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$15 Minimum
Gentry Liberalism in San Francisco

Local minimum wage hikes cause restaurants to leave or shut down and deter new ones from entering, according to a new Harvard Business School study of the San Francisco Bay Area restaurant industry that contradicts the orthodox liberal view that steeply raising the cost of unskilled labor will not affect jobs or hiring.

More interesting, though, are the study’s findings about which restaurants are forced to leave by the higher wage floors. The authors compared rates of departure of restaurants across different Yelp ratings, and found that the policy hit low and mid-quality restaurants much harder than top-tier restaurants. “Our point estimates suggest that a $1 increase in the minimum wage leads to an approximate 14 percent increase in the likelihood of exit for the median 3.5-star restaurant but the impact falls to zero for five-star restaurants.”

While a restaurant’s Yelp rating doesn’t correlate directly with its price range, this differential effect suggests that it’s easier for rich people to ignore the deleterious effects of minimum wage hikes. Virtually all of the most expensive restaurants in San Francisco have four or more stars; the city’s business and professional elite are unlikely to see many of their favorite high-end destinations pushed out of the city. Poor or middle-income workers are less likely to have the luxury of only frequenting top-rated establishments, not to mention that they are more likely to work at the restaurants that the hikes put out of business.

We’ve speculated before about the incentives for gentry liberals to support higher minimum wages that threaten to increase unemployment among the less-skilled; for example, sharpening incentives for firms to replace workers with machines will benefit Silicon Valley technologists and venture capitalists.

But this study puts the appeal of superficially progressive measures like the minimum wage hike among the wealthy into sharp relief: It will help clear out the restaurant scene of establishments they don’t want to go to while taking jobs away from people they don’t know.

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  • D4x

    These issues don’t just organically arise. The “gentry liberals” go along out of whatever (guilt?) motivates them to lean left. The campaign for $15/hour is NOT a “superficially progressive measure[s]”. It is the foundational battle plan in the War Against the 1%, courtesy SEIU, and WFP, the base for deBlasio, Sanders, EWarren, and the base for the ‘resistance’ that knows Schumer’s home address in Brooklyn.

    When will all the media, right, left, center, off the charts, acknowledge the hostile takeover of the Democratic Party?, currently on tour with Bernie (who says he is not a Democrat) &Tom DNC Perez?

    • Makaden

      It’s not guilt. It’s the dopamine-hitting phenomenon of self-righteous infused outrage expressed by self-proclaimed vanguards of anointed victim-classes.

      Basically, it feels good to hold the moral high ground.

      • D4x

        Dopamine doesn’t work that way. More likely something in the Starbucks.

        • Makaden

          I’ll have to disagree, at least with the first part, and possibly concede to you the additional factor. 🙂

          https://www.psychologytoday.com/blog/culture-shrink/201508/angers-allure-are-you-addicted-anger

          • D4x

            If anger triggers dopamine, I must need a mesolimbic transplant, or some green tea. Flip a coin 🙂

          • Makaden

            Ha! In all seriousness, though, I really think there is something to this. Not just the neurobiological factors, but the sense of being on a team that shared outrage produces, the production of and access to social power that moral condemnation provides, and the release of dark sides (masquerading as light) of our selves, such as bullying, destruction of the more powerful, outlets for jealousy, social revenge, etc. All of these are factors lying “beneath” the substance of the outrage, but which are, in my opinion, the primary drivers of moral outrage, rather than the substance itself, in many (if not most) cases. We have on our hands a new, powerful social dynamic that has become a powerful cultural phenomenon.

            It needs study. Like lots of it. Jonathan Haidt is a trailblazer in that regard.

          • D4x

            The “madness of crowds” has been studied, but no cure has been found. You are correct in seeing the ‘being on a team’ aspect, because that is how our post-modern secularists replace the tribal affiliations of the past. And, fail to comprehend for others who still have those affiliations, a failure which invites disdain.

            Good talk, even if it triggered a bushel of bad memories. I do wish dopamine came in OTC pills…

          • Makaden

            I live in Oregon. It kind of does. 😉

          • ——————————

            I am a believer that human nature drives every thing we do, and nothing can change it…no matter how much it is studied.
            Humans think they have risen themselves to a higher level than our ancestors…but in true actuality nothing has changed…only our technology has changed….

          • Makaden

            Sometimes doing studies, as I am suggesting, allows for a phenomenon to be named and placed in its proper context. The most serious error of sociology in the last 50 years is a consequence of structural biases in academic departments: the stacking of those departments with leftists. The result is that “right wing” movements, especially in my field of religion, are studied ad nauseum, in voices of condescension, disdain, and “problematization,” while “left wing” movements, in the rare times they are studied at all, are studied as movements of protest, “social justice,” or pockets of resistance.

