Missouri's New Minimum Wage Law Will Be... Complicated

Authored by Jazz Shaw via HotAir.com,

Generally when we see news of a new minimum wage law it relates to a city or state raising it. Missouri went in the opposite direction recently, instituting a rule which forbids any local government entities from instituting a minimum wage which is higher than that state minimum. (Currently sitting at $7.70 per hour.)

That’s going to cause considerable consternation for people in St. Louis who only recently received a raise to $10.00 per hour because of a municipal law. (Associated Press)

Thousands of workers in St. Louis will likely see smaller paychecks starting Monday, when a new Missouri law takes effect barring local government from enacting minimum wages different than the state minimum.

The law is drawing protests in St. Louis and in Kansas City, where a recent vote approving a higher minimum wage is essentially nullified without ever really taking effect.

The impact is direct in St. Louis, where the minimum wage had increased to $10 after the Missouri Supreme Court sided with the city in a two-year legal battle. Days after the Supreme Court ruling, Missouri’s Republican-led Legislature passed a statewide uniform minimum wage requirement. The state minimum wage is $7.70 per hour. Republican Gov. Eric Greitens declined to veto the bill, allowing it to become law.

This new law seems to be somewhat unique in that it effectively also sets a maximum minimum wage rather than just a minimum. I was glancing through the summaries of minimum wage laws around the country and couldn’t find anyplace else which has tried this. So is it a good idea? Keep in mind that the law obviously doesn’t forbid anyone from paying a higher rate if they wish, and in fact a number of businesses (mostly smaller ones) have signed on to a pledge to stick to the new, higher rate of ten dollars.

I suppose one could approach this from the supremacy angle and say that the state has the right to determine such rules for all the counties and municipalities if they wish. After all, the federal minimum wage overrides any states which attempt to have a lower rate as the minimum, so the supremacy aspect should flow downhill from there.

But the idea seems problematic. It might be a way for a more conservative state government to stick a thumb in the eye of more liberal cities who are in line with the Fight for 15 crowd, but the net effect seems negative. One of the major hurdles to a national minimum wage hike is the fact that the cost of living can vary so wildly between large, urban areas and more rural districts. New York has had to look at such accommodations because the average rent in the Big Apple can literally be ten times higher than in some rural, upstate regions.

A city can get carried away (see Seattle for an example) and jack up their minimum wage to the point where it shuts down businesses and costs jobs, but it’s understandable if some of them want to take the average cost of living into account. Will this be challenged in court by the City of St. Louis? Can it even be challenged? Interesting questions and I’m sure the rest of the country will be watching how this one plays out because the minimum wage is a hot topic pretty much everywhere these days.

UPDATE: I almost immediately received feedback on this subject. Turns out it has been done before in at least a few states. Alabama already passed such a law and it stood up to at least one challenge.

Missouri Legislature Reverses St. Louis Minimum-Wage Hike

A week ago, we reported on a study from the University of Washington that exposed how the city of Seattle’s progressive minimum wage increases, which began in 2015, are – contrary to the hopes of misguided liberals – actually crushing the city’s poor.

Specifically, the study found that higher minimum wages caused a 9.4% reduction to total hours worked by low-skilled workers, or roughly 14 million hours per year.  Given that a full-time employee works 2,080 hours per year, that"s equivalent to just over 6,700 full-time equivalents who have lost their jobs, just in the city of Seattle.

While the higher minimum wage law remains intact in liberal Washington State - despite the research suggesting that it’s harming Seattle"s most vulnerable workers - the Missouri legislature recently acted to prevent a similar catastrophe from playing out in St. Louis by passing what’s known as a preemption law to invalidate a city-approved minimum wage hike that was slated to take effect in late August. The hike would’ve raised the city’s minimum wage to $10 an hour, from the state-approved $7.70.

Preemption laws are becoming increasingly popular in GOP-controlled states as cities – typically bastions of liberal sentiment – try to raise minimum wages above statewide minimum levels. As the Huffington Post reports, it’s impossible to say how many St. Louis employers will take the GOP up on the offer to slash pay, given the effect such a move could have on competitiveness and morale.

