SEATTLE, Washington (PNN) - March 12, 2015 - Seattle’s $15 minimum wage law goes into effect on April 1, 2015. As that date approaches, restaurants across the city are making the financial decision to close shop. The Washington Policy Center writes, “Closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But the impending minimum wage hike to $15 per hour is playing a major factor. That’s not surprising, considering about 36% of restaurant earnings go to paying labor costs.
Washington Restaurant Association’s Anthony Anton said, “It’s not a political problem; it’s a math problem.”
He estimates that a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36% of funds are devoted to labor, 30% to food costs, and 30% goes to everything else (all other operational costs). The remaining 4% has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restaurateur in Seattle has been making $28,000 a year.
With the minimum wage spike, however, if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42%, and in full service restaurants to 47%.
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways, including higher menu prices, cheaper, lower quality ingredients, reduced opening times, and cutting work hours and firing workers. When these strategies are not enough, businesses close, workers lose their jobs, and the neighborhood loses a prized amenity.
A spokesman for the Washington Restaurant Association said, “Every [restaurant] operator I’m talking to is in panic mode, trying to figure out what the new world will look like. Seattle is the first city in this thing and everyone’s watching, asking how is this going to change?”
Seattle is rightly famous for great neighborhood restaurants. That won’t change. What will change is that fewer people will be able to afford to dine out, and as a result there will be fewer great restaurants to enjoy. People probably won’t notice when some restaurant workers lose their jobs, but as prices rise and some neighborhood businesses close, the quality of life in urban Seattle will become a little bit poorer.