Rep. Alexandria Ocasio-Cortez, D-N.Y., an advocate for a $15 minimum wage, returned to work as a bartender for one day. Ocasio-Cortez said: “All labor has dignity, and the way that we give labor dignity is by paying people the respect and the value that they are worth at minimum. We have to make one fair wage, and we have to raise the national minimum wage to $15 an hour, nothing less.”

The issue is simple: Does a government-mandated minimum wage help or hurt the very workers and job-seekers that Ocasio-Cortez wants to help?

Ask her former boss, who owned the Coffee Shop diner in Union Square where AOC used to work. Late last year, the Coffee Shop closed its doors after 28 years, sidelining 150 employees. How successful was the place, where diners often came to celebrate special occasions? About the Coffee Shop, Forbes wrote last year: “For nearly 30 years, serving those many occasions has added up to enormous success. According to Restaurant Business magazine’s 2017 ranking of the 100 highest-grossing independent restaurants in the U.S., Coffee Shop served 314,000 meals and pulled in an estimated $14.3 million in sales, good enough to land in the 79th spot on the list. Coffee Shop stands out as one of few non-steakhouses (there are 24, mostly in New York and Las Vegas) or bottle-service meccas (the Tao Group has five on the list) to crack the top 100, and to do so consistently for nearly two decades.”

But co-owner Charles Milite cited higher rent and the increased minimum wage as the reasons for closing. New York’s minimum wage law would have added $46,000 a month to his labor costs in 2019. Milite said: “I know it doesn’t sound like much — $2 an hour. But when you multiply it by 40 hours, by 130 people, it becomes a big number. It was going to increase our monthly payroll $46,000.”

New York City’s minimum wage for businesses with 11 or more employees had gone from $11 in 2017 to $13 in 2018. And then it increased to $15 in 2019. Milite said: “It’s a wake-up call for our industry in general. When a restaurant is one of the top-ranked restaurants in America, sales-wise, and can no longer afford to operate, you have to look at that and say there’s a shifting paradigm in the business.”

Proponents of raising the minimum wage argue that it actually stimulates employment. To make that case, they turn to a famous study known as the Card-Krueger study. The study, cited by Democratic politicians such as Bill Clinton and Barack Obama, supposedly demonstrated that when New Jersey hiked its minimum wage, there was either no effect or a small positive effect on employment at fast-food restaurants relative to the adjacent state of Pennsylvania, which did not raise its minimum wage. These results stood the bulk of economic research about the minimum wage on its head.

But there were numerous problems with the study, not least of which is that it covered only an 11-month period, starting two months before the minimum wage increased. Initially, fast-food employers in New Jersey raised prices and saw little to no adverse impact. But medium-term and long-term, other researchers found a lessening of economic activity as a result of the minimum wage, relative to Pennsylvania.

The other problem is that Card-Krueger just asked employers whether they hired people. Other researchers, attempting to replicate the results of Card-Krueger, examined actual payroll records. These researchers found that, contrary to what employers told Card-Krueger, hiring and hours fell off relative to the hiring and hours of those in Pennsylvania. Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, wrote: “Card and Krueger do not include information on the portion of employment at minimum wage at any date in time. No information was given on whether the minimum law was binding, and to what extent, for this sample. The studies did not include information by county, such as income, unemployment, teen unemployment, labor force, and labor-force-participation rates. Neither did it include changes in state taxes and franchise fees.”

Then there is the December 2014 study by the National Bureau of Economic Research, called “The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers.” The results confirmed the consensus among economists: Minimum wage laws do harm. It concludes: “We find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an “internship” effect), and lost wage growth associated with reductions in experience accumulation. ... We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.”

In short, fewer workers get hired, new hiring gets deferred or not done at all, or current workers work fewer hours — just as traditional Economics 101 tells us. Or we could simply ask AOC’s ex-boss.

(27) comments

jsklinelga

A national minimum wage sounds "pure in intent." But what is the cost of living in some Midwestern rural area compared to New York, Maybe a guideline for a national company, like Wal-Mart, would be a %of average pay for the jurisdiction. $15.00 an hour might not impact a New York Business but it could financially cripple a small Mid Western business,.

gary4books

When technology is involved all the past can seem like a prolog. Past studies do not count because a minimum wage encourages automation. And really, many jobs should be automated since no person should do them. Cleaning out the grease trap is an example. This is a good way to go. Automate the bad work and let people earn more in higher level and more educated work.

MRS M

Another "whitewashng" of a complex issue brought to you by a "journalist" from the Cartoon Network Syndicate. Fox Business reports that the Coffee Shop restaurant's rent was over 2 million dollars per year. Other journals report that many areas of Manhattan and the burroughs are becoming "dining deserts" due to the exorbitant increases in rent, including in the area of Union Square where this restaurant operated. Closing Coffee Shop is a business decision based on 2 things: the loss of it's former cache as an "in" gathering place which brought in movie stars and models for mediocre food, AND the owners' desire to keep their income at an acceptable level to support their lifestyles of the rich and famous....otherwise, why bother? The closing of Coffee Shop won't affect the lifestyle of the owners who ran it. Whether at this time the owners such as Milite will be able to build another 10 million dollar -plus "cottage" in Amagansett is the real question that Milite faced.....not whether he was willing to reduce his gross income in order to fairly subsidize those who worked for him and his partners.

