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The Latest Poster Children for the Anti-$15 Crowd: Low-Quality Restaurants?

Some sage advice for restaurant owners in this screenshot from the Hell’s Kitchen video game.

I simply can’t respond to every single dumb trickle-down take on the $15 minimum wage. If I felt the need to write back to every jerk who took an Econ 101 class and thought it earned them a Nobel laureate in economics, I’d be writing takedowns every hour of every day, with no sleep and no breaks. My fingertips would bleed from all the typing, and I’d need to rent a helper monkey to put drops in my eyes so they wouldn’t dry out as I type.

But when I noticed that someone named Peter Heck published a piece titled “Minimum Wage Hikes are Killing the Poor” — well, how could I just ignore a title as ridiculous as that? Heck says that the “wealthy liberal city of San Francisco” is facing a “coming disaster” as it’s raising its minimum wage to $15 next year. He quotes a new working paper from Harvard Business school which, according to its abstract, finds that…

…lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).

Heck then extrapolates from their abstract:

Bob’s Burgers may not be able to absorb the cost associated with paying $15 an hour for their entry level employees without coming to economic ruin. But swanky, upscale Eagle’s Nest Steakhouse, on the other hand, can simply jack up the cost of their filet by a few bucks and be okay.

In other words, the liberal minimum wage policy lets the rich get richer and the poor lose their job when the business they work for goes under.

Except that’s a really bad misreading of the study. The stars used in the study are taken from Yelp. The quality that they’re measuring is the customer experience, not the cost of the restaurants. Yelp has a second ranking, of dollar signs, to identify prices, but price didn’t really figure into the closures. In fact, the study overtly states that they found (emphasis mine) “evidence that the heterogeneous effects observed earlier are driven by quality rather than by the restaurant prices.”

So if Yelp customers rate Bob’s Burgers 4.5 stars because they like the food and the service, Bob’s Burgers will weather the minimum wage increase just fine. Some comparably rated Seattle businesses on Yelp would be Paseo, which serves no meal over $15.50; Tacos Chukis on Capitol Hill, which serves tacos for under $2 and tortas for $6.90; and Fat Ducks Deli and Bakery in the University District, which sells sandwiches for $8.95 each. (I can say from experience that all three of those restaurants, by the way, are excellent.)

And if the Eagle’s Nest Steakhouse has gotten more than a little gross over the years and customers now give it a 1.5 average star rating, under a minimum wage increase the odds increase for the Eagle’s Nest to go out of business. So even if Bob’s Burgers charges $10 for a burgers-and-fries meal deal and the Eagle’s Nest charges $75 for a steak and a side, it’s the Eagle’s Nest which, according to the study, is much more likely to go out of business.

Heck doesn’t seem to realize that he’s actually arguing against the power of the market. By opposing a decent minimum wage, he’s saying that a city should subsidize low-wage, low-quality employers by allowing them to legally exploit their workers. It’s more than a little weird to me that conservatives are now complaining about the consequences of the free market. For some reason, they hate the idea that businesses which can’t afford to pay their employees a living wage should have to close while other businesses thrive. I would hope that even conservatives like Heck would agree that low-quality employers shouldn’t be subsidized by taxpayers. When businesses pay less than a living wage, those employees often have to rely on government assistance like food stamps and rental subsidies in order to get by.

Look, opening a restaurant is risky business. Everyone knows that restaurants fail with shocking regularity. Every new location requires a confluence of many different qualities (including a good location, an inviting theme, a welcoming staff, an appealing storefront and, uh, one more thing that I can’t remember…oh, yeah — delicious food) to become a success. That’s an understood quantity for anyone opening a business.

The unfortunate truth is that there will always be losers. But by encouraging a smarter, more livable wage, we can ensure that there are more winners. Seattle, which raised the wage before San Francisco, has more eating places than at just about any other time in our history. Our unemployment nunbers are at near-record lows. If we did see the same closures of low-quality restaurants that the Harvard study found, those restaurants were quickly replaced by newer (and better!) ones. Which is exactly how capitalism is supposed to work: business owners are supposed to create new concepts, and consumers are supposed to choose between them. The concepts that don’t draw the most consumers either change into something more appealing, or they fail.

