Fallout from higher wages

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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 7:09 pm

You started this thread as a lament that increased minimum wage so it's weird that the actual result is increased employment at least in the short term.
I haven't lamented about minimum wage affecting employment, so it's weird that you would think it's weird.

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Re: Fallout from higher wages

Post by eric84 » Mon Jan 22, 2018 7:11 pm

It does seem strange that a place that is packed couldn't simply raise prices on their entrees.
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 7:12 pm

Another strategy that might work would be to add in the increased costs (so the $8 bacon and eggs would now be $12), market yourself as the longtime, local, 'authentic' diner to all the new tech residents who will pay $12 for bacon and eggs, and extend your operating hours.
I'm not sure why they didn't go for longer hours, certainly there are other diners in the city that operate 24 hours a day. I don't think the marketing thing would work for them. They're located decently far away from where any new tech residents would be settling and the newest arrivals don't seem to want to drive. Anyway, they are already somewhat covered by the marketing of their chain - this is an Original Pancake House, not a Seattle original or anything. I think they'd been at that location for twenty years or so.

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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 7:14 pm

eric84 wrote:
Mon Jan 22, 2018 7:11 pm
It does seem strange that a place that is packed couldn't simply raise prices on their entrees.
They are part of a chain, which makes it harder (impossible?) to raise prices, and undoubtedly - based on the clientele - they would have problems increasing prices. A lot of older people and young families. I do wish they would have tried though, the city hardly needs another bistro.

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Re: Fallout from higher wages

Post by eric84 » Mon Jan 22, 2018 7:27 pm

Oh, and here I thought you were lamenting the loss of old style family-owned restaurants. If it's a franchise, yes, their margins are probably thin especially if they can't raise prices. Probably the best move for them.
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Re: Fallout from higher wages

Post by ASQ » Mon Jan 22, 2018 7:32 pm

How much of it is due to labor shortage? I haven't seen this many rerail help wanted signs since the housing boom. It must be horrible and expensive for businesses not to be able to hire non-legals to exploit.

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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 7:43 pm

ASQ wrote:
Mon Jan 22, 2018 7:32 pm
How much of it is due to labor shortage? I haven't seen this many rerail help wanted signs since the housing boom. It must be horrible and expensive for businesses not to be able to hire non-legals to exploit.
I don't think it has anything to do with a labor shortage. Unemployment is low in the city (3.7%), but the high minimum wage is attractive for workers on the lower end. Housing prices... not so much.

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Re: Fallout from higher wages

Post by cowtown » Mon Jan 22, 2018 8:21 pm

it's wanting to sell booze

so they didn't before and now they have a license and the hood is starting to come up

I still don't buy the poor act, dude is still going to be running a restaurant - if anything he kicked out the poor people

wouldn't the cheap eats crowd have more money to spend on pancakes too?
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 8:26 pm

I don't get why people find it so hard to believe that a breakfast only diner might struggle when their labor costs increase 50%.

It will reopen in a few months and we'll see how well it does.

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Re: Fallout from higher wages

Post by cowtown » Mon Jan 22, 2018 8:50 pm

because that's not how it works in the restaurant biz, it doesn't add up as presented
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 8:57 pm

Which part doesn’t add up?

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Re: Fallout from higher wages

Post by cowtown » Mon Jan 22, 2018 9:20 pm

The reason presented for closing a pancake house and opening a bistro – there has to be far many other factors than labor cost otherwise, you'd just shut down and sell

the bistro will bomb
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 9:31 pm

Why sell? You wait a few years and that real estate will be worth a lot more than it is today. In any case, it's not surprising at all to me that the minimum wage increase would make a business like this one unviable and it's hardly the only business so affected.

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Re: Fallout from higher wages

Post by guruwil » Mon Jan 22, 2018 9:42 pm

The only way you can serve a massive breakfast in a diner for $10 is through very low costs and wages is probably the biggest one. It seems to me that if the wages bill goes up then the prices go up, if the same factor is effecting everyone in the business then it should still be competitive. Opening a bistro may mean they have the ability to make more margin by charging higher prices but customers are going to expect a higher standard for that and that costs money to achieve and the wage base will still be there.

I don’t believe the minimum wage story as the reason for closure. The owner is betting they can improve their margin by going upscale, it will all depend on demographics, competition and the product as to whether or not they are on a winner or not. But If they were profitable before, I’m betting that making the $10 breakfast $12 or $13 would keep them competitive and profitable.
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 9:45 pm

But If they were profitable before, I’m betting that making the $10 breakfast $12 or $13 would keep them competitive and profitable.
They are a franchise and probably have limited ability to change pricing. Also, part of the reason their clientele goes there is because of cheaper prices.

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Re: Fallout from higher wages

Post by section8 » Mon Jan 22, 2018 9:58 pm

I'd be surprised if their hands are tied regarding prices, even if they are a franchise. I would expect the national leadership to account for the cost increases.

