Exclusive Report: Seattle’s $15 Minimum Wage

The city of Seattle recently jacked up its minimum wage to $11/hr, with scheduled future increases up to $15/hr. In response, one of the city’s landmark restaurants, Ivar’s Salmon House, took the unusual step of paying workers $15 two years ahead of schedule, and instructed customers that they no longer need to leave tips. Ivar’s increased its menu prices by 21 percent.

The Associated Press wrote a glowing report about Ivar’s new policy. The report, which was picked up by dozens of newspapers around the country, including the Dayton Daily News, made Ivar’s policy sound like it created only winners, no losers.

It is staff, not diners, who feel the real difference, with wages as much as 60 percent higher than before. One waitress is saving for accounting classes and finding it easier to take weekend vacations, while another server is using the added pay to cover increased rent.

The AP article strongly suggests that everyone at Ivar’s—management, staff, and servers—is doing at least as well as before, with many doing better. But that is possible only if Ivar’s is taking in more money overall from diners. The article suggests that is, in fact, the case: “The restaurant’s revenue is up 20 percent.”

Where does this extra revenue come from? Sure, prices are higher, but remember that diners no longer need to tip. Doesn’t the lack of tips offset the effect of the higher prices? Yet, Freedom!’s on-the-scene reporter, Ron Browning, went to Seattle to find out. According to Ron’s exclusive report from Ivar’s, social conditioning makes it hard not to leave a tip.

Though the menu has a slight disclaimer about the minimum wage hike and that tipping is no longer necessary, it is difficult to just walk away without leaving a tip. It might be possible in a very impersonal setting, but with tipping so ingrained in the system, it is hard not to feel like a heel, to just walk away without leaving a tip.

So no doubt a lot of customers are still leaving tips, and assuming that business does not fall off, that would explain why there’s more money to go around for everyone at Ivar’s. But that would also suggest that the no-tip disclaimer is irrelevant. It would also suggest, implausibly, that Ivar’s previous prices were too low; to increase revenue, all they had to do was to increase prices by 21 percent across-the-board. Why wouldn’t they just increase prices sooner, without waiting for the excuse of higher wages?

A more plausible interpretation is that some diners are tipping as usual but others are now tipping much less, if at all. That suggests that Ivar’s policy is effectively a form of price discrimination; some customers pay more (including tips) than others for the same good.

Price discrimination can increase revenue if Ivar’s has essentially two types of diners; those that are very loyal to Ivar’s and don’t care too much what they pay, and those that are more cost-conscious and willing to dine somewhere else. The policy cleverly allows Ivar’s to extract more revenue out of the devoted customers, while the no-tip option allows them to retain their more cost-conscious customers.

Price discrimination, however, only works in certain circumstances. In particular, the firm needs to have some degree of monopoly power, which means the firm can’t have a lot of competitors selling almost exactly the same product. Ivar’s does plausibly have some monopoly power, since the restaurant is a longstanding fixture in Seattle, and offers a unique dining experience with the water nearby outside, and the interior decorated with antique and native art. In contrast, a conventional pizza-and-subs joint generally faces too much direct competition to successfully practice price discrimination.

In any event, the AP article depicted the new policy as a terrific boon to the restaurant’s servers.

Rochelle Hann, 25, is a second-generation worker at Ivar’s. Like her mom, she has performed a variety of roles, including serving, bookkeeping and even dressing up as a giant clam. If she keeps working 30 hours a week, her annual pay will jump about $12,000 — money she’s socking away for accounting classes at a community college.

“Before, I felt like it was maybe not quite paycheck-to-paycheck, but now I don’t even have to worry about it,” she said. “I just went away for the weekend, and it was an easy expense.”

Brett Richards, a 50-year-old singer and guitarist, has worked 25 years in food service, including the past eight at Ivar’s. Before, he made minimum wage, plus tips. Now, he gets $15 an hour, including a share of the 21 percent menu price increase, plus any additional tips customers leave. He expects to make almost $7,000 more this year, money that’s helping him with his increased rent and with taking his kids out to eat a little more often.

Our reporter, however, got a rather different reaction from his own server.

She has worked at Ivars for a year and half, as she studies at the University of Washington. Last summer she was earning enough to be paying down on her student loans, this summer has been a bit more lean. “To be honest”, she said, “I really do not like the change.”

As usual, media reports need to be taken with a very large grain of salt.

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Did Hitler win an election?