And the thing about raising the minimum wage that Heck really doesn’t get is this: when the minimum wage is increased, workers have more money, and that increases demand. It allows people to try more of their ideas out in the marketplace, and it allows consumers to decide between those ideas. Nobody ever promised that every idea would be a good one, or that every business would succeed. But Seattle’s thriving restaurant scene has proven that there’s more room for winners — among business owners, workers, and consumers — when everyone agrees to pay a living wage.

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And I wanted to take a second to address Heck’s moronic final claim. He writes: ” If $15 is better than $10 an hour, doesn’t it stand to reason that $20 or $30 an hour is better than $15?” Heck, the poor dear, acts like this is a new concept, but it’s actually as old as the minimum wage itself. Nick Hanauer addressed this concern-trolling best in this piece in the Democracy Journal:

“If $15 is so great, why not $50 or $100?” critics sometimes mockingly ask. Well, because that would be stupid. The positive benefits of a $100 per hour minimum wage would almost certainly be overwhelmed by the costs. So no one is proposing $100; instead we are proposing $15, which is roughly halfway between what the minimum wage would be had it tracked either productivity gains ($21) or inflation ($10).

I hope that passage answers Heck’s question. I also hope he doesn’t misread it as badly as he misread that study.

Daily Clips: April 25, 2017

Ivanka Trump gets booed, hissed at during Berlin event: There’s some sense in the world.

Seattle home-price hikes lead U.S. again; even century-old homes command top dollar

Washington state relies on a rotten tax system:

The top 1 percent in Washington paid 2.4 percent of their income, which is less than half of the national average, 5.4 percent.

There have been efforts to introduce an income tax, but in recent times they’ve never gotten far.

The idea of a Seattle city income tax on high-income households is going to be an issue in this year’s race for mayor. Current Mayor Ed Murray announced in the first mayoral debate last week that he will send a tax proposal to the City Council.

The grim biology of being poor:

Why do so few make it out of poverty? I can tell you from experience it is not because some have more merit than others. It is because being poor is a high-risk gamble. The asymmetry of outcomes for the poor is so enormous because it is so expensive to be poor. Imagine losing a job because your phone was cut off, or blowing off an exam because you spent the day in the ER dealing with something that preventative care would have avoided completely. Something as simple as that can spark a spiral of adversity almost impossible to recover from. The reality is that when you’re poor, if you make one mistake, you’re done. Everything becomes a sudden-death gamble.

Now imagine that, on top of that, your brain is wired to multiply the subjective experience of stress by 10. The result is a profound focus on short-term thinking. To those outsiders who, by fortune of birth, have never known the calculus of poverty, the poor seem to make sub-optimal decisions time and time again. But the choices made by the poor are supremely rational choices under the circumstances. Pondering optimal, long-term decisions is a liability when you have 48 hours of food left. Stress takes on a whole new meaning—and try as you might, it’s hard to shake.

Cuomo’s college plan is less than ideal:

The plan seems less revolutionary, however, when we remember that CUNY charged no tuition at all until 1976. And Cuomo’s progressive cred disappears when we remember that he has, until now, fought to raise tuition rather than cut it. Tuition is 30 percent higher today than it was when Cuomo took office, thanks to what he championed as “rational tuition.” In fact, only last year, he proposed slashing CUNY’s budget by $485 million, about one-third.

Daily Clips: April 24, 2017

How ideologues use grade-school economics to distort the minimum wage:

The United States has the lowest minimum wage, as a proportion of average wages, of any advanced economy—one reason for our wide gap between rich and poor. But according to economism, raising the minimum wage would only backfire and harm poor people.

