(Pun intended in the title)
There are myriad factors that typically go into determining the success or failure of any legislative policy. It will be no different with regard to the minimum wage.
Let’s turn (again) to Seattle, currently Ground Zero for the minimum wage debate, where the minimum wage was recently kicked up on a gradual journey to an ultimate $15/hour (it is $11 per hour as of April 1, 2015, and it eventually will phase in to $15 per hour for all employers by 2022).
By way of quick recap, many are focused on the restaurant industry, as it is known to employ a fairly high number of minimum wage employees relative to other industries.
Very importantly, there will be a long term study of the effects of Seattle’s recent legislation. Details of that study can be found here. It will hopefully, over time, answer many of the questions about the effects of the new law.
As the issue has been heating up, I have been keeping weekly tabs on the number of restaurant permits in issue for the city, covering five distinct NAICS codes. Below are the codes, listed in descending order of count. This count is for the city proper, not the Metropolitan Division (MD) or Metropolitan Statistical Area (MSA). This is simply a permit count; I’m implying nothing about employment.
722513 Limited-Service Restaurants
722511 Full-Service Restaurants
722410 Drinking Places (Alcoholic Beverages)
722330 Mobile Food Services
722515 Snack and Nonalcoholic Beverage Bars
Below is a recent graph of the overall count, which was first tallied by Evan Soltas here.
Based on the chart, there’s been no discernible impact on permits – they have grown steadily dating back to the first date Evan captured in March 2014, and currently sit at 3,947 (as of August 26).
As I’ve previously mentioned, one of my Seattle contacts advises that rising rents – the area is booming – will likely play more of a factor in a restaurant slowdown than higher wages. This will, hopefully, also be part of the information we glean from the aforementioned study.
Among the many factors that might also eventually be sussed out is this – food services saturation. How many restaurants can an area accommodate? Certainly there has to be a limit on the sheer number of restaurants any given geography can sustain.
Thankfully, Bloomberg has done some work in this regard. Importantly, note that Bloomberg looked at MSA’s, much broader areas in many cases than individual cities (as I’ve repeatedly pointed out). However, that said, the information is still instructive. (While some folks very subtly conflated the city of Seattle with its much broader MSA, that’s a game I’m not going to play.)
- Again, these are MSAs and not individual cities or “places.”
- While I suspect it matters very little if at all, the data were last updated in March 2014. I doubt much has changed.
- Bloomberg looked at only two NAICS categories – Full-service and Limited-service (aka “fast food”) – and not the broader array I’ve been looking at.
What we see:
- As of March 2014, the Seattle-Tacoma-Bellevue MSA was already #2 in the country behind San Francisco-Oakland-Fremont.
- A re-sort on the “fast food” column actually puts the Seattle-Tacoma-Bellevue MSA at #1 with 11.63 establishments per 10,000 population.
On Twitter, we see this observation:
— Charles WL Hill (@charles_chill) August 21, 2015
The math there seems more or less spot on: ~670,000 population/3,953 establishments = 169 people per establishment. Not sure yet how that compares to other cities (not Metropolitan Statistical Areas or Metropolitan Divisions), though I intend to try to find out, but it intuitively feels a bit crowded, at least to me.
In any event, the notion that a recently increased minimum wage in [fill in the geography] is already having an adverse impact in said geography is nonsense, as I’ve chronicled time and again (and again, again, again, again, again, again, again, again, and again).
This will be a marathon, not a sprint. That said, another factor in the equation must be the sheer number of establishments any given area can accommodate; it cannot be unlimited.
The overarching point here is this: Towns/villages/cities/states/the US all go through business and economic cycles. Rents rise and fall. People immigrate and emigrate. There are surpluses and shortages of goods, services, and labor that influence pricing. It’s all a very complex choreography, and it’s rare indeed that we get a good, clean experiment. And so it will be in Seattle, which is why the aforementioned study will be so important. In the meantime, we can stay abreast of what data we get and determine what we can, all with the knowledge that the best and most thorough data come with painfully long lags. But such is life.