hayduke2

Mrs M - [thumbup][thumbup]

shiftless88

Interesting how the columnist neglects the owners comment about rising rents and only focuses on minimum wage increases. It is a booming business so let's say they serve 500 people per day (certainly low), that adds $3 to each person's bill. Did they try to add that onto the prices and find that business slowed down? Or is this just an excuse?

nbouqu1

they always ignore rents as the reason this ONE business closed because of the minimum wage. Nor is there any discussion of repricing the menus to compensate. and your 500 people per day is hell-a low. When I worked at CPK 15+ years ago, doing less than 10K a day in sales was a SLOW day, and per person check averages was probably around $8 or $9 thanks to lunches being 1/2 oriental chicken salad and a water with lemon. So to keep the math semi-simple let's say 1100 people per day. 30 days in a month. So that works out to raising the per person check average approx $1.40 to meet the increased payroll costs of $46K a month. TOTALLY doable. Fast food restaurants with lower check averages but exponentially higher customer volumes need to increase menu prices even less.

DickD

Thanks for the math on this. It surely puts a good perspective on it.

MD1756

I suspect people spend more per person at fast food places than coffee shops.

MD1756

Regardless of rising rents, the example of $46,000/month increase in labor costs is significant. I don't drink coffee, but if you assume $2 per cup profit pre-labor cost increase, the business would have to sell and additional 23,000 cups of coffee at the current price (which I've already assumed a $2/cup profit maybe a $3 or $4 total price) each month to cover the increased labor cost. How do you think that will happen if the only thing is labor costs went up? Raise the prices and you may lose business.

gabrielshorn2013

You are correct MD1756. Many here also fail to account for the price elasticity of the good or services being sold. Many businesses cannot simply pass along the higher cost without a subsequent loss of business, especially with an artificial wage floor.

MD1756

Would you pay $3 more per cup of coffee each day?

secpol1970

Well hopefully soon she goes back to doing what she does best. I'll take an Old Fashioned.

threecents

Can you tell me why Republicans are obsessed with AOC? To me she is just a loud mouth junior in congress who I would mostly ignore - like I do with most of the rest of congress. She is certainly no less qualified for her job than Trump is for his. Does it have to do with her not knowing her place - thus the bar tender reference?

shiftless88

Because she scares them

secpol1970

Lol yeah she might spike our drinks. Other than that she is weapons grade stupid.

gabrielshorn2013

Stupid secpol? Hardly. From her bio on Wikipedia: "Ocasio-Cortez majored in international relations and economics at Boston University, graduating cum laude in 2011. " Maybe naive.

hayduke2

secpol - you debating her with be worthy of Saturday nigh live...

DickD

I don't know how hard international relations are, Gabe, but economics is not easy.  If she graduated Cum Laude it means she was considered above average, probably in the top 25 or 30 % of her class.cum laude (kʌm ˈlɔːdɪ; kʊm ˈlaʊdeɪ)adv(Education) chiefly US with praise: the lowest of three designations for above-average achievement in examinations. Compare magna cum laude, summa cum laude[Latin]https://en.wikipedia.org/wiki/Latin_honorscum laude, meaning "with praise". This honor is typically awarded to graduates in the top 20%, top 25%, or top 30% of their class, depending on the institution.magna cum laude, meaning "with great praise". This honor is typically awarded to graduates in the top 10% or top 15% of their class, depending on the institution.summa cum laude, meaning "with highest praise". This honor is typically awarded to graduates in the top 1%, top 2%, or top 5% of their class, depending on the institution. Some institutions do not award the summa cum laude distinction or only award it in rare circumstances.   

gabrielshorn2013

Agreed Dick, AOC is certainly not stupid. Econ, especially more advanced courses can be difficult for many. Although it makes me wonder why, with grades like that, after graduating in 2011, she went to work as a bartender instead of her fields of study, or attending grad school.

DickD

Oh, if you are going to look at qualifications, Trump would not qualify for any jog, not even a dog catcher.

gary4books

After all his rallies, he dos like to "run."

rbtdt5

Three - I think people react to the news. She is a main headline on CNN and Fox at least 3 times a week. Plus many democrats running for president have been touting her green new deal. I think people talk about what makes the headlines, but then again, I know if a republican disagrees with a democrat it make them an ist or phobe. Are you trying to go with sexist here? AOC puts herself out there and the headlines eat it up and she becomes the talk. This is pretty much what Trump did to get elected. I've heard she is going to go after Chucks seat so maybe this is her campaign plan

gary4books

She "has their number." And for many reasons she bothers them. To distraction. (smile)

hayduke2

Old fashioned you certainly are....

DickD

Sevpol, do you have an asteroid named after you? https://en.wikipedia.org/wiki/Alexandria_Ocasio-Cortez Ocasio-Cortez attended Yorktown High School, graduating in 2007.  She came in second in the Microbiology category of the Intel International Science and Engineering Fair with a microbiology research project on the effect of antioxidants on the lifespan of the nematode C. elegans.  In a show of appreciation for her efforts, the MIT Lincoln Laboratory named a small asteroid after her:

MD1756

Pay money and you can have a star named after yourself. No biggie there.

gary4books

+You think she paid money? Or is it a worthy honor? I go with the later idea.

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