But if businesses agree that the wage hike was too aggressive, then at least some of them will likely revert to lower pay rates, particularly in low-wage industries like fast food.

“If St. Louis’ existing measure were to stay in effect, the city’s minimum wage would be $10 this year and would then climb to $11 in 2018. The statewide rate of $7.70 typically goes up just a few cents a year, since it’s tied to an inflation index.

St. Louis originally passed a minimum wage hike two years ago, prompting business groups to sue to stop it in court. The Missouri Supreme Court recently ruled that the St. Louis measure was lawful, but the new state preemption law renders it irrelevant.”

However, St. Louis is one of the more interesting preemption-law case studies because it undoes a hike that was already approved – even if it hadn’t yet gone into effect. But at least 17 states have preemption laws that stand in the way of local minimum wage legislation, according to a recent study by the National League of Cities.

Though Missouri is hardly alone. Just days after the Birmingham, Ala. City Council passed a wage hike in February 2016, GOP state legislators in Alabama passed a preemption law taking aim at the new $10.10 minimum wage. The Alabama chapter of the NAACP ended up filing a civil rights lawsuit against the state, claiming that the majority-white legislature was disenfranchising Birmingham residents, who are 73 percent African-American.

Fearing the political backlash associated with potentially cutting people’s pay, Missouri Gov. Eric Greitens wouldn’t affix his signature to the bill; Missouri’s constitution stipulates that bills that go unsigned by the governor automatically become law.

Pelosi Vows To Get A Bunch Of Teenagers Fired If Democrats Win Congress

Top congressional Democrats, including Senate Minority Leader Chuck Schumer, House Minority Leader Nancy Pelosi, House Minority Whip Steny Hoyer and Bernie Sanders, held a press conference earlier today to officially introduce their "Fight For $15" minimum wage legislation, dubbed the Raise the Wage Act.  Among other things, the bill primarily serves to more than double the federal minimum wage from it"s current level of $7.25 to $15 by 2024. 

The Raise the Wage Act would raise the minimum wage to $15 per hour by 2024 and would be indexed to the median wage growth thereafter. These increases would restore the minimum wage to 1968 levels, when the value was at its peak. The bill would also gradually increase the tipped minimum wage, which has been fixed at $2.13 per hour since 1991, bringing it to parity with the regular minimum wage. Moreover, it would also phase out the youth minimum wage, that allows employers to pay workers under 20 years old a lower wage for the first 90 calendar days of work. This legislation would give more than 41 million low-wage workers a raise, increasing the wages of almost 30 percent of the wage-earning workforce in the United States.

The Raise the Wage Act is front loaded to provide the biggest impact to workers. Upon enactment, the federal minimum wage would be increased from $7.25 to $9.25.  The following increases are: $10.10 (2018); $11 (2019); $12 (2020); $13 (2012); $13.50 (2013); $14.20 (2023); $15.00 (2024).

Meanwhile, foreshadowing the Democrats" key campaign promise in 2018, undoubtedly designed to win back working class voters of the Midwest who abandoned them "yugely" in 2016, Nancy Pelosi vowed her party would pass a $15 per hour minimum wage within the first 100 hours if they manage to recapture Congress during the next election cycle.

"We"re willing to fight for $15, and I"ll tell you one thing for sure, we win the election and in the first 100 hours we will pass a $15 per hour minimum wage."

"We"d rather have it now.  We"d rather win on the issue than worry about the election."

Of course, seemingly no amount of empirical evidence will ever convince progressives that raising minimum wages to artificially elevated levels is a bad idea.  Somehow the basic idea that raising the cost of a good ultimately results in lower consumption of that good just doesn"t compute. 

