#RaiseTheWage: Seattle businesses push back against minimum wage increase

July 6, 2014
"But at least we won the election! Obama!!"

“But at least we raised the minimum wage!”

Rick Moran at PJMedia has an article up about an effort on the part of Seattle business owners to get a measure on the ballot that would roll back the city’s recently passed $15 per hour minimum wage to a more “reasonable” $12.50. You can go there to get the details (there are accusations of fraud in the petitions to get the measure on the ballot), but here is a portion in which a Seattle business owner describes the very real impact raising the minimum wage has on his and other businesses:

That favorite coffee shop that you go to? That great neighborhood restaurant? That store where you buy your books, pet food, art supplies, or clothes? Each of those businesses survives on around a 5 percent net profit margin. That means that at the end of the year, after all the expenses—the payroll, the supplies, the inventory, insurance, rent, etc.—we all will end up with only about 5 percent income in our pockets if we’re doing a half-decent job. Maybe a bit more, maybe a bit less—but you get the idea. This does not leave a small local business with much room to absorb even a small increase in costs, much less the 60 percent increase demanded by the well-meaning but ill-researched and biased reporters and neighbors involved in this discussion.

Here are some more boring facts:

Payroll is approximately 30 percent of my entire costs at Liberty, the bar I own (the average in this business seems to be 30 to 35 percent). If the minimum wage goes up to $12.50 an hour (a reasonable middle ground some have proposed), that would be an increase of 34 percent, which means just to stay even I’d have to raise prices 10 percent across the board—the labor’s percentage increase in total cost to operate Liberty.

If the minimum wage goes to $15 an hour, I’d have to raise my contribution to payroll by 18 percent. So my costs would have to rise by no less than 18 percent, just for payroll—and that’s before my vendors’ increases in costs have to be considered, which I believe will be around another 5 percent, and that’s before Liberty adds any profit.

So it’s not impossible to imagine that costs for business like mine in Seattle will go up by no less than 20 percent.

Those increases are way more than my income. Again, my profit is around 5 percent. And it’s not just me, that’s across the board—for restaurants, for bars, for clothing stores, for pet stores, for art supply stores—many of whom have set costs and are competing with online retail. This makes it very difficult for them to adjust their purchasing.

So, what are this business owner’s options? That’s his problem, not the Seattle city council’s.

Thomas Sowell has often observed that politicians almost never feel the economic consequences of the decisions they force on the rest of us. While they’re buying their way to reelection by handing out goodies and making themselves feel good by supposedly “fighting for the people,” someone else has to pay the cost — in this case, the businessman who takes less profit, the worker who gets fewer hours, or the consumer who pays higher prices.

I left a comment to Moran’s post and I want to share part of it here. It’s anecdotal, but I think it illustrates the very real effects of politicians thinking they can ignore the laws of economics:

A friend supervises minimum wage, hourly employees in an educational setting. Our minimum wage [in California] has just gone up to $9 per hour. She has told me that she knows for a fact her budget for hiring will not increase, so she has to cut employee hours and, perhaps, eliminate a couple of jobs. Now, someone explain to me again how this increase actually helped these workers? But it sure made the pols in Sacramento feel good about themselves.

Those employees are student workers, often from minority groups, who work to help pay their way through school. And they are very real victims of progressives’ “good intentions.”

(Crossposted at Sister Toldjah)


It begins: SeaTac businesses add “living wage surcharge” to cover minimum wage

June 6, 2014

When discussing Seattle’s new, progressive –FAIR!!– $15 per hour minimum wage, I wrote that business owners had just a few choices in response:

Critics, on the other hand (and including your humble correspondent), argue that the laws of economics cannot be repealed by legislative fiat: raise the cost of labor, and businesses will be faced with a choice from among four options — pass the costs on to the consumer; reduce labor costs by cutting hours or whole jobs; eat the costs and accept lower profits; or cease doing business in that jurisdiction, either by moving or closing shop. 

Having seen some businesses hold off on hiring, while others moved out of Seattle, we now have an example of another option: pass the cost along to the consumer:

And just look at that sales tax, too: 10.9%. Add the “living wage charge” and…

Yep. This is going to be a very interesting experiment.

via Twitchy

UPDATE: Just had it pointed out to me that SeaTac is not Seattle. My mistake; I’m not that familiar with Washington. Still, it can’t be all that long before Seattle itself sees these “living wage surcharges.” Also fixed the headline.

via:

(Crossposted at Sister Toldjah)


Seattle approves $15 minimum wage, higher unemployment

June 3, 2014
x

Seattle minimum wage proponent

I wrote about this last week, when it was still just a proposal, noting how some businesses were already slowing hiring and moving out of the city, and how even progressives were coming to have second thoughts.