A recent quote from Candidate Bernie Sanders got quite a bit of attention online:

A guy named Adolf Hitler won an election in 1932. He won an election, and 50 million people died as a result of that election in World War II, including 6 million Jews. So what I learned as a little kid is that politics is, in fact, very important.

This quote also caught the attention of Glenn Kessler, a soi-disant “fact checker” at the Washington Post. Kessler took issue with Sanders’ interpretation of history, and ultimately awarded him “Four Pinocchios,” the Post’s harshest rating, reserved for untruths that rise to the level of “whoppers.” That’s as many Pinocchios as Obama got for “If you like your health-care plan, you can keep your health-care plan.”

Hitler was a loser when he appeared on the ballot. He mostly gained power not through the voting booth but through violence, intimidation and deceit. Still, we wavered between Three and Four Pinocchios, given that the Nazis did gain seats in the parliament.

But we ultimately decided that calling it “an election” devalues the traumatic history of the era, and Sanders should clarify the record — especially when legions of his supporters are repeating his flawed history lesson all over the Internet.

The Post’s Karen Tumulty joined the attack by captioning a pic she tweeted as follows.

The Democratic hopeful earns Four Pinocchios for getting his history very wrong.

But the false history here comes not from Sanders, but from the Washington Post. The fact is that in 1932, as Kessler’s own exposition shows, Hitler won not just one, but actually two elections.

[T]he July 31 elections resulted in the Nazis winning 230 seats and 37 percent of the popular vote. Suddenly no government could be formed without either the Nazis or the communists, and Hitler demanded that he be appointed chancellor.

Hindenburg refused, offering Hitler the vice-chancellorship, which Hitler declined. The government fell and yet more elections were held for the Reichstag on Nov. 6. This time, the Nazis lost 34 seats, ending up with 196.

But Hindenburg’s next choice for chancellor also could not form a government. Finally, on Jan. 30, 1933, Hindenburg appointed Hitler as chancellor in an effort to break the deadlock.

In the July 31 election the Nazis, although they did not attain a majority, won nearly twice as many seats and popular votes as any other party. Support for the Nazis dropped somewhat on November 6, but even in this election, the last free and fair election held throughout Germany for nearly 60 years, the Nazis won the most seats and votes–11.7 million, compared to 7.3 million for the next-highest party.

Nazi strength in these two free elections, along with the failure of the opposition to coalesce, is what eventually forced Hindenburg to appoint Hitler Chancellor. The historical fact is that Hitler became Chancellor of Germany as the result of a political process that was essentially legal and democratic.

Although the Wiemar Republic was not fully a parliamentary system, Hitler won the 1932 elections with pluralities in much the same way a plurality made David Cameron Prime Minister of the UK in 2010, and Stephen Harper Prime Minister of Canada in 2006. Although neither Cameron nor Harper attained a majority, both were said to have “won” their elections, and so it is fair to say that Hitler won as well.

Despite the Washington Post‘s tortured arguments, Bernie Sanders is correct that Hitler entered the German government by winning elections. The lesson Sanders draws from this incident is also correct and wise; that elections are no guarantee against tyranny, and that “politics is, in fact, very important.”

Bernie Sanders 1, Washington Post 0.

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Not Really Accurate

Vox.com is a commentary site founded by typical credentialed-but-not-educated millenials that, for some reason, was recently bought by NBC for $200 million.

Here’s a tweet Vox put out today. We wonder how many of our students could say what is wrong.

CNbd4iFWEAAuz_YAnswer here.

If these guys are worth $200 million, we’re holding out for $1 billion.

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LOLZ: In July, Goldman Sachs was bullish on China

From a Bloomberg report dated Wednesday, July 8.

Goldman Sachs Says There’s No China Stock Bubble, Sees Rally

Kinger Lau, the bank’s China strategist in Hong Kong, predicts the large-cap CSI 300 Index will rally 27 percent from Tuesday’s close over the next 12 months as government support measures boost investor confidence and monetary easing spurs economic growth. Leveraged positions aren’t big enough to trigger a market collapse, Lau says, and valuations have room to climb.

Goldman Sachs is sticking with its optimistic forecast in the face of record foreign outflows, the biggest-ever selloff by Chinese margin traders and a chorus of bubble warnings from international peers. The call hinges on the success of unprecedented government efforts to revive confidence among individual investors who watched equity values tumble by $3.2 trillion over the past three weeks.

“It’s not in a bubble yet,” Lau said in an interview. “China’s government has a lot of tools to support the market.”

