3 unintended consequences of Seattle’s minimum wage hike

By Alex Vargo of Watchdog.org. 

"Seattle’s new minimum wage law—which raised base pay to $15 per hour in April—is prompting many employers to change the way they do business. For Ivar’s Seafood restaurant, it means switching to an “all-inclusive menu,” or raising prices by over 20 percent while doing away with tips.

Like any well-intentioned law, government-imposed minimum wage increases seem to help workers, at least on the surface. But is it really as easy as mandating that employers pay their employees more?

In the restaurant industry, there are three possible consequences for young workers that stand out.

Fewer Hours

With rising labor costs due to mandatory base pay increases, employers will have a tough time employing as many people.

If they have to raise wages across the board, restaurants like Ivar’s may have to decide between running on a deficit, raising prices, or cutting workers’ hours. With an unsustainable and artificial wage increase, young Seattle residents could be working fewer hours—which could ultimately lower their take-home pay.

The Demise of the Tipping Culture

Some restaurants are excited about doing away with tipping while raising base pay, but others are skeptical. Many are worried that their best servers will leave, as the tipping system allows them to make more in an hour than a base hourly wage ever could.

“The tipped culture is what draws people into the industry,” Christin Fernandez, spokeswoman at the National Restaurant Industry, pointed out.

The minimum wage increase in Seattle will raise base pay for everyone in the restaurant industry, but that could backfire on servers who no longer have the opportunity to earn tips.

Higher Prices

Under the all-inclusive model, some customers won’t be happy about paying 20 percent more for their order. And some restaurant owners are concerned that customers will see the higher prices without taking into consideration that gratuity is included. They’re worried that the higher prices will drive customers away—which will mean less revenue for restaurants and possible lay-offs of staff.

Some restaurants may embrace doing away with tips, and they should be able to experiment with that—if they choose. However, the fact that mandatory minimum wage raises are pushing restaurants across New York City and Seattle to adopt this model is not a win for young workers.

Continually increasing the minimum wage and forcing restaurants and other industries to adapt decreases opportunity for the young Americans—especially low-income workers—in our society. And we should all be against that."