Well, they did it:

Seattle’s city council on Monday unanimously approved an increase in the city’s minimum wage to $15 an hour, making it the nation’s highest by far.

The increase was formally proposed by Seattle Mayor Ed Murray, and his spokesman said he intends to sign the ordinance on Tuesday.

Washington already has the nation’s highest state-level minimum wage, at $9.32. That rate also applies to the city.

The current federal minimum wage is $7.25, and Democrats in Congress have been pushing for a gradual increase to $10.10, but so far to little effect.

The increase to $15 in Seattle will take place over several years based on a scale that considers the size of and benefits offered by an employer. It will apply first to many large businesses in 2017 and then to all businesses by 2021.

The first increase, on April 1, 2015, brings the minimum wage to $10 for some businesses and $11 for others.

While the law phases in increases starting only with “large businesses,” that designation includes franchises. In other words, if you’re a franchisee with only a couple of Taco Bells, you’re still considered a large employer because you’re part of a large chain; even though your revenue only comes from two locations, you’re still on the hook for $15 per hour starting in 2017. You’re welcome.

This is going to be a good experiment (and, dare I say it? A “teachable moment?”) for several reasons. Advocates of raising the wage say it’s only fair, that minimum wage earners aren’t paid enough to live on, and that the costs to society will be minimal as businesses adjust. And there is some little evidence for the latter, as we have indeed learned to live with the costs previous minimum wage increases. (Whether those wage increases have been worth the costs, however, is another argument for another time.) Advocates in Seattle argue that raising the wage will help around 100,000 people.

Critics, on the other hand (and including your humble correspondent), argue that the laws of economics cannot be repealed by legislative fiat: raise the cost of labor, and businesses will be faced with a choice from among four options — pass the costs on to the consumer; reduce labor costs by cutting hours or whole jobs; eat the costs and accept lower profits; or cease doing business in that jurisdiction, either by moving or closing shop. We’ve already seen in the Seattle case that some businesses are moving to nearby towns that have not raised their wage. And, here in California, where the wage was recently raised to $9 per our and there is a proposal to raise it statewide to $13, some businesses are closing, choosing to put their capital to work where they can get a better return on investment. In each case, these are jobs lost.

Critics also maintain that raising the cost of labor gradually prices out the unskilled, such as teens looking for their first jobs, where they can acquire valuable skills and habits for later, better-paying work. A very interesting piece at AEI (h/t Andrew Garland in the Sister Toldjah comments section) argues for this very point by examining the effects on teen hiring as the minimum wage rose 41% between 2007 and 2009:

And that’s exactly what happened when the minimum wage rose by 41% between 2007 and 2009 – it had a disastrous effect on teenagers. The jobless rate for 16-19 year olds increased by ten percentage points, from about 16% in 2007 to more than 26% in 2009.  Of course, the overall US jobless rate was increasing at the same time, from about 5% to 10%. Therefore, the graph attempts to better isolate the effects of the minimum wage increases between 2007 and 2009 on teenagers by plotting the difference between the teenage jobless rate and the overall jobless rate, i.e. “excess teen unemployment,” and the minimum wage.

During the 2002-2007 period when the minimum wage was $5.15 per hour, teenage unemployment exceeded the national jobless rate by about 11% on average. Each of the three minimum wage increases was accompanied by a 2 percentage point increase in the amount that the teenage jobless rate exceeded the overall rate, from 11 to 13% after the 2007 increase from $5.15 to $5.85 per hour, from 13% to 15% following the second hike to $6.55 per hour, and from 15% to 17% following the last increase to $7.25. The 17.5% “excess teen unemployment” in October 2009 was the highest on record, going back to at least 1972, and was almost 5 percent higher than the peak teen jobless rate gap following the last recession (12.7% in June 2003).

Bottom Line: Artificially raising wages for unskilled workers reduces the demand for those workers at the same time that it increases the number of unskilled workers looking for work, which results in an excess supply of unskilled workers. Period. And another term for an “excess supply of unskilled workers” is an “increase in the teenage jobless rate.”

It will be interesting and edifying how Seattle’s experiment in progressive labor law plays out. I suspect it won’t have nearly the benefit that advocates like Seattle Mayor Murray or California State Senator Leno predict.

And it’s a shame others have to suffer for their hubris.

RELATED: This Center for Freedom and Prosperity video provides a good overview of why minimum wage laws are job killers.

(Crossposted at Sister Toldjah)


Seattle: $15 minimum wage already costing jobs

May 28, 2014
"But at least we won the election! Obama!!"