Going bistro is a terrible idea. The US is awash in mediocre gastropubs serving "New American" fare and IPAs. If they aren't inventive enough to make a diner chain work, then they will have a lot more trouble figuring out a set up with many more variables.
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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 10:06 pm

Well I think part of it is they probably know that a place like that will not get the same clientele if they raise prices, they'll probably just lose business. Still, I wish they'd tried.

I was wrong about it being a bistro, actually. It looks like they are going to reopen with the name "Crown Hill Broiler". Broiler is worse than bistro right?

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Re: Fallout from higher wages

Post by guruwil » Mon Jan 22, 2018 10:12 pm

muthafunky wrote:
Mon Jan 22, 2018 9:45 pm
But If they were profitable before, I’m betting that making the $10 breakfast $12 or $13 would keep them competitive and profitable.
They are a franchise and probably have limited ability to change pricing. Also, part of the reason their clientele goes there is because of cheaper prices.
Well if the franchise operator won’t let them adjust for wages then I think the problem is the franchise, so again my guess would be that the owner wants out of the franchise which may be a good call again ai suspect there are more factors than just the minimum wage rise. I know a few people that own franchises and pretty much all of them will say they are good to get you started but once you are up and running and experienced they just hold you back but often it’s very tough to get out of the contracts.
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Re: Fallout from higher wages

Post by cowtown » Mon Jan 22, 2018 10:16 pm

oh, a franchise and now a broiler

um, yeah, lot going on there with dude

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Re: Fallout from higher wages

Post by muthafunky » Mon Jan 22, 2018 10:21 pm

So in summary we think a 50% increase in wages was nothing the breakfast only cheapish franchise could deal with and the staff is lying about why they closed?

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Re: Fallout from higher wages

Post by guruwil » Mon Jan 22, 2018 10:24 pm

Wages should be about 30% of the costs of a diner, less if they limit table Service. So if the minimum wage goes up by 50% then the original $3 of Costa should go up by about $1.50 on a $10 breakfast, make it $2.00 to account for some on costs from suppliers.

I guess some people are so close to the line that $2 makes the difference between affordable and not affordable but my guess is that for most people $2 won’t keep them away.
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Re: Fallout from higher wages

Post by guruwil » Mon Jan 22, 2018 10:26 pm

muthafunky wrote:
Mon Jan 22, 2018 10:21 pm
So in summary we think a 50% increase in wages was nothing the breakfast only cheapish franchise could deal with and the staff is lying about why they closed?
It may be a f@cror in his decision to get out of the franchise but I don’t buy it that it is the primary cause.
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Re: Fallout from higher wages

Post by eric84 » Mon Jan 22, 2018 10:30 pm

Some franchises are more restrictive than others so it’s possible he couldn’t raise prices. You can’t if you own a Tim Hortons franchise.
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Re: Fallout from higher wages

Post by Godjira » Mon Jan 22, 2018 11:06 pm

One problem could be from raising the salary of the wait staff dramatically. In NJ, they make half of minimum wage.

If they could do away with gratuities, then a price hike would be less noticable.
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Re: Fallout from higher wages

Post by matt_melb » Tue Jan 23, 2018 2:26 am

So they have a franchise contract which requires fixed prices that are set on the basis of overall low national wages, even though they operate in a state that has higher wages.

I’m seeing he franchise contract as the primary problem here, not the wages.

If you’re in a place that’s moving from low wages to living wages for everyone, then ‘unfortunately’ you’ll probably find it harder to get monkeys to perform personal services for you for peanuts. You’ll become a country more like, say, NZ, where people think they should either pay someone what it’s worth to make their breakfast, or do it themselves.

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 23, 2018 2:56 am

We already pay waiters a lot more than places like New Zealand. Have for years.

I don’t think anyone knows the franchise pricing rules for the Original Pancake House, so I don’t think you should draw too many conclusions. There are chain restaurants in Seattle that charge the same prices as they do in cheap rural areas though fewer and fewer every year. A shame that means we can’t have old school diners anymore.

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Re: Fallout from higher wages

Post by section8 » Tue Jan 23, 2018 3:06 am

I'll bet I could make an old school diner work in the most tech-broey part of Seattle.

In the spirit of this thread I went and had lunch at an old school greasy spoon. It was Terrible.
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Re: Fallout from higher wages

Post by eric84 » Tue Jan 23, 2018 3:14 am

Can an original pancake house franchise be considered An old school diner?
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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 23, 2018 3:21 am

eric84 wrote:
Tue Jan 23, 2018 3:14 am
Can an original pancake house franchise be considered An old school diner?
Breakfast only diner maybe. Why not?

