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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 study the impact of the minimum wage on firm exit in the restaurant industry, exploiting recent changes in the minimum wage at the city level. The evidence suggests that higher minimum wages increase overall exit rates for restaurants. However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).

In another ruling allowing pension cuts, an appeals court last week overturned a state labor board ruling that a voter-approved San Diego pension reform was invalid because the city declined to bargain the issue with labor unions.

It may turn out that the widespread belief that most Americans’ incomes have stagnated for years is, well, false or at least overstated. . . In a provocative new study, economist Bruce Sacerdote of Dartmouth College reviewed the material well-being of the poorest 50% and 25% of Americans. What he concluded was that even these families had achieved a “meaningful growth in consumption … (despite) a prolonged period of increasing income inequality … and a decreasing share of national income accruing to labor.”

California cities and counties will see their required contributions to the largest U.S. pension fund almost double in five years, according to an analysis by the California Policy Center.

In the fiscal year beginning in July, local payments to the California Public Employees’ Retirement System will total $5.3 billion and rise to $9.8 billion in fiscal 2023, according to the right-leaning group that examines public pensions.

Cities and counties from Portland, Maine, to Los Angeles have successfully passed local minimum-wage increases, but recent resistance in seemingly friendly territory suggests a momentum shift. . . Lawmakers in several other states also are pushing back against local minimum-wage increases. At least four municipalities in Cook County, Ill., have opted out of the county government’s move to raise the minimum wage in the Chicago suburbs to $13 an hour by 2020. Iowa Gov. Terry Branstad, a Republican, approved legislation in March to roll back higher minimum wages already approved in four counties. In Flagstaff, Ariz., council members just amended a minimum-wage increase approved by voters in November to slow the pace of increases.

Often, advocates could not raise enough money for signature gathering, advertising and other costs of an initiative campaign. Some of the most promising efforts, however, ran into a different kind of obstacle: an official summary, written by the state attorney general, that described the initiative in terms likely to alienate voters. Facing bleak prospects at the polls, the sponsors abandoned the campaigns.

Taxpayer advocates contend that the attorneys general — Democrats elected with robust support from organized labor — put a finger on the scale, distilling the initiatives in language that echoed labor’s rhetoric.

Amid an abrupt slowdown in growth, nearly 4,000 food-service jobs may have been cut or not created throughout San Diego County from the beginning of 2016 through February of this year, according to an analysis of federal payroll data by Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University.

One of the most obnoxious trends in the nation, and one that is particularly acute in California, is the continued push to enshrine public employees as a special, privileged

The pension fund for California teachers is about $97 billion short of the assets it would need to pay all of the benefits it owes to its members today, according to a new valuation from the California State Teachers’ Retirement System. . . The $202 billion fund has about 63.7 percent of the assets it needs to pay the benefits it owes. That reflects a 4.8 percent decrease in CalSTRS’ funded ratio from its most recent assessment.

Private nonfarm business sector multifactor productivity decreased at a 0.2-percent annual rate in 2016, the U.S. Bureau of Labor Statistics
reported today. This 2016 decline reflected a 1.7-percent increase in output and a 1.9-percent increase in the combined inputs of capital and labor. Capital services grew by 2.4 percent and labor input–which is the combined effect of hours worked and labor composition–grew by 1.6 percent. This was the first decline in multifactor productivity growth since 2009. 

Confusion and uncertainty over the prospect of hitting the magic number has pervaded the challenge of measuring the actual budget itself. Disagreement has not gone away over just how big the number is. “Brown pegs the ‘General Fund’ budget at $122.5 billion and $179.5 billion if special funds — such as those spent on highways — and bonds are included,” wrote Dan Walters in the Sacramento Bee. “But that’s less than half of the true budget, which includes federal funds — especially those for health and welfare services — and such things as the fees on college students and pension checks to retired public employees.”

Since 2012, the Los Angeles Unified School District has had the highest percentage of its bond funds going toward staff salaries and benefits. In that district – the state’s largest – 19.9 percent of school bonds have been spent on salaries and benefits.

The new study found that the average pension for a retired public employee in California was $68,673 in 2015, before benefits. By contrast, active private-sector workers earned on average just $54,326.

In lieu of steep menu price increases, many independent and regional chain restaurants in states including Arizona, California, Colorado and New York are adding surcharges of 3% to 4% to help offset rising labor costs. Industry analysts expect the practice to become widespread as more cities and states increase minimum wages.