So while it will undoubtedly fall on deaf ears, we would once again point Ms. Pelosi to a recent study from the American Action Forum (AAF) which estimated that 2.6 million jobs will be lost around the country over the next several years as states phase-in minimum wage hikes that have already been passed (see "State Minimum Wage Hikes Already Passed Into Law Expected To Cost 2.6 Million Jobs, New Study Finds").  Shockingly, and only after running a lot of really complicated math using complex equations that most of us stupid people just wouldn"t understand, AAF ultimately concluded the whole elasticity of demand thing actually works (a.k.a. "the higher shit is priced the less people will buy of it").

Moreover, as Dunkin" Donuts" CEO recently pointed out, a significant number of Americans working for minimum wage are teenagers and not the "older, blue-collar workers" that Bernie and Nancy say they want to help.  Which, of course, means that to the extent they get to keep their jobs a fair portion of the minimum wage increases will simply flow to teenagers who may already be a part of affluent families.

But goodluck with the crusade, Nancy and Bernie!  If you get hungry along the way, we highly recommend you try out a sandwich from this new "Big Mac ATM" which comes with McDonald"s special sauce and all the fixin"s but requires exactly 0 of your minimum wage workers to prepare.

Perfect Example Of Why Job Losses From Minimum-Wage-Hikes Are Being Underestimated, 'Bigly'

Over the past several months, we"ve highlighted a number of economic studies analyzing the potential negative impact, in terms of job losses, that may be expected to result from the state-mandated minimum wage hikes that are currently being implemented around the country.

One such study came from the American Action Forum (AAF) and estimated that 2.6 million jobs will be lost around the country over the next several years as states phase-in minimum wage hikes that have already been passed (see "State Minimum Wage Hikes Already Passed Into Law Expected To Cost 2.6 Million Jobs, New Study Finds").  Here were a few of the key takeaways:

• In isolation, the minimum wage increases in 2017 will cost 383,000 jobs;


• The entire minimum wage increases currently phasing-in will cost over 2.6 million jobs; and


• Each job lost only leads to an extra $6,900 in total wage earnings across all workers.

After running a lot of really complicated math using complex equations that most of us stupid people just wouldn"t understand, these studies ultimately come down to a simple economic premise: elasticity of demand (a.k.a. "the higher shit is priced the less people will buy of it" rule).  In fact, the AAF analysis even summarized their study by saying that each 10% increase in wages results in an proximate 0.3% - 0.5% decline in net job growth...a rule which they used to conclude the following:

While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences. Meer & West (2015) find that raising the minimum wage reduces job creation. Specifically, they find that a 10 percent increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job growth rate. As a result, three years later employment becomes 0.7 percent lower than it would have been absent the minimum wage increase.

While the Meer & West (2015) findings may not seem very problematic, when taking into account the magnitude of the minimum wage increases and the number of states implementing new laws, the negative labor market consequences add up. Let’s first examine the minimum wage hikes of 2017 in isolation, without considering previous or future minimum wage increases under the new state laws.

The problem is that these studies consistently underestimate the number of jobs that will be impacted by minimum wage hikes.  For the most part, the economists simply tally up the number of jobs in a given market that currently fall beneath the new minimum wage threshold and then assume that a certain percentage of them will disappear.

In reality, minimum wage hikes trigger pay increases across the pay scale, not just for the employees earning minimum wage, because most people make employment decisions based on relative wages and not absolute wages. 

Consider, for example, the folks working at a California McDonalds where the minimum wage was $10 per hour in 2016 but is set to increase to $15 over the coming years.  Lets also assume that most of the customer service staff earns the minimum pay rate while managers earn $15.  Under the methodology above, the manager would never be counted as an "at-risk" position because his job would never technically fall below the new minimum wage.  But, in reality, there"s no conceivable world where the manager will simply agree to keep his $15 per hour pay rate once all of his workers have received a 50% pay increase and now make the same as him...instead, he"ll run some basic math and conclude he needs to be making $22.50 per hour to have the same "relative" compensation he had before or he"ll just go work as an order taker with less responsibility. 