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 23, 2018 3:23 am

section8 wrote:
Tue Jan 23, 2018 3:06 am
I'll bet I could make an old school diner work in the most tech-broey part of Seattle.

In the spirit of this thread I went and had lunch at an old school greasy spoon. It was Terrible.
I just don’t understand why the breakfast places have to go all hipster with their menus. Just offer the same sorts of things Denny’s does but at twice the price.

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Re: Fallout from higher wages

Post by eric84 » Tue Jan 23, 2018 3:23 am

There’s nothing terribly authentic about a franchise resto experience if I can also have the same breakfast you can.
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Re: Fallout from higher wages

Post by section8 » Tue Jan 23, 2018 3:26 am

I would go with a classic diner menu (including some specials that have mostly disappeared), but make it so it wasn't shit, and charge just 50% more than Denny's.
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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 23, 2018 3:28 am

eric84 wrote:
Tue Jan 23, 2018 3:23 am
There’s nothing terribly authentic about a franchise resto experience if I can also have the same breakfast you can.
Weird

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 23, 2018 3:29 am

section8 wrote:
Tue Jan 23, 2018 3:26 am
I would go with a classic diner menu (including some specials that have mostly disappeared), but make it so it wasn't shit, and charge just 50% more than Denny's.
I shall provide you with seed money provided you open within walking distance of my workplace.

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Re: Fallout from higher wages

Post by Godjira » Tue Jan 23, 2018 4:13 am

What they should do is have a strict no tip policy, and then, add a symbolic 5% gratuity to the bill along with price increases. That would probably cover the higher costs while giving servers a salary similar to what they made with tips before. I bet you anything that most made a lot more than minimum wage on tips alone before the higher minimum wage.
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Re: Fallout from higher wages

Post by Electrolyte » Sat Jan 27, 2018 6:06 pm

A panel of top economists asked about large increases in the minimum wage is mixed about the impact on employment.

http://www.igmchicago.org/surveys/15-minimum-wage

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 30, 2018 5:03 pm

Just saw an article saying that Seattle hit a new high in cost of living and is now the 6th most expensive place in the US to live. I guess it's not surprise that a place serving cheap breakfasts can't survive.

https://www.seattletimes.com/seattle-ne ... t-housing/

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Re: Fallout from higher wages

Post by cowtown » Tue Jan 30, 2018 5:15 pm

muthafunky wrote:
Tue Jan 30, 2018 5:03 pm
Just saw an article saying that Seattle hit a new high in cost of living and is now the 6th most expensive place in the US to live. I guess it's not surprise that a place serving cheap breakfasts can't survive.

Cheap is relative

McDonalds and other cheap spots are doing fine there

Again, I’m guessing it’s an entire host of factors and one of those is the owner’s ambition to try something different. The build out, marketing, hiring new (more expensive) staff for flipping a new restaurant , plus that notorious difficult first year tells me it’s more than just wages
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Re: Fallout from higher wages

Post by coffeeguy » Tue Jan 30, 2018 5:17 pm

Could be that the dude didn't figure he could raise prices to compensate for the min wage increase without losing customers, but to me smells more like he took advantage of changing demographics to upgrade to selling hipter breakfasts and brunches to loaded software developers who set their own salaries.... Cost of ingredients not that different, but the check is probably double or...

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 30, 2018 5:22 pm

Again, I’m guessing it’s an entire host of factors and one of those is the owner’s ambition to try something different.
Maybe, but regardless there sure aren't many cheap breakfast diners in the city anymore. There used to be a lot.

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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 30, 2018 5:24 pm

but to me smells more like he took advantage of changing demographics to upgrade to selling hipter breakfasts and brunches to loaded software developers who set their own salaries
He's in the wrong place for that then. An older, poorer neighborhood without any foot traffic. Maybe in 10 years if Ballard expands for enough north, but for now you don't see any hipsters up there.

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Re: Fallout from higher wages

Post by eric84 » Tue Jan 30, 2018 5:28 pm

https://civicskunk.works/new-uw-report- ... 6bb53dcab8

Here's a UW study on Seattle minimum wage increases. Conclusion?

We do not find compelling evidence that the minimum wage has caused significant increases in business failure rates. Moreover, if there has been any increase in business closings caused by the Minimum Wage Ordinance, it has been more than offset by an increase in business openings.
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Re: Fallout from higher wages

Post by coffeeguy » Tue Jan 30, 2018 5:49 pm

eric84 wrote:
Tue Jan 30, 2018 5:28 pm
https://civicskunk.works/new-uw-report- ... 6bb53dcab8

Here's a UW study on Seattle minimum wage increases. Conclusion?