In the seven weeks since Lau made his prediction, the CSI 300 has fallen 23%. At this point, for his 12-month prediction to come true, the index would have to rally 65% in just over 10 months. Hey, it could happen, but we wouldn’t bet on it.

As always, the best investment advice is to ignore all investment advice.

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Rutgers: ‘No such thing’ as free speech

Anyone who doubts that today’s campus administrators harbor intense ideological hostility to free speech need only check out a web page from Rutgers University. On an official university page hosted by the Dean of Students, Rutgers creepily warns students to “think before you speak,” which sounds like a slogan from a dystopian novel. The intention could hardly be any clearer as the site declares explicitly that “There is no such thing as “free” speech.” And in what sounds like a threat, Rutgers warns that “all speech has a cost and consequences.”

Consequences you say? We would remind Rutgers that the First Amendment, at least for now, prohibits punishing students for their speech. Rutgers knows that, of course, but the purpose of this website is to intimidate students who don’t know their rights, or just don’t want any trouble. Such are the enlightened ideals of today’s university administration.

Yielding to their totalitarian temptation in a way that would have made Stalin proud, Rutgers even encourages students to snitch on their mates for their crime speak.

When the Rutgers site started catching online criticism, the cowards stealthily edited out the line about there being “no such thing” as free speech. They had to do this because they can’t afford to let the public know who they really are.

Of course, even with that line deleted, the rest of the page remains an abomination.

Here are the before and after images.

Before.

Before2After.

After2Clearly Rutgers is a benighted place where no serious scholar or freedom lover should want to enroll.

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‘Child Protective’ Tyranny: New Jersey Edition

In a small victory for good sense, the New Jersey Supreme Court recently granted a New Jersey mother a chance to defend herself against charges of ‘gross neglect’ of her child.

According to court documents, the woman, identified by the initials E.D.O., left her sleeping [19-month-old] daughter in a locked car with the engine running and the windows slightly opened while she shopped in a South Plainfield store for about five or 10 minutes in May 2009.

The temperature at the time was about 55 degrees, according to court documents. A security guard noticed the child in the car and called police.

The Division of Child Protection and Permanency filed a complaint against the woman and her husband seeking care and supervision of their four children.

The woman appealed, but her request for a hearing in front of an administrative law judge was denied and the appeals court upheld that determination.

The 7-0 ruling Thursday by the state’s highest court held that the entire circumstances of the incident should be taken into account before a determination of neglect or abuse is entered.

While the Court’s ruling is a positive step, the case is not over yet, and the family remains in legal jeopardy. The fact that the state agency is “seeking care and supervision of their four children” suggests to us that the bureaucrats are trying to take away all four children.

Furthermore, even if the family is eventually cleared, the time involved is astonishing. The date of the incident suggests that the bureaucrats have had this family under siege for more than six years now. The U.S. was at war with Nazi Germany only for a bit more than three. Even the Supreme Court was appalled.

The court also chided the Division of Child Protection and Permanency for the length of time it has taken to resolve the case, noting that the child will be nearly 8 years old when the case is heard by a judge.

The ‘Division of Child Protection and Permanency.’ Does the ‘permanency’ part refer to how long they keep cases open?

We can’t even imagine how horrible it must be for this family to have these charges hanging over their heads for going on seven years, even if they are eventually acquitted. Justice delayed, as the saying goes, is justice denied.

Meanwhile, the professional and objective journalists at the Associated Press used this story as an opportunity to remind the peons that leaving children unattended in vehicles is serious business, you guys.

Awareness about the dangers of leaving young children alone in cars has grown over the last several years. More than 600 children in the United States have died since 1998 after being left in cars, according to the National Highway Traffic Safety Administration. In a case that drew extensive publicity, a single mother in Arizona was sentenced in May to 18 years of supervised probation for leaving her two young sons in a car that reached temperatures in excess of 100 degrees while she went to a job interview.

We get the point, except that the New Jersey situation did not pose the same danger at all. In this case, the temperature was only 55 degrees, the windows cracked, and the child left alone for just 5-10 minutes. As the Court ruled, “the entire circumstances of the incident should be taken into account.”

In these cases of children left briefly in vehicles, Lenore Skenazy of Free Range Kids points out that the child was almost certainly in more danger when the vehicle was moving. After the parent returned to the vehicle and started driving home, the danger to the child increased.

