Tuesday, June 10, 2014

Economies are like the Internet - SeaTac businesses work their way around restrictions

Those who champion freedom and occupy and other kewl wUrdz often marvel at the capabilities of people to get around Internet restrictions. If an oppressive government locks down the Internet to prevent people from getting to child porn - whoops, I mean information about Tiananmen Square, there are ways to work around the firewalls and get to the information that you need to get.

However, the champions often neglect the fact that economies work the same way. Throw up a roadblock to a business, and the business will simply work around it.

Let me acknowledge at the beginning that there is no such thing as a "free market" - a totally free market requires all people to have access to all information, and that just doesn't happen today. However, there are clearly gradations of a free market, where you can work for anyone for whom you wish to work provided your views are not deemed offensive, and you can live anywhere you can afford unless the neighbors don't like you.

At the same time, governments impose restrictions that affect the economy. Taxes, insider trading bans, and zoning restrictions are but a few examples, but one example that everyone likes to talk about is the minimum wage. For proponents, a minimum wage potentially helps to ensure that citizens do not depend upon governments for other types of assistance - if the wage is high enough, people can take care of themselves. Opponents state that artificially high wages depress the local economy, as companies do not hire, and jobs move to other cities or perhaps other countries.

Right now, a lot of these opponents are looking at the town of SeaTac, Washington. Why? Because the much better-known town of Seattle just passed a $15 minimum wage - a minimum wage that is already being implemented in the Seattle suburb of SeaTac. SeaTac happens to be right next to Seattle's airport (while not including the airport itself), so a lot of hotel employees and parking lot attendants are now making $15 an hour.

According to the opponents, SeaTac is now going to hell in a very expensive handbasket.

When I see claims such as this, I want to verify the claims to see if they are true. Here are some of the things that I've found over the past few days. From a February Seattle Times article:

At the Clarion Hotel off International Boulevard, a sit-down restaurant has been shuttered, though it might soon be replaced by a less-labor-intensive cafe....

To be sure, SeaTac’s $15 minimum wage has claimed some casualties.

The 215-room Clarion Hotel closed its full-service restaurant in December, laying off 15 people, said general manager Perry Wall. The hotel also let go a night desk clerk and maintenance employee and is considering a 10 percent increase in room rates for the spring travel season, Wall said.

He estimates that without a reduction in head count, the hotel’s annual payroll costs would have increased $300,000. It still employs about 30 people for jobs Wall describes as more in-demand than ever.

“I just think unskilled workers are going to have a harder time finding jobs,” he said. “You’re going to have people from as far away as Bellevue or Tacoma wanting these jobs, and they’re going to come with skills and experience. For $15 an hour, they’ll go that extra distance.”

But, on the other hand:

Even management at the Cedarbrook Lodge, which had been a vocal opponent of the minimum-wage measure, went quiet after breaking ground in December on a project to add new rooms and a luxury day spa.

Cedarbrook general manager Scott Ostrander, a former co-chairman of the campaign against Proposition 1, said when announcing the expansion that it would generate additional revenue to help pay for higher wages.

One of the companies mentioned in the February article is a parking lot known as MasterPark.

The new surcharge of 50 cents a day at MasterPark in SeaTac is an attempt to recoup some costs of the $15 minimum wage, said managing partner Roger McCracken.

He said he also is considering cuts to MasterPark’s advertising budget, but he called layoffs “foolish” and rejected the notion that cashiers soon would be replaced by automation.

“Whatever we do, service is key,” he said. “We want an employee answering our phones, and anytime someone pulls into one of our lots, they’re greeted by a human being.

“That’s great news for our employees,” he added. “They’re pretty happy campers right now.”

Well, MasterPark is making the news again in June, because that 50 cent per day surcharge has increased.

Consumers are also picking up the tab, in the form of increased prices. Many SeaTac businesses have tacked on an additional fee to mitigate the increased cost of labor. On the receipt below, a $6.93 "living wage surchage" was added to a $84.00 parking charge....

Incidentally, the article above claims that "(m)any SeaTac businesses" have added additional fees, but the only evidence that's been presented is the MasterPark surcharge. Minimum wage opponents, your arguments would make more sense if "many" were greater than 1.

The surcharge works out to 99 cents a day, which is what MasterPark is currently advertising on its website.

MasterPark charges, taxes, and fees include a 'Living Wage' surcharge of 99 cents per day. This is due to the new $15 per hour minimum wage requirement for certain businesses in SeaTac. The surcharge covers a portion of the resulting increase in operating costs.

There's another thing that needs to be clarified - the living wage in and of itself does not necessarily REQUIRE that affected businesses raise their prices. After all, price SHOULD be set by the market, not by costs. If all of the other parking garages in SeaTac suddenly reduced their prices, for whatever reason, you can get that MasterPark would discontinue this surcharge in a second - or perhaps MasterPark would do the things that they said in February they wouldn't do, such as firing employees.

In essence, SeaTac's living wage is just another market condition. While some businesses are affected by frosts in Florida or war in the Middle East, SeaTac businesses are affected by government regulations.

And MasterPark, the Clarion Hotel, the Cedarbrook Lodge, and other SeaTac businesses have the freedom - within limits - to decide how to respond to these market conditions.
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