A Pizza Place Closes in Seattle . . .

Barry here: I know Invictus personally for more than a decade. I also know he works at a shop that does not allow its staff to publish economic and data analysis outside of their formal imprimatur. I would not allow his work to be published here if I was not confident about his respect for data, his integrity and his intelligence.

Read on:

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@TBPInvictus:

In two recent pieces (see here and here), I pushed back on the notion that Seattle’s new minimum wage had caused a “a rising trend in restaurant closures,” as that claim was wholly unsupported by data I found by contacting the City of Seattle’s Office of Economic and Financial Analysis (which, by the way, anyone could have done).

As an aside, I asked the Washington Policy Center – the nexus of the misinformation – to correct their mistaken assertion.

Instead of conceding they’d gotten it wrong, which they clearly had, they made it about me and my pseudonymity, as if those who use pseudonyms have no claim to facts:

“Someone who hides his identity is in no position to instruct others about integrity. We accurately cited our sources and stand (quite publically [sic]) behind our blog. If you disagree, you’re welcome to your opinion based on your view of your own sources. Engaging in public debate means having the courage to stand up for your views. I don’t have much respect for someone who wants to judge others and issue stately calls to “do the right thing” from behind a cloak of anonymity. You see the issue one way, based on data you find persuasive, and we see it another. You’re demanding some sort of correction, but that’s not going to happen because I don’t think it’s merited. We quoted our sources accurately. You are welcome to expound your views any way you like, and in any manner you like, but we are not required to agree.”

So, accurately citing poor, misinformed, and data-free sources is okay in some policy circles, so long as you do it by name. Got it.

But I digress.

In support of my argument, I produced, among other data, the following graph detailing – as the title states – the City of Seattle Food Business Count.

Screen Shot 2015-04-09 at 7.06.00 PM

Beyond that, my contact in Seattle, Anthony Cacallori, whose job it is to monitor the local economy, and who’s in a position to have some insight into matters such as these, had this to say:

“As mentioned before, I think the biggest threat to restaurants in Seattle right now are rent prices. I’ve seen a few articles since we last spoke where the owners of closing restaurants themselves indicated this as the factor in their business decision. Things here are crazy! To put it into perspective, rent control seems to be the topic du jour in local media. That’s not something I ever thought I’d hear brought up in Seattle, but here we are.”

In the face of all the data indicating that the only trend in Seattle’s business environment thus far is currently for more businesses, not less, I must now concede defeat because AEI’s Mark Perry (@mark_j_perry) has discovered that a pizzeria is closing, and that the owner attributes said closure to the rise in the minimum wage. Not surprisingly, Mark makes no mention of this January article citing the planned 2015 openings of 29 – that’s twenty nine – new restaurants, 27 if we net out the two closures mentioned.

There’s also this, from Working Washington – a piece highlighting over a dozen pizzerias that are currently hiring in Seattle. Maybe the pizzeria that’s closing just didn’t serve good pizza? Just sayin’.

Herewith Professor Perry delivers the coup de grâce:

Screen Shot 2015-04-29 at 7.20.43 PM

 

So, sadly, when I place the copious and thorough data I found refuting the claim of a “rising trend of restaurant closures” against the impending closure of one pizzeria on which Professor Perry is hanging his hat, I have no choice but to concede defeat. Your one pizzeria closure trumps the data – encompassing thousands of establishments – I found and presented, Mark. As an economist, certainly you’re aware of the fact that one data point trumps hundreds or thousands, right?

I’d be remiss if I didn’t note that Professor Perry was among those who spread the false information that originated at the Washington Policy Center. His piece at AEI was titled [emphasis mine]: Seattle’s new minimum wage law takes effect April 1 but is already leading to restaurant closings and job losses. In that piece, he wrote that [emphasis mine] “the “new math” of the minimum wage is already starting to “break the system” for Seattle’s restaurant owners.”

However, in the face of data to the contrary, Professor Perry responded to me as follows:

Screen Shot 2015-04-29 at 9.05.40 PM

Now, the data I provided are not “from last year.” In fact, following on the work of Evan Soltas, I’ve been monitoring the NAICS codes for the food service industry in Seattle via up to date licensed business counts. That chart (capturing more of the 72 series businesses than the chart above) looks like this:

Second, and arguably more importantly, if Professor Perry wants to “check back in a year,” he should not have been so quick to jump on that misbegotten bandwagon and claim that the minimum wage was “already” having an adverse impact.

Lest I be misinterpreted or misunderstood, I will be crystal clear here:

  1. It’s a shame when any business closes, for whatever reason.
  2. I never said nor implied there might not be casualties from Seattle’s minimum wage move. I did say that “the Seattle experiment will bear watching as the city’s minimum wage gradually scales higher. At the moment, however, it certainly appears to be much ado about nothing.”

Finally, I should say a word about Sara Jones, the reporter of the piece that conservatives latched on to. I’ve corresponded with Ms. Jones, and came away with the impression that she was very surprised at the way her article had been hijacked. She closed one piece of correspondence with this:

All of that said, this has been a big learning experience for me and I would craft the article differently next time. I never intended to claim and do not claim now that restaurants are closing due to the minimum wage increase.

 So, there it is from the original source. Shame on those who hijacked, twisted, and contorted that story to fit their narrative.

 

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What's been said:

Discussions found on the web:
  1. lo574 commented on Apr 30

    it’s so much more fun (or self serving) to blame the government instead of your local banker who raised the rent…….again. As if to say continually increasing rent is o.k., – we expect that but people earning enough to eat w/o living on gov’t assistance? Never! Puhlease people; wake up.