But the bureaucrats don’t think that way, or just plain don’t think at all, and although they’re unelected and unaccountable nobodies, they somehow have the power to destroy a family.

And people wonder what we’re talking about when we say that Americans have lost their country.

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Annals of Post-Modern Art

Brooklyn-based ‘artist’ Kurt Perschke created a 15-foot, 250 pound red ball.

The ball has made an appearance at a number of cities around the world – including London in 2012 – and is said to draw attention to city spaces.

This week, the city space to which the ball drew attention was in Toledo, where the ball accidentally broke free of its moorings at the Toledo Museum of Art and careened out of control along the city streets. Residents who had their parked cars damaged were instructed to contact the museum, which likely retains insurance for this sort of thing.

Despite the mishap, the Toledo museum remains a top-10 or so art museum in America, perhaps top-5 apart from the East Coast.

But the out-of-control 250 pound ball is yet another reason to steer clear of the post-modern collection.

The True Purpose of the Minimum Wage: Discrimination

Minimum wages have now been around for over 100 years, and while the stated justification for the wage is always the alleviation of poverty, the real motivation is and always has been discrimination. The minimum wage always discriminates by disadvantaging one group of workers relative to another, or one business relative to another.

For instance, the earliest historical minimum wage laws in the United States were intended to discriminate against women. An early example was the minimum wage imposed by Congress on the District of Columbia in 1918. This minimum wage was struck down by the decision of the Supreme Court in Adkins v. Children’s Hospital (1923). How do we know the Adkins minimum wage was designed to discriminate against women? Because the minimum wage applied only to women–it did not apply to men. The purpose was to protect jobs for men by pricing women out of the market. In fact, the Adkins case was brought by a female elevator operator who lost her job to a man who was legally paid less than she could be.

As a modern example, the New York Fast Food Wage Board earlier this month decided to raise the minimum wage to $15 by 2018 in New York City, and by 2021 in the rest of New York State. The obviously discriminatory aspect of this new wage is that it does not apply to all workers, but only to those working literally in fast food.

The Fast Food Wage Board’s decision would only apply to fast-food restaurant chains with at least 30 outlets. Fast-food service is defined as a restaurant where food and drinks are served at counters, and customers pay before taking the food to a table.

So McDonald’s has to pay employees $15, but farther down the street at Momofuko Ko, where the beautiful people pay $175 per person for Asian fusion, the kitchen help gets only $9. A non-franchise restaurant chain, fast-food or otherwise, with 20 outlets needs only to pay $9. But a Burger King franchisee with only a single restaurant must pay $15. Fairness!

This policy clearly advantages the sit-down restaurants relative to the fast-food establishments. To some extent, the two types of eateries are substitutes, and so the wage policy benefits the sit-down industry at the expense of the fast-food industry. One wonders to what extent the sit-down restaurants were involved in creating the policy in the first place, and how much political pressure they’ll exert in order to preserve their advantage in the future.

Note also that, as is so typical of modern governance, the new wage was imposed rather undemocratically. None of the people’s elected representatives in the legislature was involved. The law was enacted solely by a handful of appointed, unelected officials–the state labor commissioner and members of the Fast Food Board.

Finally, some people are predicting that the new fast-food wage will indirectly force wages higher in other industries.

Cuomo might not have to use his political skills to push through the next minimum wage hike. Market pressure might force the business community’s hand on raising wages because of the Fast Food Wage Board decision.

“It will likely put pressure on employers in other industries to raise wages in order to compete for workers,” Irene Tung, a policy researcher for the National Employment Law Project, told the New York Times.

“It would be very attractive for somebody working at the Gap, making around $9 an hour, to look across the street and see Chipotle paying $2 or $3 or $4 more and decide that they would rather work at Chipotle,” she said.

Well, Irene Tung may work as a “policy researcher,” but she has her analysis precisely back-asswards. Working at Chipotle may well become more attractive than working at The Gap, but to benefit from that, the Gap worker needs to get Chipotle to hire her. And that won’t be so easy because Chipotle and the rest of the fast-food industry will be cutting back on their hiring–the higher wage decreases the quantity of labor demanded. The flow of workers will therefore go in the opposite direction–out of fast-food and into other industries like retail. Rejected fast food workers would rather work for less in retail than not at all, so the Gap’s pool of applicants at a given wage will increase. The Gap won’t have to pay more to retain workers; they might even be able to pay less. Contrary to Irene Tung’s prediction, the minimum wage will result in downward pressure on wages at The Gap.

Economics is hard.

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