U.S. Chamber of Commerce Chief expects basic NAFTA deal by mid-2018

Republicans want to muzzle database of consumer complaints

Want to rescue rural America? Bust monopolies

It is a myth that the economic challenges that rural and small-town America face are caused by forces largely outside our control, like globalization or improvements in technology. We have the ability to help restore competition and economic vibrancy in rural America and beyond. The government has the authority to ensure markets are once again open and competitive so that communities have a chance to shape their own economic destinies. The question is whether we will recognize the error of our ways and put taking on monopolies high on the economic agenda — for rural and small-town America, and for everyone who wants to ensure our country can once again be the land of opportunity.

Watch: Bill Nye rips CNN for treating climate change like theater instead of science

Daily Clips: April 21, 2017

Trump tax plan to rely on future US growth to fund cuts

Republicans believe major tax reform would drive annual U.S. economic growth above 3 percent. But if anticipated improvement fails to materialize, the strategy could rob the Treasury of tax revenue and saddle the economy with bigger deficits and higher debt burdens.

Bill Nye Saves the World brings us an updated, unapologetically political science guy

Does the government subsidize low-wage employers?

America is regressing into a developing nation for most people

Seattle Mayor Ed Murray proposes income tax for city’s ‘high-end’ households

The end of men? Not in the retail sector

Daily Clips: April 20, 2017

Happy 4/20. Here’s a quote from Carl Sagan:

The illegality of cannabis is outrageous, an impediment to full utilization of a drug which helps produce the serenity and insight, sensitivity and fellowship so desperately needed in this increasingly mad and dangerous world.

Blacks and whites use pot at about the same rate, but blacks get arrested for pot possession a lot more

A new high: 61 percent of Americans believe weed should be legalized

Nobel Prize-Winning Economist: We’re Headed for Oligarchy

Pesticide maker tries to kill risk study

The jobless economy

Why has growth been so slow? This too is a topic in itself but there are several reasons.

One, popular among mainstream economists, is that very deep recessions, like the 2008–9 affair, have historically left deep scars that make recovery slow and difficult. Another, less orthodox, way of interpreting those “scars” is that a very deep recession is itself a sign of serious structural problems beyond the normal ups and downs of capitalist economies.

Daily Clips: April 19, 2017

After using n-word in front of black colleagues, Fla. state senator faces calls to resign

New election analysis: Yes, it really was blatant racism that gave us President Donald Trump

Sean McElwee, a policy analyst for Demos and a frequent contributor to Salon, published a statistical analysis last week, based on data collected by the American National Election Studies, that demonstrates clearly that racism, rather than economic insecurity, was the primary factor that helped push Trump over the top.

Fighting child poverty with a universal child allowance

It might seem naive that a universal child allowance could be adopted this year. But with support from both sides of the aisle, it is now a viable policy alternative.

Cary Moon is running for Seattle mayor

What Trump’s H-1B visa executive order actually does

Daily Clips: April 17, 2017

Morgan Stanley’s CEO says repealing Dodd-Frank would be a mistake

Are sectorial unions the way of the future?

Sectoral bargaining is certainly getting more attention in legal academic and labor law policy debates,” Benjamin Sachs, a professor at Harvard law school and former practicing labor lawyer, says. ‘The way I would think about it is that there’s an existential panic about what will happen to the labor movement. That’s not new, it’s just getting worse … If we need unions for economic and political equality as I think we do, we have to do something to stop that downward spiral.’

Why don’t all jobs matter?

While we can’t stop job losses from happening, however, we can limit the human damage when they do happen. We can guarantee health care and adequate retirement income for all. We can provide aid to the newly unemployed. And we can act to keep the overall economy strong — which means doing things like investing in infrastructure and education, not cutting taxes on rich people and hoping the benefits trickle down.

Tax cuts don’t work the way trickle downers think:

Tax cuts that go to high-income taxpayers generate less growth than…cuts for low and moderate income taxpayers.

