02/10/2017 / By Don Wrightman
Restaurants in the bay area of California are closing because the $15 minimum wage hike has made it too costly for them to do business. Somehow, Democrats are having difficulty making the connection between the wage hike and the business closures. One local bay area publication covered the restaurant closures but hardly mentioned the pay rate hike as a significant factor. Restaurants are faced with economic challenges that not all will be able to overcome.
Minimum wage hike critics predicted that restaurants would fail under a higher minimum wage. While a variety of factors may have ultimately contributed to the closures, it is unwise to discount the role played by the wage increases. There are certainly other contributing factors that have helped push restaurants into the red, including rising rents and an increasing number of on-premises food and beverage options at workplaces that are designed to keep employees from venturing elsewhere on their breaks. (RELATED: Find food supply news at Foodsupply.news)
One of the main factors listed for the closures is the fact that the bay area is a very pricey place to live. Rent increases in the housing market could have had an impact the residents’ dining budgets. But one undeniable fact is that the action of raising the minimum wage came with the consequences of business failure. Did restaurants increase their prices to offset the wages they must pay their workers? Price increases may have turned some patrons off to the high cost of eating out, making for another direct effect of the wage hike.
At least 60 restaurants have closed in the Bay Area over the last 6 months. The reasons they are citing include the cost of finding and maintaining good workers, rent increases, health care requirements, and new local competition. While restaurants have always been susceptible to a rise and demise in any market, current struggles might be indicative of a necessary industry-wide overhaul. “We’re at this precipice where the model of the full-service restaurant is being pushed to the brink,” said executive director of the Golden Gate Restaurant Association, Gwyneth Borden.
Many prominent staples in the Bay Area restaurant scene have been forced to close their doors after decades of business. Profit margins are small across most of the industry making it increasingly difficult to pay out the new minimum wage and even harder to dedicate funds to better employee recruitment efforts. Unemployment is low in the Bay Area which also provides workers with better work options than fetching ketchup and refilling drinks. The labor shortage also plays a factor in the rising costs of doing business.
Higher wages make for higher payroll taxes and workers compensation premiums. Over half of the Bay Area restaurants have recorded a decline in sales since the implementation of the new wages. It’s difficult for restaurants to absorb all the new costs when patrons aren’t willing to pay higher prices. (RELATED: Find clean food news at Cleanfood.news)