And while these are simple concepts to most of us, even if we don"t understand the complicated econometrics equations, as the Associated Press points out today they"re completely foreign concepts to our elected officials who ignorantly passed minimum wage bills across the country without understanding the real economic consequences.  As a perfect example, apparently New York Governor Andrew Cuomo was shocked to learn that home healthcare experts would rather take his new $15 per hour minimum wage job flipping burgers with no stress than to earn the same amount of money for a job that requires a ton of expensive education and stressful, long hours....who knew?

It"s a national problem advocates say could get worse in New York because of a phased-in, $15-an-hour minimum wage that will be statewide by 2021, pushing notoriously poorly paid health aides into other jobs, in retail or fast food, that don"t involve hours of training and the pressure of keeping someone else alive.

"These should not be low-wage jobs," said Bruce Darling, executive director at the Center for Disability Rights. "We"re paying someone who gives you a burger the same as the person who operates your relative"s ventilator or feeding tubes."

There are 2.2 million home health aides and personal care aides in the U.S., with another 630,000 needed by 2024 as the Baby Boomer generation ages, according to the nonprofit research and consulting group PHI. New York state employs about 326,000 home health workers but is predicted to need another 125,000 by 2024.

For now, home health aides in New York state earn an average of about $11 an hour, though wages are lower in upstate regions. Advocates say the system needs an overhaul that focuses on higher pay, worker retention and finding methods of compensation beyond what is provided through Medicaid.

Here"s an idea...how about we just let markets set wage rates?

New Study In D.C. Finds That New $15 Minimum Wage Could Cost 1,200 Jobs

Authored by Ted Goodman via The Daily Caller

A new study that analyzes the potential effects of a $15 minimum wage in the District of Columbia (Washington, D.C.), found that an increase to $15 could cost 1,200 jobs.

The District of Columbia’s Office of Revenue Analysis released a report Thursday, asserting that 150,000 workers in the District would be affected by the higher minimum wage and as many as 1,200 jobs could be lost by 2020 due to the new policy.  Of course, nearly one-third of those jobs are in the food service industry where young people, already suffering from massive unemployment rates, represent a disproportionate percentage of the labor force. 

The study further states that as many as 2,000 jobs could succumb to the increased minimum wage by 2026.

The mayor’s “Fair Shot Minimum Wage Amendment Act,” stipulates that the minimum wage increases to $15 an hour by 2020, with incremental increases each year. The minimum wage is currently $11.50.

The findings revealed that nearly two-thirds of the pay increases will benefit non-D.C. residents who work in the District, but live elsewhere (likely Virginia or Maryland, which borders D.C.). While nearly two-thirds of the pay increases go to non-residents, D.C. residents will absorb 80 percent of the job losses.

“This study proves what we’ve known all along: this dramatic D.C. wage hike will hurt the most vulnerable in the District, costing them jobs and important economic opportunities,” Jeremy Adler, Communications Director for America Rising Squared, a conservative policy organization, told the Daily Caller News Foundation (TheDCNF).

“D.C. must focus on creating more good-paying jobs for workers that need them the most and it’s clear an artificial minimum wage increase is the wrong approach to achieving this goal,” Adler continued.

The Obama administration proposed an increase to the federal minimum wage from $7.25 to $9.00 an hour in 2013. The former president continued to call for an increase in the federal minimum wage throughout his presidency.

Seattle, Washington raised its minimum wage to $15 in 2014, followed by San Francisco and Los Angeles. New York Gov. Andrew Cuomo signed into law a new $15 minimum wage for his state in 2016, and the University of California proposes to pay its low-wage employees $15.

State Minimum Wage Hikes Already Passed Into Law Expected To Cost 2.6 Million Jobs, New Study Finds

Even though we know that Bernie and his alt-left compatriots will never tire of their endless "Fight for $15" no matter how much data we throw at them, we thought we would go ahead and highlight yet another economic study detailing the devastating job losses that will result from minimum wages hikes that have already been passed in states all around the country.