We do not find compelling evidence that the minimum wage has caused significant increases in business failure rates. Moreover, if there has been any increase in business closings caused by the Minimum Wage Ordinance, it has been more than offset by an increase in business openings.
Studies aside, I can tell you from personal experience that large raises in the min wage do have an impact... The money has to come from somewhere - a business owner can raise prices if they are able to and pass the wage increase on to their customers, they can cut expenses elsewhere, or they can eat the increase in the form of lost profitability and potentially future investment. It is one of the 3.

At the business that I am a minority owner, our wage bill increased over $200K with the recent large increase in min wage in Ontario. We had very few people making min, but it is the relative salaries that we had to bump up - if a entrance level person with limited skills is making $14/hour, you cant pay $14.50 to a skilled worker with 10 years of experience. We had to bump up over 50% of our workforce. We don't have alot of flexibility of raising prices - we compete in north American/world market to a limited extent, we might get a couple of percentage points of increase. We've dealt with this by trimming our workforce by 5% (we let 6 people go) and we'll see a hit on profitability that will directly hit my wallet.

If Ontario had mandated a smaller more gradual increase, we probably could have managed it easier, but 30% all at once has made it pretty difficult.

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Re: Fallout from higher wages

Post by eric84 » Tue Jan 30, 2018 6:10 pm

Well, these are somewhat different economies so there will be somewhat different experiences and will also from sector to sector.
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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 30, 2018 6:15 pm

Here's a UW study on Seattle minimum wage increases. Conclusion?
It's actually a series of reports and is ongoing, as it should be. Here is a newer report, with worse outcomes:

https://www.seattletimes.com/business/u ... ting-jobs/

Of course, such studies aren't looking at the effect on traditional inexpensive breakfast places. Maybe I should publish a paper.

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Re: Fallout from higher wages

Post by vanceen » Tue Jan 30, 2018 6:36 pm

Significant minimum wage increases are obviously going to cause some disruption, including price inflation and the failure of businesses with low price flexibility. To think otherwise is like buying a perpetual motion machine, studies notwithstanding.

On the other hand, the growing impoverishment of poorer working people is potentially an enormous social problem. Apart from minimum wage increases, how can we reverse the erosion in the rewards for low skilled labor?

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Re: Fallout from higher wages

Post by coffeeguy » Tue Jan 30, 2018 8:26 pm

vanceen wrote:
Tue Jan 30, 2018 6:36 pm
Significant minimum wage increases are obviously going to cause some disruption, including price inflation and the failure of businesses with low price flexibility. To think otherwise is like buying a perpetual motion machine, studies notwithstanding.

On the other hand, the growing impoverishment of poorer working people is potentially an enormous social problem. Apart from minimum wage increases, how can we reverse the erosion in the rewards for low skilled labor?
Well that's a really good question that I don't think has a simple answer. Or at least a no one loses answer. You can raise wages for low skilled labour through government wage supplements or regulation, but that causes inflation, or taxes capital and lowers investment. You can restrict completion through tariffs or protectionism, but that negatively impacts growth, and makes everyone 'poorer' by raising prices of goods and services. Or you try and provide training and a path forward for low skilled labour to upgrade and rise in the value chain, but knowing that a large segment will likely be left behind or not be able to make the transition.

Any of these are not easy policy decisions.

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Re: Fallout from higher wages

Post by cowtown » Tue Jan 30, 2018 9:47 pm

muthafunky wrote:
Tue Jan 30, 2018 5:22 pm
Again, I’m guessing it’s an entire host of factors and one of those is the owner’s ambition to try something different.
Maybe, but regardless there sure aren't many cheap breakfast diners in the city anymore. There used to be a lot.
Maybe not in you formerly cheap areas of the city but I’m guessing if you got out of your little bubble into the working class parts of the city, cheap eats abound. I don’t expect too many dinners in the Gold Coast either
New York and other hot metro area are experiencing restaurant deserts because they can’t pay the rent in certain areas. Urban mom and pop breakfast dinner all have to re-vamp or die, they need to be on trend after 50 years of slinging cans of hash and doing a Denny’s menu, food death


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Re: Fallout from higher wages

Post by muthafunky » Tue Jan 30, 2018 10:02 pm

Yet within a mile of where this place closed you have a dollar tree, value village, grocery outlet, handful of fast food restaurants, and all sorts of things you don’t see in the neighborhoods that have undergone development.

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Re: Fallout from higher wages

Post by flojin » Tue Jan 30, 2018 10:05 pm

I'm guessing you can get all the cheap pancakes you want in Oil City, PA.

New York City has closed a lot of diners lately too. San Francisco is a different city from when I lived there in the '90s.

You can't really blame gentrification on a minimum wage increase. The wage increase was the response to the gentrification, an attempt to make the city more liveable for people who serve pancakes for a living.

How far are people supposed to commute to serve a pancake? In NYC they commute for over an hour.
Lost Soul wrote:I have it on good authority that William Brennan, Maobama's CIA head, will be referred by the IG for criminal indictment.

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