“But at least we raised the minimum wage!”

And it’s not even in effect, yet.

But, it’s not surprising. Business managers have to plan for the future, and a looming huge increase in their labor cost will force many to rethink how they do business in Seattle, if they continue to do business there at all. Writing for the free-market Washington Policy Center, Erin Shannon reports on how small businesses are planning to cut back on hiring, delaying expansion, or moving out of the city to deal with the new wage law. Most striking, though, is the account of one business owner who supported the law, but now thinks she may have made a mistake:

One of those business owners is a well-known and active supporter of “progressive” labor policies, including a higher minimum wage. Jody Hall, owner of Cupcake Royale, initially supported a $15 minimum wage. But now Hall admits the proposed policy is, “keeping me up at night like nothing ever has.”

While Hall has serious concerns with Mayor Ed Murray’s plan to phase in a $15 minimum wage over seven years with a temporary tip credit, her biggest fear is if voters approve the radical charter amendment sponsored by the group 15Now. The charter amendment would force all large employers to begin paying $15 in 2015, and would give small business owners just three years to acclimate to the high wage. And the 15Now proposal would not allow for any tip credit.

If the charter amendment passes, Hall says she would be forced to close half of her seven locations and lay off 50 of her 100 workers.

But beyond the differences between Mayor Murray’s proposal or the more aggressive 15Now proposal, Hall says she now has “serious second thoughts” about a $15 minimum wage in general, especially since Seattle would be “going it alone” with a wage that is significantly higher than any other minimum wage in the nation.

Hall’s second thoughts about a $15 minimum wage have led to second thoughts about expanding her business. She was set to open a new business in Seattle this year, but has tabled the plan until after voters have their say on the charter amendment in the November election. Hall says if she considers any new locations before then, they will be outside the city limits.

In other words, when progressivism meets economic reality, guess which wins? You would think a successful businesswoman like Hall would have seen this coming. Maybe she thought she’d get a waiver from Obama.

And pay special attention to her comment about “going it alone.” As minimum wage increases are applied and then have the same effect in various places, there will be more and more calls from the fairness crowd to apply these laws statewide and even nationwide, to make sure business owners can’t just move to a friendlier jurisdiction, which would be “unfair.” The minimum wage thus becomes a wedge issue in an attack on local control, federalism, and jurisdictional competition, things progressive just hate, because their favored policies usually fail.

Meanwhile, I want to thank Seattle for volunteering to be a case study on the foolishness of government control of wages.

via Adrian Moore

(Crossposted at Sister Toldjah)


#Obamacare: more proof that liberals don’t “get” economics

April 22, 2014
x

Obamacare insurance commissioner

Sometimes I think one of the greatest acts of charity I could perform would be to buy progressives each a copy of Thomas Sowell’s “Basic Economics: A Common Sense Guide to the Economy,” because they clearly were not paying attention in high school or college:

The practice of offering relatively inexpensive health plans with bare-bones provider networks has created tension between making health care affordable and keeping it accessible. It’s set to come to a head this week in Olympia.

The growth of “narrow networks” in Washington comes as the Affordable Care Act limits the ability of insurance companies to control their costs. That’s made it harder to offer plans at a range of prices — something the companies want to do as they compete for comparison shoppers on the health exchanges.

Many companies figured out they could sell cheaper plans that offer consumers fewer choices of where to get care. That caught some consumers, and Washington’s insurance commissioner, by surprise.

Commissioner Mike Kreidler says companies need to justify those narrow networks.

Mr. Kreidler wants insurance companies to prove they need to narrow their networks; after all, under Obamacare, they’re not really allowed to run their own businesses anymore. So he’s proposing new rules, regulations, and reporting requirements that have even the people running Washington’s exchange screaming that this will increase costs to the consumer and hinder companies from providing effective service. Kreidler, however, like many other fans of bureaucracy, just doesn’t get it:

Kreidler says he doesn’t believe prices will increase. He sees himself as walking a fine line, but with his compass oriented decidedly toward the consumer.

“Oriented” like a missile aimed straight at their wallets, he means.

Moe Lane provides a succinct explanation of why, to put it kindly, Mr. Kreidler’s belief is… “ignorant:”

There are three major elements to healthcare plan decisions:

  • Cost: How much does it cost per month or year, just to have it?
  • Deductible: How much does the consumer have to kick in for any given procedure?
  • Network: Who is willing to take you on as a patient, if you use that plan?

