Jobless in Seattle? Not Yet, Anyway. Part 2


On Wednesday, I threw in my $0.02 about the controversy surrounding the increase in Seattle’s minimum wage. Unlike any of those who have been decrying the new law and its impact, I used some data to demonstrate the absence (as yet) of any ill effects. Specifically, I looked at restaurant permit issuance and found nothing out of the ordinary. Today, I’ll double down on Wednesday’s $0.02 with a bit more data and a bit of backstory.

Best I can tell, our story starts with a March 4 piece in Seattle Mag titled “Why Are So Many Seattle Restaurants Closing Lately?” There was no data that I could find in that piece and, as I mentioned in my previous post, buried in the story was this, with my emphasis added:

Though none of our local departing/transitioning restaurateurs who announced their plans last month have mentioned this as an issue*, another major factor affecting restaurant futures in our city is the impending minimum wage hike to $15 per hour.

Despite not a shred of actual proof that restaurants are feeling any ill effects from the minimum wage hike, the story took off in the conservative blogosphere and elsewhere. Here is just a sampling:

The Weekly Standard regurgitated the story:

However, there’s little doubt that the city’s heralded food scene is running scared.

Mark Perry jumped aboard over at AEI, citing the Washington Policy Center’s article “Seattle’s $15 wage law a factor in restaurant closings.”

Tim Worstall, who’s written about little else of late, also appeared to give a nod to the Washington Policy Center’s piece:

Restaurants are closing at higher than normal rates.

The NY Post weighed in:

According to the Washington Policy Center, it’s already having unintended consequences: namely, forcing restaurants to close.

Seattle magazine calls the minimum-wage hike a “major factor,” given that labor costs acccount for 36 percent of restaurant earnings.

Taking the Post’s comments in reverse order, I’ll note first the despicable way in which they took “major factor” out of context. See above for that phrase in its original context, and note that it was preceded by “none of our local departing/transitioning restaurateurs…” and was forward-looking (i.e. “restaurant futures”).

The Washington Policy Center’s piece would appear to be the one from which many others were spawned. It was published one week after the Seattle Mag piece, and had this opening line, with my emphasis added:

As the implementation date for Seattle’s strict $15 per hour minimum wage law approaches, the city is experiencing a rising trend in restaurant closures. 

You can see in that one line where Worstall and others got their hook. Certainly such a claim would be both supported by data and easily verifiable.

Curious about that claim, I contacted its author and asked him to share or point me to the data he used in coming to that conclusion. Unsurprisingly (at least to me), he said he didn’t have any. How then, I asked, could you make that claim? “I relied on the other sources I cited in the piece,” he replied. But, I countered, those have no data, either. “Well,” he responded, “if you’re looking for data you should contact the authors of the pieces to which I linked.” And this is journalism and policy-making in 2015? Data? We don’t need no stinkin’ data! We know what we know. I sometimes feel a tinge of embarrassment for people who operate this way. It passes very quickly, but still. I’ll vent my spleen about the state of journalism in another post at another time.

Because I didn’t want to waste my time talking to journalists who I knew had not researched the issue or had the data, I got it on my own, straight from the source. So let’s take a look.

Question: Is the city of Seattle experiencing a rising trend in restaurant closures?

Screen Shot 2015-04-09 at 7.04.59 PM

Let’s look at that another way, shall we. Behold the death of Seattle’s restaurant business:

Screen Shot 2015-04-09 at 7.06.00 PM

Now, let’s be clear here: It is conceivable that the trend of restaurants closing in Seattle is rising. However, if that is the case, the trend of restaurants opening in Seattle obviously must be rising even more, or the graph above would look a helluva lot different than it does. That said, I am quite comfortable claiming that the city is not, in fact, experiencing a rising trend in restaurant closures. And the data – the permits data from Wednesday and the food business counts above – prove it. So let’s get to the bottom line: There is no evidence (yet) that the increase in Seattle’s minimum wage – which was known almost a year ago and implemented earlier this month – is having any adverse effect on Seattle’s restaurant business. That is a data-driven conclusion. Everything else I’ve looked at on this issue was bullshit.

To those named above who should be ashamed but I’m sure are not, you’re all disgraceful, apparently lazy, and intellectually dishonest. Not that folks don’t know that, I suppose, but it does bear repeating occasionally. Any ethical outlet would retract its story with an apology and an explanation about how lazy their writers and editors are. I won’t hold my breath.

