As predicted, restaurants across Seattle are already shutting down.
Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurant across the city are making the financial decision to close shop. The Washington Policy Center writes that “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.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.”
What a surprise! Of course, it's not as though they weren't warned, but hey - it sure felt good at the time! Now, however, it's time to pay the tab: there go the jobs, and a lot of them. For the servers, making $9+ an hour plus tips, that $15 an hour minimum wage mandated by the city council translates into $0 an hour plus no tips. How cool is that? Aren't feel-good laws marvelous things?
Here's how it goes down: let's say you own a little restaurant in Seattle, and it brings in $700,000 a year. That's not bad, is it? Well, look again: since the average profit is 4% when all is said and done, that means that you, the owner, are taking home just south of $30,000 a year.
What that also means is that you're paying your servers more per year than you get to take home - and you don't get tips on top of that!
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine. As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.”
Of course, some restaurants will remain open; you just won't be able to afford to patronize them.