            The academic left has utterly failed to write itself into the (increasingly global) social conflicts that beset our world, and not a bit of that reality is surprising. So now we (all of us) have no capacity to name or “problematize” leftist phenomena as human phenomena–which I believe is heading the same direction as the sentiment you just suggested. We have to do the work of carefully studying, comparing (especially globally), and collecting data on the left wing and then publishing the hell out of it. That will buy us quite a bit of capacity to push back, and not just in academic circles.

          • ——————————

            I didn’t realize that Leftist phenomena is barely studied. That is a huge problem, as you say. Perhaps the mainly Left-wing academia is afraid of the results, so just ignores it.

            But how to get the Left side studies?…that is a problem. The Right really has little organization with anything. They complain a lot, but can’t organize a movement to get things turned around. Even religions have failed to stop the madness of the last 50+ years.

            The good news is that the problem with Leftist thinking is that it goes against Darwinism and basic human nature…so it will fail someday….

    • Fat_Man

      Stealth?

      • D4x

        Seems invisible to all the media. And, it is not a hostile takeover.

        • Fat_Man

          Its been perfectly obvious to the most casual observers since they trashed Joe Liberman. Of course the media won’t say anything. They love it.

          • D4x

            Yes, but I do not see ‘conservative’ media online noticing the organized ongoing civil war inside the Democratic Party.
            Anyway, I need a favor – could you please reply so my Disqus thread loses the troll at PJM posting pornography replies? His ‘resistance’ is triggering me, and having pest control coming at 11 today to suppress the mosquitoes is not enough of a cognitive trick to erase those images. TY.

          • Makaden

            reply…

          • Fat_Man

            I can reply. But I have nothing to say. I hope this helps.

    • The SEIU took time out from its War on the 1% to wage a wage war on 27,000 ‘home care workers’ in Minnesota last fall. Only now are these parents of disabled children and children of disabled parents digging out. Check into it. Connoisseurs of hypocrisy and unintended consequences will enjoy that buffet.

      • D4x

        Minnesota reaps what they allow to sow. Guess Minnesota needs more time to figure out how to make the cost of home care workers double that of Iowa, by swallowing Medicaid dollars. NY Medicaid was the model for PPACA, even though New York has double that per capita cost, compared to Connecticut and New Jersey. No one seems to care, except The Manhattan Institute’s City-Journal.

  • Gary Hemminger

    This article states the obvious. so what exactly is the problem? Lower end restaurants being driven out of business. So what? If you are an elite, then I repeat again, so what? And if you are an employee of a low end restaurant that loses their job, so what, I say again, if you are an elite. The elites make the rules, and if the elites want only 4 star restaurants, that is what they will get. As long as the poor people vote democrat because of the handouts, then they think they are getting ahead, and the elites can continue to wipe out middle class jobs and make sure that they have enough low end workers to do their gardening, their pools, be their nannies, and wash their clothes. Everyone wins right? I don’t see the problem here.

    Unfortunately the only ones that could disrupt this are the Republican whacko’s who care more about abortion than actually winning elections. They are the ones that enable Democrats to do their dirty work. the republican party in this state has completely lost its mind. They are cultural warriors for a culture that died two decades ago.

    So in the end we are stuck with the mindless democrats who build policies for the elite. What else explains $10K subsidies for people who buy $100K Tesla’s in this state? Does anything else need to be said for a state with the highest energy costs in the continental US, the highest welfare rates and we give $10K subsidies to rich people buying expensive cars. Are you kidding me!

    • Jim__L

      To someone who hates the hoi polloi, fewer Subway shops and McDonald’s is a feature, not a bug.

      By the way, as far as the nannies and gardeners go — most of those are likely paid under the table, avoiding minimum wage concerns completely.

      As far as abortion goes — pro-life is not a losing issue; most of America supports some limits on abortion.

      • Brian

        The problem is that Republicans never frame it that way. Have you ever seen a Republican in a debate with their Democratic counterpart ask them what limits would they place on abortion? They never do. Instead, it’s Republicans always trying to defund, limit, or outright ban. Morons like Todd Akin are presented as the spokesman for the Republican position on abortion. Add in the Freedom Caucus, and you’ve also got a party that cares more about ideological purity than actually governing, to paraphrase Gary.

  • FriendlyGoat

    If only those people earning under $25,000 a year voted on minimum wage hikes, what do we suppose would happen? They’re not “gentry”, right?

    • QET

      Let’s go with those people and Rawls behind the Veil of Ignorance and ask, if it were true, or at least probable, that for every sub-$25K worker who received the raise, another sub-$25K worker would lose his job altogether, so that each sub-$25K worker behind the Veil, in considering his vote, faced an equal or near-equal probability of becoming a $30K worker or a $0K worker if the vote passed: how would he rationally vote?

      • FriendlyGoat

        There are good reasons why we and many other countries have minimum wages. http://www.businessinsider.com/minimum-wage-around-the-world-2015-5

        The only question is what is the right number. The answer to that is correctly depended on the locale and the economies of various places. We could start by examining the top-to-bottom pay rates at every Trump-branded property in the world. None of our business, you say? The maids, cooks and caddies probably don’t think that. Why should they? Hey, maybe the Trump pay rates are higher than we think. Who knows? Might be a good exercise for finding the right balance.

