San Diego raises the minimum wage, restaurants respond

By Matt Johnson

As I reported in my last blog, 12 states raised their minimum wages on January 1, 2017. However, I didn’t get into any specifics about how some businesses might respond, nor did I mention how some American cities are fighting the good fight and raising minimum wages well ahead of the curve. But I always appreciate a good economics experiment.

Well we’re only a couple of days into the new year and this economics experiment is in full swing. San Diego businesses are already responding.

According to The San Diego Union-Tribune, restaurants are already responding to a city minimum wage increase of $10.50 to $11.50 and they’re doing it with a surcharge. To make up for labor costs,

…many of San Diego’s full-service restaurants are introducing for the first time an average surcharge of 3 percent of the meal’s cost to help cover increased labor expenses that some operators say amount to hundreds of thousands of dollars in a single year.

Exactly! As with Newton’s Third Law, “for every action there is an equal and opposite reaction.” Well, it’s more the case that for any economic policy, the market – firms and agents – will respond and not necessarily in the way policy makers and voters think.

Back in June, the citizens of San Diego approved the minimum wage hike to help the city’s lowest wage earners. Indeed, it was an honorable thought. But in response, business owners contemplated and even tried different ways to offset the wage hike.

For some, they cut costs and reduced the hours of their employees. But in the end, restaurant owners felt the surcharge would be the best course of action. As one restaurant owner who owns 5 businesses, 3 in San Diego County, exclaimed,

‘I can’t get to sleep at night wondering where in the heck am I going to get the dollars I need to pay all my employees.’

Of course, he’s not the only restaurant owner participating in this economics experiment. A lot of business owners across San Diego will be looking for ways to absorb this new labor cost into their business expenses. And for the ones who are in the restaurant business, the next couple of years will be telling as the minimum wage approaches $15 because the majority of their employees are service based employees – meaning, they are minimum wage employees.

 

Matt Johnson is a writer for The Systems Scientist and the Urban Dynamics blog; and is a mathematical scientist. He has also contributed to the Iowa State Daily and Our Black News.

You can connect with him directly in the comments section, and follow him on Twitter or on Facebook

You can also follow The Systems Scientist on Twitter or Facebook as well. 

Photo credit: Wikipedia

Photo explanation: Joe’s Crab Shack, San Diego 

 

 

 

 

Copyright ©2016 – The Systems Scientist

One thought on “San Diego raises the minimum wage, restaurants respond”

  1. Interesting. If “the labor market” had been left to operate on ‘supply-demand’ without government interference, this would have been worked out long ago. Restaurants have been around for thousands of years. Whether it is economic meddling at this end, or farm subsidies and bank bailouts to millionaires on the other end, government putting its thumb on the scale will distort markets. (Thereby leaving a lot of people to conclude that MORE government meddling is required, when it is actually LESS government that is needed.)

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