Why the 101 model doesn’t work for labor markets:

Labor is a crucial input in so many markets that it really needs to be dealt with in general equilibrium – in other words, by analyzing all markets at once – rather than by treating it as a single market in isolation. That makes the basic Econ 101 partial-equilibrium model pretty useless for analyzing labor.

WA passes Student Loan Transparency Act: 

Starting next year, Washington college students who take out student loans will get an email or letter from their school telling them how much they owe and how much their monthly loan payments will be after graduation.

Wow, what an amazing step forward. Now when students take out tens of thousands of dollars in loans they’ll know how much they’ll need to repay. I am so sick of all this winning! WA is so progressive!

Daily Clips: April 13, 2017

“We live, work, shop, and travel under a system of grossly asymmetric power relationships”

Alabama set to allow church to create its own police force: The constitutionality argument with this issue is not as black and white as you might first think.

The British warned us about Trump-Russia connections:

Members of the British intelligence agency GCHQ knew about “suspicious” contact between associates of President Donald Trump and Russian operatives as early as 2015, the Guardian reported on Thursday, citing a source with links to British intelligence.

Homeless camp cleared under Seattle’s Spokane Street Viaduct: Pictures of the “clearing.”

WA state’s student-achievement guru knows college isn’t for everyone; here’s what he proposes instead:

Q: The word “college” causes some confusion — I hear lots of readers say, well, not everyone needs to go to college. And the phrase “postsecondary credential” doesn’t resonate the same way.

A: I got exactly that reaction when I went around talking about this (in Connecticut). So I started using the phrase “something after high school.” I had conversations with people where they said, “Not everybody should go to college,” and I said, I agree with you, if you mean Yale, or the University of Connecticut. What I’m talking about is something after high school, and people would go, right away, “Yes, I agree with that.”

Daily Clips: April 12, 2017

Doing free college correctly:

That said, as we celebrate the Cuomo Administration’s commitment to New York’s students and families, New York’s plan isn’t without its warts. Naming them can get us toward a Unified Theory of Free College, and provide a model when the federal policy window on college affordability opens once again. Here are a few thoughts for what might make for a powerful, progressive, free college proposal.

Two WA streams make America’s most endangered rivers list:

A pair of scenic Western Washington river systems, the South Fork Skykomish near Stevens Pass and the Green and Toutle rivers near Mt. St. Helens, got flagged on an annual list called America’s Most Endangered Rivers by the environmental group American Rivers.

San Bernardino reels from elementary school shooting two years after terrorist attack: It’s just another day in America.

Jacksonsonian history:

Jackson likened indigenous people to “savage dogs” and boasted as a general that “I have on all occasions preserved the scalps of my killed.” The Indian Removal law would ultimately be responsible for the deaths of over four thousand Cherokees on the Trail of Tears.

Embattled United CEO accepts responsibility for treatment of passenger: Finally.

Daily Clips: April 10, 2017

How California hopes to undo Trump:

California is the Trump administration’s most formidable adversary, not only on matters of immigration, but on damn near everything. No other entity—not the Democratic Party, not the tech industry, surely not the civil liberties lobby—has the will, the resources, and the power California brings to the fight. Others have the will, certainly, but not California’s clout.

How the fight for a $15 minimum wage in Baltimore fell apart: Surprisingly, businesses said they’d have to move or cut jobs.

Keynesian economics is hot again:

Someday, when economists have a better handle on the basics of why people consume and businesses invest, macroeconomic models won’t have to be rethought every time a big recession happens.

Right-wing nationalism vs. one-percent oligarchy: In the war between Bannon and Kushner, Trump agrees with both:

The president shares Bannon’s idea that the country is collapsing and can only be saved with toughness, strength and power. In Jared and Ivanka, Trump sees a golden future for his progeny, building the family wealth and securing his legacy. That’s the Trump worldview, perfectly embodied in his two top advisers.

The gig economy’s false promise: “Instead of freedom, workers at companies like Uber have encountered low wages and coercion.”