Another story of why the minimum wage is awful

An economic lesson is playing out in California.

EconomicPolicyJournal.com carried this story on a popular restaurant in California cutting back due to the minimum wage hike:

When it comes to coffeeshops, Pann’s is as iconic as it gets. The diner opened in 1958 and has been dishing out their fried chicken and cajun andouille sausage for decades. It’s also noted for its distinctive Googie-style architecture, and everyone from Vin Diesel to Nicolas Cage have filmed a movie there.

In spite of all the years, Pann’s will be undergoing some changes. As owner Jim Poulos told LAist, the restaurant is struggling to keep up with the new minimum wage hikes, and will have to shorten their hours to stay afloat. Starting August 1, the restaurant will be operating from 7 a.m. to 3 p.m., meaning it will be closed for dinner…

According to Poulos, the wage hike produces a domino effect that has significantly raised his cost of operations. “The cook who is already making $15 an hour is not going to like it that the dishwasher is making the same amount,” said Poulos. He adds that his vendors have been rising their prices because of the wage hike. “It’s been a huge hit. How else is the restaurant industry supposed to deal with it? There’ll be more automation. They’ll be cutting labor, cutting quality.”

Several things pop out in just three short paragraphs. One, prices being absorbed by the consumer are just not happening. This is then forcing rising costs associated with the minimum wage hike to be shifted back to the owners either eating it in their profits or doing the above cutting of hours. Secondly, the minimum wage hike cost is spreading economically by businesses. This is normal of course in any economic situation. Not mentioned is the amount of payroll taxes that go up on the owner when wages are raised.

I think the most imporant and ever forgotten is who deems what is the proper price of labor for certain positions. I’ve always argued this point time and again when confronted with minimum wages supporters. The cook will now be pissed he/she is making same as the dishwasher. Obvisously your cook is way MORE IMPORTANT then your dishwasher. Anyone can wash dishes, not everyone can cook. Food is what brings the customers in.

 

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