A new working paper by Dara Lee Luca of Mathematica Policy Research and Michael Luca of Harvard Business School looks at the impact of higher minimum wages from a new angle. Traditionally, scholars have focused on whether or not minimum wages reduce employment. But the Lucas asked something else: does it force firms out of business? In particular, they looked at the restaurant industry—about half of minimum-wage workers toil over food—in the San Francisco Bay Area, which contains 15 of the 41 cities and counties that have changed their minimum wages since 2012. Their analysis relies on data from Yelp, a restaurant-review app favoured by millennials.
The Lucas found that a restaurant has, on average, a one-in-250 chance of closing in any given month. Whether or not the odds change when the minimum wage rises seems to depend on the quality of the eatery—or at least, on its Yelp rating. Restaurants with a coveted five-star score are barely affected; but less impressive joints are suddenly more likely to close (see chart). Restaurants with a middling rating are about 14% more likely to shut down when the minimum wage goes up by a dollar. (The authors also show that rating is distinct from price—in other words, a glorious but cheap takeaway has less to worry about than sellers of pricey but tasteless fare).
Seattle is getting creative about the higher minimum wage. Some restaurants are now including 20% “service charge”. The restaurant uses that money to pay staff. This way the restaurant gets credit for spending the money towards the minimum wage. If it’s a tip, the restaurant has to pay minimum wage on its own.
Man come now. How is that ever appropriate… sigh. People might be educated but common sense is still not that common…
When will US as a society move towards transparent pricing and start including taxes, services charges, yada yada in the prices shown on the menu. I want to know what I’ll pay for what I buy, before I buy it and I don’t want to have to whip out a calculator to know that!
That is the practice in Singapore for decades.
Unfortunately, I can’t invest…
https://www.bizjournals.com/sanfrancisco/news/2017/08/04/yelp-earnings-forecast-buyback.html
Wow, Anthony Bourdain goes on an epic rant against my beloved Yelp…
Yet, isn’t this Yelp review quite appropriate for pointing this out???
I agree with Bourdain…yelp is for professional whiners…Passive agressive tyoes who don’t have the balls to complain to the wait staff when the problem could actually be solved…Imagine people actually having a conversation. …No …Yelp is the ultimate end of our texting, non comunitive society…Sulk at dinner then go home and whine on the Internet
I like KFC original. .Popeye is over breaded and dry…My Mom and Grandma were from Arkansas. .I grew up on homemade…KFC original is the closet thing…I love it, but my wife won’t let me eat it…Wants me to live to 100…
You’re a smart man Elt but I disagree with you on Yelp. There are some noise and petty reviews but in the aggregate the ratings are usually pretty accurate.
If you read more than a handful of reviews, you generally get a good feel of the place.
I have a thing for fast food fried chicken too but not when it is served IN ANOTHER RESTAURANT!!! This is how Yelp is fundamentally helpful. Of course, just like Craigslist, there is abuse or scams to be leery about but all in all both are useful resources. If used properly, we wouldn’t be having issues with either…
My wife only complains on yelp…never compliments. .I like TripAdvisor. .I try to give balanced reviews…I never complain. .unless directly to the staff…I just think it is more honest…Like when I saw a mouse at the Cantina…or cockroaches at my favorite taco place…I would have told the staff about Popeye…One time a friend served meatballs…I said they taste just like Ikea…she fessed up…I actually like Ikea meatballs, horsemeat and all
Tell her you don’t want to live to be 100. Old age isn’t all its cracked up to be. KFC is much more important.
I do the same, 99.9% of my Yelp reviews are compliments. I get it, I am not out to harm a person’s livelihood with the mighty pen but if something is not right (like serving Popeye’s chicken as your own) well that ought to be pointed out. If I wanted Popeye’s, I know where to go…
I agree…Pizza too…The only go thing about being old is I don’t have to worry about dying young…Plus now I get guilty pleasure from KFC when she isn’t with me…It is the salt that makes is so tasty and deadly…
Assholes complain about my vacation rental online…Never to my face…Sorry but I wasn’t brought up that way…If you have a complaint call me, I will fix it…But to go online with cheap shots 2 weeks later is pointless mean stupid counterproductive and makes my Russian wife want to go nuclear. …
Ooooh, did someone say nuclear???