With me so far?  Good.  What Obamacare does is turn all of this into a zero-sum game: it mandates an across-the-board, let’s-slap-something-together, we-don’t-care-about-your-stinking-special-circumstances product and doesn’t really care how insurers and consumers cope with the situation.  So the insurers are left with a quandary: if they want to keep the networks intact, thanks to the various mandated procedures and general bureaucratic detritus either the total cost will go up, individual plan deductibles will, or both. And the same is true for the other two categories: push one down and the other two rise. All the good intentions in the world will not alter this calculation.

To use another example, the three legs of Obamacare mentioned above are like a balloon: squeeze one portion, and another must expand. It’s a law of physics, just as the cost to do business and the consequent price of insurance policies are subject to immutable laws of economics.

But technocrats like Mike Kreidler think they can control complex economies with a flourish of their pen, without there being any consequences for others. Perhaps along with a good book on economics, he should learn a lesson in humility and study the parable of King Canute.

Meanwhile, Washington voters should think of Mr. Kreidler and his “compass” as their premiums go up. They elected him with 58% of the vote in 2012; 2016 would be a good time to undo that mistake.

(Crossposted at Sister Toldjah)


Western Washington University: “Help us be less White!”

April 16, 2014

clueless1

Here’s a thought experiment for you: Imagine a university that, through sheer chance, wound up with a mostly Black or Asian student body. Concerned faculty meet, their brows furrowed gravely. What can be done to fix this problem?

And then, a solution! Solicit advice from students and alumni on how the university can make itself  “more White.”

And now imagine the national furor that would erupt.

That’s what should happen to Western Washington University in Bellingham, which is worried that it is too White:

Western Washington University sent a questionnaire to students asking them for advice on how the administration could succeed at making sure that in future years, “we are not as white as we are today.”

The question notes that WWU’s racial make up does not perfectly reflect the nation at large, and asks students to consider strategies that other universities have used to focus on skin color as the paramount indicator of a student-applicant’s worth.

The president of WWU has stated that his explicit goal is to reduce the white population on campus, according to Campus Reform.

“I’ve said before and I’ll say it again, that we as a faculty and staff and student body, as an administration, if we 10 years from now are as white as we are today, we will have failed as a university,” said Bruce Shepard, president of WWU, in a 2012 address.

Maybe I’m just a parochial, knuckle-dragging, mouth-breathing, supremacist White guy from a middle-class, suburban background, and so I’m too reactionary and by definition racist to comprehend the enlightened attitudes of our academic betters. Evidently I’m too stupid to see that nothing is more important than skin color. And I’m just crazy enough to still take seriously something once said by another noted reactionary:

I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character.

WWU President Bruce Shepard probably would like to tell Dr. King he had it backwards: he should have wanted his children judged not for the content of their character, for then they could have earned admittance to Western Washington University based solely on the color of their skin.

This is progressive racialist nonsense laid bare. Instead of looking for real diversity, such as an intellectual diversity ranging from Right to Left and a cultural diversity not inextricably tied to skin tone, the academic Left divides society into group identities, to which everyone is assigned regardless of individual belief (1). You can bet WWU’s struggle to be less White is informed by Critical Race Theory and is meant to battle the Leftist scapegoats, structural racism and White privilege.

The only factors that should ever be considered in admissions decisions are academic performance and, if you want to give aid, economic need. One of the few things California has done right in recent years is to ban “affirmative action” in college admissions, though that battle is never truly over.

If I were a student a WWU, I’d transfer. I wouldn’t want to be associated with such a race-obsessed institution. If I were a donor, I’d cancel my donation. And if I were a citizen of Washington, I’d demand to know why the state legislature is funding an institution that not only discriminates based on race, in contradiction to everything this nation is supposed to stand for, but asks for advice on how to do it better!

This is just bunk. (3)

Footnote:
(1) An example I came across years ago: a man of Black African ancestry, born in Francophone Africa but raised in France, identifies wholly with France — French culture, French history, the French language. His heart stirs when he sings La Marsellaise (2) or sees La Tricolore. Now, is he “French,” or (in American racial-cultural terms) “Black?” The gentleman himself would tell you he is French, and proudly so. The racialist, on the other hand, sees only the melanin in his skin. The rest just makes him a self-hating victim of “cultural imperialism.”
(2) Whatever else I might say about France, they do have the best national anthem on the planet.
(3) I’m sure you know what word I really meant. But, this is a family show.

(Crossposted at Sister Toldjah)


#Obamacare: people who think they have coverage get hit with massive bills

March 23, 2014
"Obamacare has arrived"

“Obamacare has arrived”

Correct me if I’m wrong, but wasn’t our new, glorious, designed by unicorns healthcare system supposed to prevent things like this? If you signed up for coverage and made your payments, you weren’t supposed to get crushed by the ensuing medical bills, right? All those horror stories from the dark days before Obamacare the Affordable Affordable Affordable Affordable Affordable Care Act (1) of people with unbearable financial burdens? Gone. Banished forever. Not gonna happen ever again in our new progressive paradise.

