That’s what we learn from Buffalo Wild Wings CEO Sally Smith who was interviewed by the WSJ and had this to say about how labor costs affect the company’s expansion plans to increase the chain of more than 1,000 sports bars by 10% before the end of the year (emphasis mine):
WSJ: How are minimum-wage increases affecting the way you make business decisions?
MS. SMITH: You look at where you can afford to open restaurants. We have one restaurant in Seattle, and we probably won’t be expanding there. That’s true of San Francisco and Los Angeles, too. One of the unintended consequences of rising minimum wages is youth unemployment. Almost 40% of our team members are under age 21. When you start paying $15 an hour, are you going to take a chance on a 17-year-old who’s never had a job before when you can find someone with more experience?
Bottom Line: It’s an important economic point that national chains like Buffalo Wild Wings make expansion decisions based on labor costs, and will avoid expanding in cities like Seattle, San Francisco and Los Angeles that have passed $15 an hour minimum wage legislation. That’s why I’ve called such legislation an “economic death wish” for those cities, because their $15 an hour minimum wage laws, though well-intentioned, will kill jobs, businesses and economic opportunity. There are 35,000 cities and towns in America and nearly 400 metropolitan statistical areas (MSA) with core urban populations of 50,000 or more, and those areas are all competing against each other to attract new businesses, including national chains like Buffalo Wild Wings. Since labor costs are the highest single operating expense for most companies, chains like Buffalo Wild Wings consider local labor costs, and will now obviously avoid $15 an hour minimum wage cities like Seattle, LA and San Francisco. As I’ve mentioned before, the minimum wage is a “math problem” not a political problem, and the mathematics of the $15 an hour minimum wage are very simple: it’s one of the most effective business-repellents a city or state could implement, i.e. an “economic death wish.”
University of Chicago economist John Cochrane summarizes the damaging cost of regulation, which would include the $15 an hour minimum wage laws in Seattle, LA and SF, like this:
The overwhelming cost of regulation [and the $15 an hour minimum wage] is the economic dislocation: companies not started, products not produced, innovations not innovated, people not hired, costs not slashed, prices too high. And growth too slow. Just because it’s harder to measure these costs does not mean that these are not the overwhelmingly more important costs, and the costs that we need to address.
And as we learn from Sally Smith, the economic dislocation of the $15 an hour minimum wage for cities like Seattle includes: chains that didn’t expand there because labor costs are too high, restaurant workers not hired, restaurants not built, construction workers not hired, etc. Like I said, it’s not politics, it’s basic, simple restaurant/business math…..
HT: Don Boudreaux
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