        At any rate, the idea of the REAL elites threatening job loss to workers EVERY time this is mentioned is pure bullsh*t. I used to be the accountant where the company had over a thousand employees. I knew or could know the pay of every one of them. This kind of access focuses the mind and makes one think “reasonableness” from all angles. We’d be a better country if everyone had such access.

        • Tom

          “At any rate, the idea of the REAL elites threatening job loss to workers EVERY time this is mentioned is pure bullsh*t.”

          And yet, the job losses keep happening over and over and over and over again…

        • Boritz

          ” threatening job loss to workers EVERY time this is mentioned”

          Conservatives have been filling spiral notebooks (not very computer literate as you would imagine) with accumulated liberal wisdom. This is the flip side of the blue city political leaders threat that if you lower taxes the first things we cut will be police, fire, and garbage collection. Not one ounce of the bureaucratic rent-seeking bloat will be touched as long as there is at least one patrol car, one fire truck, and one garbage truck operating. If you’re going to threaten people, the most effective way is to threaten them with concerns at the base of Maslow’s pyramid. You want to talk about “focuses the mind” that will do it. I’m not sure about “better country”.
          Others have offered an economic interpretation of the minimum wage. I offer a political one for the sake of completeness.

          • FriendlyGoat

            Stop over-doing or you’ll probably have an aneurysm.

    • Fred

      There’s no way I can top QET’s response, but I would add this. Taking people who earn under $25K per annum as we find them, not behind Rawl’s veil, of course most of them would vote to raise the minimum wage. People with those kinds of jobs tend not to be educated, and in many cases not intelligent, enough to comprehend the broader effects and long-term consequences of such a precipitous rise in the minimum wage. Likely they would simply think “More money! Yaaaaaay!” It would never occur to them that it could be their job that gets cut and their children denied the entry-level opportunities from the skyrocketing cost of labor. In other words, since people with those kinds of jobs tend to have a very short-term outlook (that’s why they have those jobs in the first place), your argument is pretty weak tea.

      • FriendlyGoat

        As for calling everyone under $25,000 “not intelligent”, let’s remember we let them vote. Some of them voted for Donald Trump. A LOT of people not far north of that rate voted for Trump on his promise of “we’re not gonna forget you any more.” Let’s show them the Trump tax returns, the Trump-property pay scales and “improve” their economic understanding of the real world.

        • Tom

          And yet, most of them voted for…Clinton.

        • Fred

          First, I didn’t call everyone in that category “not intelligent.” I was talking about group tendecies. Second, I doubt improving their economic understanding would have quite the result you envision (See QET’s response). Third, Trump’s tax returns are a non-issue. He is not and never was under any legal obligation to release them, and he is president despite not releasing them during the campaign. They have now become nothing more than a stick the “resistance” attempts (largely unsuccessfully) to beat him with.

          • FriendlyGoat

            And we will continue beating Mr. Trump with that issue as he seeks to repeal basically the only two taxes which hit him—-Alternative Minimum Tax and Estate Tax. The level of ridiculousness from Mr. Trump’s supporters concerning his tax returns is unprecedented. Half of the country—-probably more than half as time goes on—–will continue to ride the issue. We’re not stupid enough to drop it.

  • markterribile

    We should expect ‘reforms’ to worsen the problem while driving it out of sight. It’s what these reformers do.

  • DanielAMcAllen

    I’m not sure this study can really be used to draw meaningful conclusions. Yelp allows you to sort by cost. So sort first by stars then by $$ and see what happened to high rated/low cost restaurants.
    My guess is that highly rated+low cost have a decent survival rate because happy customers will generally be willing to absorb higher costs, particularly when it is clear the reason for the increase is the mandated wage increase.
    There is a limit to this of course because many people eat at inexpensive places because it’s what they can afford.

  • GlobalTrvlr

    “this differential effect suggests that it’s easier for rich people to ignore the deleterious effects of minimum wage hikes. ” Brilliant work, Harvard. Now if you could just explain this basic math concept to such geniuses as Jerry Brown, Gavin Newsome and Garcetti.

    • Boritz

      To them it’s just the myth of arithmetic.

  • Those who eat out because they ARE out are somewhat different from those who go out to eat. If the restaurant is your destination the nickels and dimes are not important. If you are seeking a meal because you are away from your kitchen, well, it might be easier to just let yer tummy grumble a little bit until you get home. As regards The Poor and the Rich…. which is which?

  • Rick Caird

    What??? You mean the narrative that it will have no affect on business is not correct. Quick, call Krugman and Kreuger. They must be informed.

  • surellin

    Hey, why should the good folks of SF be pikers? I say that if raises in the minimum wage have no effect on unemployment, then let’s raise the minimum wage to $100. How does that sound? Or $1000?

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