Just ask Alex Szablya of Washington:

Alex Szablya just wants the best health care she can get for her children. So she got a gold plan, the highest level possible with the Washington Health Benefit Exchange. She picked a plan with Lifewise, an affiliate of Premera Blue Cross.

In early March, her 16-year old daughter had a medical emergency. Alex drove her to the nearest hospital, which was Seattle Children’s. Alex says doctors there felt her daughter’s situation was so dire she needed to be admitted to the hospital immediately. She was there for nine days.

Then came news that her stay, which involved specialized mental health care for adolescents, was going to cost $36,000 and her insurance would only pay for half because Seattle Children’s was considered on out-of-network facility.

She thought by going for the highest premium PPO gold level coverage offered the state exchange, a majority of the bill would have been covered.

“I’m paying a premium for that and I’m willing to pay that premium, but I expect to get services that are not so limited by the insurance companies,” she said.

Premera told her to take her daughter to facilities either in Yakima or Bremerton, the one a three hour drive and the other two hours away via ferry, while Seattle Children’s was just 15 minutes away. Now, where would you go with your child in an emergency? Remember that she bought a gold plan. Among the many problems we’ve heard about regarding the exchanges is that is can be hard to tell if a particular doctor or hospital is included. Ms. Szablya might well have looked at the online offerings and just assumed that, of course, nearby Seattle Children’s would be included. When you have an emergency, especially one involving your child, you’re not going to stop, call your insurance agent, and ask if a particular doctor or hospital is part of the network. (via Katnandu)

An even worse bill awaited Larry Basich of Las Vegas, who thought he had done everything right, but, after undergoing triple bypass surgery, found himself on the hook for over $400,000:

The hospital bills are hitting Larry Basich’s mailbox.

That would be OK if Basich had health insurance. But he doesn’t.

Thing is, he should be covered. Basich, 62, bought a plan through the state’s Nevada Health Link insurance exchange in the fall. He’s been paying monthly premiums since November.

Yet the Las Vegan is stranded in a no-man’s-land where no carrier claims him, and his tab is mounting: Basich owes $407,000 for care received in January and February, when his policy was supposed to be in effect. Instead, he’s covered only for March and beyond.

Basich has begged for weeks for help from the exchange and its contractor, Xerox. But Basich’s insurance broker said Xerox seems more interested in lawyering up and covering its hide than in working out Basich’s problems. Nor is Basich the only client facing plan-selection errors through the exchange, she added.

Xerox, meanwhile, said it’s working every day to fix Basich’s problem, and its legal counsel is routine.

In the rollout of the Affordable Care Act and its insurance exchanges, you can find a success story for every failure (2). But Basich’s case is extreme.

Be sure to read the whole thing. Basich worked for weeks to make sure he had coverage, both using the crappy online exchange and telephone help. He’s dealt with Xerox and even gotten Governor Sandoval’s office involved. His case is so bad that Harry Reid won’t even call him a liar; his office is instead trying to help.

The problem in this case is the web site, itself. It looks like Xerox did almost as good a job with it as Oracle did with Oregon’s exchange. While payments have been deducted from Basich’s bank account, UnitedHealthCare has no record of his coverage beginning when he was told it would begin, the exchange says he signed up with a different company (even though he has proof otherwise), and that company has no record of him and doesn’t want to be stuck with the bill.

Before this ever gets worked out, the stress may drive Mr. Basich to another heart attack.

In both cases, the the articles miss the mark when attributing blame. By limiting its networks, Premera is doing what any company would when faced with government mandates that impose highers costs: find ways to control them. In Larry Basich’s situation, Xerox deserves all the blame that can be heaped on it, but they’re not the root.

The source of the problem isn’t corporate greed or incompetence: it’s Obamacare, itself. All these problems people are experiencing are due to the top-down mandates that are the essence of the Affordable Care Act. A bunch of legislators and bureaucrats trying to control by law something as complex as the health care system of the United States was bound to fail. And that ongoing, rolling disaster is causing real-life misery for Americans all over the nation.

It has to go.

Footnote:
(1) There apparently are five “affordables” in the bills name. Just ask Nancy Pelosi.
(2) Why do I think that last sentence was meant to deflect the ire of Harry Reid? “Sure there are success stories, too! Just trust us!”

(Crossposted at Sister Toldjah)


Follow

Get every new post delivered to your Inbox.

Join 13,395 other followers