Minimum Wage Hike Forces a Nonprofit Restaurant to Close
By Michael Saltsman
More than two dozen states and cities raised their minimum wages on Jan. 1. It’s well-established in the economic literature, if not in the minds of proponents of these laws, that the result will be job losses. Yet this empirical reality fails to capture the emotional reality of the employees who are let go, or of the business owners who had no choice but to let them go. I learned this on a snowy November day in Hillsdale, a college town in rural south-central Michigan.
Michigan’s minimum wage rose in September to $8.15 an hour from $7.40 (the minimum wage for tipped employees rose 17%, to $3.10 an hour). The wage will rise to $9.25 by January 2018. The law was enacted by a Republican legislature, and signed by a Republican governor to head off a more draconian proposal that left-wing activists were attempting to place on the November ballot.
But the good intentions behind these political machinations didn’t make a difference to Jack Mosley, a pastor who until this fall operated a restaurant in Hillsdale called Tastes of Life. The increased minimum wage, he told me, was “the straw that broke that camel’s back,” forcing him to close his doors and lay off his 12-person staff....
Mr. Mosley’s financial goal was to break even and use any excess funds to subsidize Life Challenge participants. After more than two years of operation on Beck Road, 2½ miles from the center of town, Tastes of Life had a steady flow of loyal customers, but rising food costs presented a challenge. Terri Tucker, who handled the restaurant’s finances, said the price of beef was up 40% in 2014.
Mr. Mosley and Ms. Tucker had planned to print new menus with higher prices to cover the food costs, but the September wage hike complicated those plans, in particular because the increase covered both tipped and non-tipped employees.
Handling this one-two punch of new costs presented Mr. Mosley with conflicting goals: raising prices and boosting customer traffic. “If we had a $10 menu item, it would have to be $14,” Mr. Mosley said. The restaurant’s customer base of seniors on a fixed income and Hillsdale locals made this option a nonstarter. The restaurant also had to find roughly 250 new customers a month, unrealistic in a small town of about 8,300.
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