The latest study comes for the American Action Forum (AAF) and estimates that 2.6 million jobs will be lost around the country over the next several years as states phase-in minimum wage hikes that have already been passed.  Here are the key takeaways:

• In isolation, the minimum wage increases in 2017 will cost 383,000 jobs;


• The entire minimum wage increases currently phasing-in will cost over 2.6 million jobs; and


• Each job lost only leads to an extra $6,900 in total wage earnings across all workers.

Below are the 14 states where the minimum wage is set to increase in 2017 as well as the entire increases anticipated for states where large increases have been passed but will be phased in over several years. 

First, AAF estimates that the minimum wage increases planned for 2017 alone will result in 383,000 job losses.  The analysis assumes that each 10% increase in wages results in a 0.3% - 0.5% decline in the net job growth rate. 

While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences. Meer & West (2015) find that raising the minimum wage reduces job creation. Specifically, they find that a 10 percent increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job growth rate. As a result, three years later employment becomes 0.7 percent lower than it would have been absent the minimum wage increase.

While the Meer & West (2015) findings may not seem very problematic, when taking into account the magnitude of the minimum wage increases and the number of states implementing new laws, the negative labor market consequences add up. Let’s first examine the minimum wage hikes of 2017 in isolation, without considering previous or future minimum wage increases under the new state laws.

Of course, for most states that have enacted minimum wages increases, 2017 hikes are just one component of multi-year increases.  Below is a look at how much minimum wages are expected to increase overall after they"re fully implemeneted. 

Using the same correlations between minimum wage increases and net job losses noted above, AAF estimates that 1.8 million jobs will be lost once current increases are fully implemented. 

As if that weren"t enough, several states, including California, passed their current minimum wage laws several years ago.  Therefore, adding in jobs that have already been lost from current minimum wage legislation, AAF estimates that a total of 2.6 million jobs will be lost courtesty of misinformed liberal agendas. 

So goodluck with the continued crusade, Bernie!  If you get hungry along the way, we highly recommend you try out a sandwich from this new "Big Mac ATM" which comes with McDonald"s special sauce and all the fixin"s but requires exactly 0 of your minimum wage workers to cook. 

New York Times Admits "Higher Minimum Wage May Have Losers"

The New York Times would like for you to know that, after attending the annual meeting of the American Economic Association where they sat in on multiple presentations on the economic impacts of minimum wage, they can now confirm what most of us have known for most of our adult lives, namely that basic economic supply/demand models actually work.

Apparently, the NYT was pleasantly surprised when the first presentation suggested that higher minimum wage didn"t actually result in job losses, just lower hours, but then quickly realized it"s basically the same thing.

At first glance, the findings were consistent with the growing body of work on the minimum wage: While the workers saw their wages rise, there was little decline in hiring. But other results suggested that the minimum wage was having large effects. Most important, the hours a given worker spent on a given job fell substantially for jobs that typically pay a low wage — say, answering customer emails.

Mr. Horton concluded that when forced to pay more in wages, many employers were hiring more productive workers, so that the overall amount they spent on each job changed far less than the minimum-wage increase would have suggested. The more productive workers appeared to finish similar work more quickly.

Unfortunately, the second study left a bit less to the imagination.  After studying "tens of thousands of restaurants in the San Francisco area," researchers
Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research found that many lower rated restaurants have a unique way of dealing with minimum wage hikes: they simply go out of business.

A second study presented at the conference suggests another way that employers may respond to a rising minimum wage: simply going out of business.

The husband-and-wife research team of Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research identified the ratings of tens of thousands of restaurants in the San Francisco area on the website Yelp and found that many poorly rated restaurants tend to go out of business after a minimum-wage increase takes effect.

Finally, confirming what we"ve noted multiple times (and basic common sense for that matter), Zane Tankel, an owner of several dozen Applebee’s restaurants in the New York City area, informed the startled New York Times that higher minimum wage simply improves the ROIC profile of capital investments thereby speeding up employee replacement projects....shocking.

