February 20, 2019
Investor's Business Daily
Economics 101: When Amazon pulled out of New York, the loss of 25,000 future jobs made headlines. What isn't making headlines are the thousands of jobs being destroyed right now thanks to the city's new $15 minimum wage.
Over the past four years, the minimum wage for New York City restaurants that employ more than 10 workers went from $10.50 an hour to $15. That's a whopping 43% increase. Next year, every restaurant, big and small, will have to pay their workers at least $15 an hour.
A big victory for workers, right? That's how it's depicted by the "Fight for $15" crowd. And, yes, if you held a full-time minimum-wage job over those years, your gross income would have gone up by $9,360.
But those massive wage hikes come at a painful cost that backers refuse to acknowledge. They kill jobs. Just like they're doing right now in New York City.
In just the last three months of last year, 4,000 workers lost jobs at full-service restaurants, Bureau of Labor Statistics data show.
By the end of last year, there were fewer restaurant workers in the city than in November 2016. Even though overall employment climbed by more than 163,000.
Job Losses Coming
There will be more job losses this year.
A New York City Hospitality Alliance survey found that 47% of full-service restaurants expect to cut jobs this year to cope with the latest wage hike. Last year, 36% said they'd eliminated jobs. The picture is worse at limited-service restaurants. The survey found half reported cutting jobs last year. And 53% say they'll do so this year.
Click here to view the graph.
"It usually takes an economic recession to cause year-over-year job losses at NYC's full-service restaurants," notes economist Mark Perry, "so it's likely that this is a 'restaurant recession' tied to the annual series of minimum-wage hikes that brought the city's minimum wage to $15 an hour at the end of last year."
Perry compiled the nearby chart, which shows the recent year-over-year declines since New York started hiking its minimum wage.
Even during the Great Recession, restaurant workers didn't suffer as much as they are now. In fact, over the course of the recession, which lasted from December 2007 to June 2009, the number of restaurant jobs in the city actually increased by 1,800.
It's getting so bad that fast-food workers now want the city to protect them from getting fired without "just cause."
Those who keep their jobs aren't necessarily better off, either.
The Hospitality Alliance survey found that more than three quarters of New York restaurants cut worker hours in 2018 to offset that year's wage hike. Seventy-five percent say they want to cut hours this year.
"Though the new regulations are intended to benefit employees, some restaurateurs and staffers say that take-home pay ends up being less due to fewer hours — or that employees face more work because there are fewer staffers per shift," notes Tara Crowl in an article in New York Eater.
This is all in keeping with numerous economic studies that have documented the ill effects of mandatory wage hikes.
University of Washington economists found that the average low-wage worker in Seattle saw their earnings drop $125 a month because of the city's wage hikes, which had gone from $9.47 in 2014 to $13 in 2016.
Illinois Makes Same Mistake
A study by the American Action Forum concluded that minimum-wage hikes that went into effect in cities and states around the country this year will kill 261,000 jobs right away, and 1.7 million jobs over the long term.
Yet advocates for a $15 minimum wage press on. This week, in fact, Illinois Gov. J.B. Pritzker signed a bill to raise that state's minimum wage to $15 over the next six years.
"Today is a victory for the cause of economic justice," Pritzker said.
Pritzker should go to New York. And then try to explain the wonders of "economic justice" to the thousands of people who lost their jobs because of it.