  2. VennData commented on Apr 30

    Republicans and their orthodox is a bunch of drivel to support low rates for the uber wealthy.

    Reagan’s and Bush’s tax cuts ended in economic crisis, huge increases in debt and deficits.

    OH! That is not right because the guy’s “NAME” is VennData!

    ROFL. Republicans are clowns.

    • VennData commented on Apr 30

      After you’ve won the argument The Republican will say, OK then let’s raise the minimum wage to a hundred dollars about hour.

      The don’t realize this PROVES they don’t understand the market failure that causes low-skilled work to be underpaid means there is room for a rise in the minimum wage to optimize the positive economic impact. It has to be monitored…

      Oh Guess who doesn’t like it when the government monitors the economy? Go ahead, guess.

      Correct Republicans.

  3. howardoark commented on Apr 30

    The minimum wage went up to $12.25 on March 2 here in Oakland – haven’t seen any restaurants closing (opposite in fact).

    The comfort of the rich depends on an abundant supply of the poor – Voltaire

  4. James Cameron commented on Apr 30

    As mentioned before, I think the biggest threat to restaurants in Seattle right now are rent prices. I’ve seen a few articles since we last spoke where the owners of closing restaurants themselves indicated this as the factor in their business decision.

    Nice piece. I have to say, I’ve read of more businesses closing their doors or moving because of increased rent prices than anything else in Seattle. And as far as I’m concerned, if a business owner can’t pay a livable wage here in this city where the cost of renting has skyrocketed over the last decade then they shouldn’t be in business.

    Meanwhile, if WPC really wants to contribute to the public good they should give up their non-profit, tax-exempt status that is just another form of government welfare for both them and their donors.

  5. DeDude commented on Apr 30

    This so-called “Professor” Perry is an embarrassment to his profession. The Dr. Oz of economics.

    Citing “sources” is not enough. You have to make references to underlying data. I could easily recite whatever Bill O’reaaly” pulled out of his a.. – and cite him for that. But that is not science, nor is it acceptable.

    The idea that an argument gets stronger or weaker because of who it is raised by is moronic. Arguments are exclusively weighed by the data and evidence supporting them. So far Invictus have presented much better evidence in support of his argument than this phone “Professor”.

  6. 4whatitsworth commented on Apr 30

    Keep up the good work I am very interested in how this plays out myself. Business has a great way of making things work if there is a level playing field. I suspect as your data shows it will not have much of an impact on restaurants, and the demand for this service will stay steady or grow with the economy. Being first in business is also a big advantage and maybe a higher minimum wage will attract better workers and Seattle will be all the better off with this move.

    I would like to see some data on the overall cost of living in Settle in three years. I suspect that is where we will see this show up however I also suspect on final analysis this is an overall net positive for Seattle and the people who work there.

  7. Slash commented on Apr 30

    The conclusion here is pretty clear, you guys (sorry if someone’s mentioned already and I haven’t read yet, but then again, it bears repeating):

    Higher wages go to workers, so that’s bad because SOCIALISM.

    Higher rents go to job creators/property owners, so that’s good.

    Schooled!

  8. Crocodile Chuck commented on Apr 30

    @ Invictus: Thanks for pulling this data together & posting.

    BR, thanks for reposting: important.

  9. Slash commented on Apr 30

    And another thing. Whenever somebody “polls” anybody (business owners, voters, etc.) about anything that is sensitive or soliciting opinions of public policy that most people don’t understand (like economics), I almost immediately discount it as a source of useful information. Because it isn’t useful. It generally gets the opinions of the most zealously for or against, while the people in the middle either admit ignorance or express disinterest. But this is what some people think we should use to make public policy, the misinformed opinions of the 10% who irrationally hate something, the 10% who irrationally love it and the 80% who couldn’t care less about it.

    As you pointed out, maybe the pizza place owner just made crap pizza. Or he’s a bad business person. Whenever I hear/read business owners bitching about minimum wage or the cost of health insurance as ruinous (not that the cost of insurance is a minor thing), I always assume (just naturally skeptical, I guess) that the parts of their struggles they’re leaving out is their shitty management or poor business decisions (like hiring an incompetent relative or friend) or just sub-par product/service.

    Not too many people are going to be honest enough (or smart enough to even have figured out yet) to say: “Yeah, the minimum wage going up was a challenge, but what really turned the screws on my business was when I hired my jackass brother in law and he drove off my best employees, then started skimming from the till. The shitty service that resulted from his incompetence kept some regular customers from coming back and by the time I realized what was going on, I was already in the red. If I had just made decent decisions based on logic, I’d probably still be doing OK today.”

    • intlacct commented on Apr 30

      @Slash: last para.: so true! I think of some friends I know who made their sister in law the receptionist at 3X the going rate or who fooled around with the help and got sued out of their pants…

  10. jbegan commented on Apr 30

    I had to Google “Seattle pizza closes”, and came across an article about Z’s Pizza, which claimed to be closing because of wage increases. Yelp (take it with a grain of salt…or Romano), says that this is a 3 1/2 star pizza parlor. The description also notes that it’s a ‘gluten free, vegetarian’ pizza parlor. Going to just take a stab here, but I’m guessing that isn’t a high demand product, and having a room mate that is gluten free, I know the costs of producing that crust can be pretty high…higher than the regular pizza crust. I’d say the business is folding for lack of demand and higher than normal product costs.

    Yelp: Z pizza Seattle, WA http://www.yelp.com/search?find_desc=Z+Pizza&find_loc=Seattle%2C+WA&ns=1

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