See another chronology of how the conservative echo chamber ran amok on this here.

I must give a huge shout-out here to Tony Cacallori in the City of Seattle’s Office of Economic and Financial Analysis. Dude, you totally rock. Neither piece I’ve written on this subject would have been possible without you, and I so appreciate your responsiveness and cooperation. You guys have an interesting experiment underway, and I’m happy to have spoken with you and discussed how it can and should be monitored over time. A most sincere thank you for all your help.

Thanks also to Alan Pyke over at ThinkProgress for his March piece on this issue, which was very useful to me. And for our very instructive conversation yesterday.

What's been said:

Discussions found on the web:
  1. VennData commented on Apr 10

    There are five million job openings in this country.

    The one thing pundits and politicians should be rhink in and talking about (and doing) is getting people EDUCATED for those jobs.

    Sorry GOP, if people get educated in tech and become Democrats fighting you too bad. Change YOUR party. Dump the snakehandlers.

  2. WickedGreen commented on Apr 10

    The internet was way more fun – and useful – before corporate influence and (allegedly) ‘conservative’ hackery waded in deep.

  3. Herman Frank commented on Apr 10

    City of Seattle, “YOU ROCK!” for raising the minimum wage and thus providing an ENORMOUS BOOST to your economy! The ripple-effect of more disposable income in the economy will do more good than any kind of tax-credit to either a group of individuals or an industry-“we’ll invest if you pay for it”-style. Good for you guys … let the blossoms bloom!

    And folks, “go out for some excellent restaurant food!”

  4. Joe commented on Apr 10

    This gets a lot more reasonable if, upon the publication of the original article, “Why Are So Many Seattle Restaurants Closing Lately?” and your response, that it is recognized that the article is faith based. All subsequent publication should appear under the heading of Religion in the publication section where its content, viewpoint, origin, and worth could be recognized at a glance.

  5. rd commented on Apr 10

    The data are incorrect. Arthur Laffer will prove it to you. If you just wait long enough, the inexorable grinding of the corrosive effects of the minimum wage will cause the Seattle restaurant industry to implode. Similarly, we just haven’t waited long enough for the tax cuts in Kansas to kick in their positive effects, so the data showing the Kansas budgets getting blown to smithereens are simply misleading.

  6. CD4P commented on Apr 10

    What a time for cynicism!!!!

    Look for opposition to a $15 minimum or living wage to “melt away”. Why? How about a price spike now to ease the introduction of automation later??? Imagine half or 3/4ers of your local McDonald’s, Burger King, Starbucks, etc., service staff being replaced by technology in less than 5 years. People will get disturbed about the loss of jobs unless its accompanied by a 20% price cut for the customer. Then the customer becomes an ally in the adoption of new technology. Plus, by socializing the public now to much higher labor costs, margins will explode to the upside when labor costs are drastically reduced later. What a Christmas/Hannukah/Kwanzaa gift for the haves!!!!

  7. Iamthe50percent commented on Apr 10

    So, if labor costs are indeed 36% of restaurant costs, presumably that includes management labor and skilled labor (chefs), not just waiters and bus staff. Ignoring that, the implication is that a 50% rise in wages will increase costs by 18%. If the demand for food is inelastic (improbable), prices will rise 18%. So a $5 burger becomes $6. A $20 Olive Garden entree becomes $23 or $24. I can live with that, especially knowing that the person serving me isn’t dependent on my charity for survival.

  8. SumDumGuy commented on Apr 10

    Don’t forget that besides increasing food prices, if a restaurant can increase the amount of customers served per hour (including lessening empty table time), they can recoup the increased salary cost that way, too.

  9. Lyle commented on Apr 10

    As some fast food places are doing provide a smartphone app that you can order on their wifi network, so that all a human need do is collect the money. The app may even take the credit card info and give you an order number. So in the fast food case 1/2 of the labor is gone. Consider that already fast food places if you dine inside just give you a cup and let you fill it, again reducing labor. So basically you would order, and wait for the number to be called to pick up the order with the cups on the tray. (Not like today where you get the cups when you order).

  10. msndc commented on Apr 12

    i had a hunch that Seattle’s’ demographics were mostly white with a small Hispanic population, ( among others ) and their census data says as much, ( see their city web site ) which says to me that the large influx of central Americans has contributed to the low wage growth and low tax revenue for the country as a whole.

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