker’s half-time employment?

The employer tax of $2.85 would work out to an additional tax of $2,850 per year per part-time minimum wage employee. The surtax on that under current payroll tax law would come to just under $220 per year per employee, or a total employer tax of just under $3,070 per year. Per employee.

How many small business employers (the Walmarts of the world are an aberration) can afford that additional labor cost tax? At what point does an employer, of any size, decide the work being done isn’t worth the mandated cost and either stops doing it or automates it?

More Excessive Government

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US financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.

Regulators are considering requiring certain employees within Wall Street firms hand back bonuses for egregious blunders or fraud as part of incentive compensation rules the 2010 Dodd-Frank law mandated be written, according to people familiar with the negotiations. Including such a “clawback” provision in the rules would go beyond what regulators first proposed in 2011 but never finalized.

Congress created a bureaucracy, and it expanded it enormously with that Dodd-Frank. Now the bureaucrats have to do something to justify their existence. Regulators gotta regulate. And so we get this.

Never mind that the free market is a fine regulator, and “certain employees” and their “Wall Street firms” employers will be severely and promptly regulated when those excessive risks fail.

Government intrusion isn’t just not needed, though, it’s counterproductive. Now businesses, on and off Wall Street, will incur additional costs as they seek compliance, additional costs as they seek work-arounds, additional costs from the expanded field for nuisance suits (and legally legitimate ones), additional costs as they’re forced to negotiate even more complex compensation packages in order to hire the best, rather than the second best.

Such regulatory nonsense also is in large part duplicative and so wasteful. For instance:

Some banks are already voluntarily recouping money from employees who engage in misconduct or excessive risk.

We already have adequate laws (not regulations) on the books to handle both criminal and civil misconduct. Additional regulation here would be useless.

Too, that some businesses think such procedures are appropriate for them does not at all justify government interfering to impose such procedures on all of business.

Update: Corrected a typo in the third paragraph: Government intrusion isn’t just not needed….  <sigh>