Zane Tankel, chief executive and equity partner in a group that owns and operates several dozen Applebee’s restaurants in the New York City area, said replacing low-skilled workers with higher-skilled ones after the state’s recent minimum-wage increases is “not something that we try to do.”

Mr. Tankel argued that differences in the productivity of low-level workers in his industry are not very big. “It’s just a lot more money for the exact same job description,” he said. He is accelerating automation in his restaurants, including tablet devices for ordering certain items and payment, to offset the costs of the higher minimum.

With that, here are some charts illustrating where the most minimum wage workers will lose their jobs over the coming years:

And while California and Washington DC have already won their "Fight for $15", here"s where all the other states stand in their efforts to crush low-income workers.

What Puerto Rico Can Teach Us About The Minimum Wage

This week, twenty states began implementing minimum wage increases that were passed during 2016. As the country waits to see how these increased wages this will affect the economy, the U.S. territories have already provided us with a grim example. 

After the 2007 Fair Minimum Wage Act was passed, each of the fifty states was required to raise the minimum wage from $5.15 an hour in 2006, to $7.25 by 2009. Few Americans realize that this legislation was also applied to the U.S. territories of Puerto Rico, American Samoa, and the Northern Mariana Islands, who were also forced to raise wages.

When the minimum wage is increased, the private sector is responsible for finding the means to actually pay for these increases. Though many companies will be forced to raise prices in order to continue operating within their profit margins, some might be left with no choice but to lay off employees or dramatically cut employee hours.

Since minimum wage pay is typically associated with entry-level workers, if employers are forced to let these employees go, they will lack the skills necessary to quickly rebound in the job market. As a result, unemployment rates begins to rise.

When minimum wage requirements are made at the city or state level, the losses experienced from high unemployment rates are offset in the local economy, since many who are unable to find work often relocate to an area where the minimum wage isn’t as restrictive.

However, for those living in U.S. territories, relocation is not as easy as it is for residents in the continental states. Without the flexibility to relocate, the economic catastrophe that resulted from 2007 minimum wage increase was felt on a grander scale. 

According to researchers Paul Kupiec and Ryan Nabil, “The impact on the economies of American Samoa and the Northern Mariana Islands was devastating. In American Samoa, by 2009, after only three of the ten scheduled minimum-wage increases, overall employment dropped 30 percent — 58 percent in the critically important tuna-canning industry. Real per capita GDP in American Samoa fell nearly 10 percent from 2006 levels. In the Northern Mariana Islands, by the end of 2009, employment was down by 35 percent, and real per capita GDP off by 23 percent.”

As the situation grew desperate, the governor of American Samoa testified before the U.S. Congress explaining that the new minimum wage policy created, “the real possibility that American Samoa could be left substantially without a private-sector economic base except for some limited visitor industry and fisheries activities.” He continued, “American Samoa’s economic base would then essentially be based solely on federal-government expenditures in the territory.”

Puerto Rico met a similar fate after the new minimum wage rate went into effect. The increase resulted in a minimum wage that was 75 percent of the Puerto Rican median wage. In fact, the situation grew so dire, unemployment in Puerto Rico surged and its GDP per capita declined by almost 7 percent between 2007 and 2013. As a result, many young and able-bodied Puerto Ricans left for the U.S. mainland, creating an imbalance as the old and less motivated were forced to stay behind. 

Additionally, foreign investors were turned off by hiring Puerto Ricans, since residents of Jamaica and the Bahamas would only cost half as much to employ.

By raising the minimum wage to as much as $15 an hour, states like California and New York are not just setting an American record for highest minimum wage, they are setting a global record as well. Even France, where socialism thrives, has a minimum wage equivalent to only $10.90 an hour.

In fact, the only time in history that the minimum wage was increased at economic levels comparable to that of New York and California was in 2007, when the U.S. territories implemented the Fair Minimum Wage Act. As we all know how that situation ended, we can only hope that in the future, governments can learn from history and avoid causing economic catastrophes.

