Facing High Labor Costs from Minimum Wage Hikes, Chicago Restaurant
Closes, by Leah
Jessen, 8/23/16
A Chicago restaurant abruptly closed
this week, with ownership blaming the “rapidly changing labor market” and a 27
percent increase in base minimum wage costs over the last two years as culprits
for the collapse.
Cantina
1910, a farm-to-table Mexican restaurant
located in Chicago’s Andersonville neighborhood, opened in September 2015.
Former Cantina 1910 employees said
they were shocked to find out late Sunday evening of the closing, DNAinfo
reported.
“We are unable to further raise
prices in this competitive restaurant market in order to sustain the labor
costs necessary to operate Cantina 1910,” Mark Robertson and
Mike Sullivan, Cantina 1910’s
owners, said in an emailed statement to The Daily Signal.
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In December 2014, the Chicago City
Council passed an ordinance to raise the city’s minimum wage from $8.25 an hour
to $13
an hour by 2019. The minimum wage for non-tipped
employees went up to $10.50 an hour on July 1.
“Unfortunately, the rapidly changing
labor market for the hospitality industry has resulted in immediate,
substantial increases in payroll expenses that we could not absorb through
price increases,” the restaurant’s owners said. “In the last two years, we have
seen a 27 percent increase in the base minimum wage, a 60 percent increase in
kitchen wages, and a national shortage of skilled culinary workers.”
The owners say they “do not see a
path forward” with mandatory paid sick leave and minimum wage set to increase
in 2017.
They stated: As we look down the
road, we are facing a Dec. 1 change in federal labor regulations that will
nearly double required salaries for managers to qualify as exempt, a 2017
mandatory sick leave requirement and another minimum wage increase. Coupled
with increasing Chicago and Cook County taxes and fees that disproportionately
impact commercial properties and businesses, we are operating in an environment
in which we do not see a path forward.
Raising the minimum wage was a “much
needed” and “an essential
step in making sure that hard work pays
off for all of our residents,” Chicago Mayor Rahm Emanuel, a Democrat and
President Barack Obama’s
former chief of staff, said in a July 2015 statement.
Employment in the Chicago area’s
leisure and hospitality sector sunk to a five-year low, according to government
data, after a $1.75 an hour minimum wage hike went into effect in July 2015, Investor’s
Business Daily’s Jed Graham wrote this past
January.
“If Illinois mandated $15/hour
starting wages this would cost over 300,000 jobs statewide.” —@JamesBSherk
“The law of demand states that when
prices rise, customers buy fewer goods or services,” James Sherk, a research
fellow in labor economics at The Heritage Foundation, says. “Cantina 1910’s
closing is another demonstration that this economic law applies to businesses
too.
“Chicago raised mandatory starting
wages in the city, but the restaurant could not afford to stay in business at
those prices. So it closed and all its employees lost their jobs.
Heritage Foundation analysis finds that if Illinois mandated $15/hour starting wages
this would cost over 300,000 jobs statewide.”
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