There's A Massive Restaurant Bubble, And It's About To Burst

In January 2009, just three days after his inauguration, an arrogant President Obama, a "community organizer" and one-term senator from Illinois, proclaimed to then Republican Whip Eric Cantor that "elections have consequences, and at the end of the day, I won."  Unfortunately, he was absolutely right and the consequences of Obama"s election, having already crushed the coal industry, are about to bring the restaurant industry crashing down as well.

To be fair, Obama hasn"t crushed the restaurant industry single-handedly.  While Obamacare went a long way toward destroying the industry, it"s demise would not have been certain without a little help from leftist state legislators that have passed a slew of egregious minimum wage hikes in recent years (not that Obama didn"t try and fail twice to accomplish the same thing at the federal level).  Add to that a multi-year run of near 0% interest rates that have driven commercial real estate soaring and a dash of "hope" from culinary grads looking to become America"s next  famous celebrity chef and it"s easy to see that you"ve had a recipe for disaster simmering on low heat for years.

And while he avoided the political attributions we note above, a recent Thrillist article by Keven Alexander highlights the demise of one independently owned restaurant in San Francisco, AQ, that will be shutting down later this month for all the same reasons. 

When it comes to minimum wage, Alexander highlights that just a $1 per hour minimum wage increase can reduce an independent restaurant"s already thin profit margins by $20,000, or 10%.  So we imagine the $5 minimum wage hike that California just passed is probably slightly less than optimal for companies like AQ in San Francisco.

I should say before I go any further that all of the restaurant owners and chefs I"ve talked to are compassionate humans who support better coverage and livable wages, and seem on the whole progressive by nature, but restaurant margins are already slim as hell. There are no political agendas here -- they"re just genuinely worried about how to afford to pay extra without radically changing the way they do business.

Let"s start with the minimum wage. According to the Bureau of Labor Statistics, of the 2.6 million people earning around the minimum wage in 2015, the highest percentage came from service jobs in the food industry. Though the Obama administration"s attempt to increase the federal minimum wage above $7.25 failed, 21 states and 22 cities have raised the minimum wage starting this year, including Washington, DC ($12.50 an hour), Massachusetts ($11), New York ($9.70), and Arkansas ($8.50).

Considering that hour-wage workers are usually the lowest earners and the increase is essential to ensure they earn an actual living, this is the least controversial of the newer expenses and something almost everyone in the industry supports, in theory, but it doesn"t change the fact that it"s an additional cost that must be factored in. If you have 10 hourly employees working eight-hour shifts, five days a week and you raise the wages a dollar an hour, that comes out to a nearly $20K increase on the year. In AQ"s best year -- a phenomenal year by restaurant standards -- that would have been nearly 10% of profits.

And while California is certainly the poster child for misinformed liberal policies, as the Wall Street Journal recently pointed out, they"re hardly alone in their implementation of a massive minimum wage hike in 2017.

Meanwhile, when it comes to Obamacare, Alexander notes that AQ was hit with an incremental $72,000 of annual expenses in 2015 that didn"t exist in 2012, which eroded another ~30% of the company"s peak net income.

Then there"s health care. For the better part of its history, the restaurant business was a health care-free zone, which is ironic, given this Bureau of Labor Statistics" description of the back-of-house work environment: "Kitchens are usually crowded and filled with potential dangers." With the introduction of Obamacare, most restaurant workers finally got the coverage they"ve needed for years through the employer mandate, but critics often talk about the strain it puts on small-business owners due to a puzzling and controversial element that defines "full time" as 30 hours per week, and not the 40-hour workweek used almost everywhere else (the Save American Workers Act proposes to move this back to 40 hours).

Though this mainly affects bigger restaurants with staffs of 50 or more full-time workers, independent sit-down restaurants still need to provide suitable coverage (meaning it has to be affordable, less than 9.5% of the employee"s income) or face fees of $2K per employee. Consider AQ. Semmelhack told me that in 2012 they paid $14,400 for health care costs. In 2015, they paid $86,400. That"s an increase of $72K MORE per year than 2012, or 29% of their best year"s profit.

Then there are those pesky rental rates which have been driven ever higher by nearly a decade of 0% interest rates that have resulted in artificially high demand for "yieldy" commercial real estate.

In the restaurant world, rent always sucks. Unless you manage to play it perfectly, as a restaurant owner you"re either moving into a sketchy or "emerging" neighborhood where the rent is cheap but few want to go there, or you"re overpaying for an established "hood and need to be a runaway success from day one. And even if you do manage to make it in the former type of neighborhood, your success often ends up pricing you out of the "hood you helped revitalize.

In Miami, Michelle Bernstein"s Cena by Michy helped rebirth the MiMo historic district but was forced to close this year, after the landlord attempted to triple the rent. And even Danny Meyer had to close and move Union Square Cafe in New York, which, since 1985, had served as one of America"s culinary landmarks, when he couldn"t rationalize paying the huge rent hike the landlord proposed.

For all the reasons above, Alexander notes that "AQ will serve its last meal sometime in January, 2017"...an inconvenient fact that we"re sure the liberal politicians in Sacramento will promptly ignore. 

And while the publicly-traded restaurant companies have potentially started to take note of some of the risks above...

...the broader markets, which are also exposed to the same risks albeit to varying degrees, couldn"t seem to care less.

Minimum Wage Protesters Call For "Day Of Disruption" In 340 US Cities

In what may be an early crisis test for the president-elect, on November 29, the nationwide campaign to increase the federal minimum wage in the United States has calling for a "Day of Disruption", namely strikes and civil disobedience, on November 29 in the latest push to raise the minimum wage in the US to $15.

The Fight for 15 group is preparing to protest in 340 cities across the United States, and is calling for airport and fast-food workers to strike.

Group representatives have stated that they expect subcontracted service staff at roughly 20 airports to participate. It is anticipated to be the largest day of protest in the organization’s four year history, coinciding with the anniversary of the launch of the movement.

“Tuesday, November 29, the #FightFor15 is staging a national day of disruption. We won’t back down,” the Fight for 15 Twitter account posted on Monday morning.

BREAKING: Tuesday, November 29, the #FightFor15 is staging a national day of disruption. We won"t back down.
RSVP: https://t.co/4pJIXGkLjq pic.twitter.com/eJcUdCQJIE

— Fight For 15 (@fightfor15) November 21, 2016

On its website, the campaign writes the following statement: “For too long, McDonald’s and low-wage employers have made billions of
dollars in profit and pushed off costs onto taxpayers, while leaving
people like us – the people who do the real work – to struggle to
survive. That’s why we strike.”

Fight for 15 began in New York City, as fast-food workers went on strike demanding $15-an-hour pay, as well as union rights. The movement was successful, and in April of this year NY Governor Andrew Cuomo signed a law to increase wages to a $15 minimum by the end of 2018 in New York City, and by 2021 in other counties, including Nassau, Suffolk and Westchester.

For the rest of the state, the minimum wage will be raised to $12.50 by the end of 2020.

The movement has since spread to over 300 cities on six different continents, and has seen additional successes, winning $15 an hour in the state of California, and in large cities such as Seattle. Other cities, including Portland and Chicago, have seen significant minimum-wage increases.

While previously the group"s demands have been ignored at the Federal level, in a potential complication this July, then-Republican presidential candidate Donald Trump broke from his party’s platform, promising to increase the federal minimum wage, which may boost the leverage of the protesting organization.

However, Trump acknowledged that states with more expensive urban regions need to have a higher minimum wage than lower-cost rural areas.

Minimum-wage regulations, Trump noted, are most feasible when they are based on the living costs in each particular area, rendering the federal wage level regulations largely irrelevant to the economic reality in different regions of the US.

With a $10/hour federal minimum wage, individual states, he claims, could go above that threshold. “I would leave it and raise it somewhat. You need to help people and I know it’s not very Republican to say but you need to help people,” Trump said in his July interview.