Restaurant Closing Time

Sometimes, notwithstanding our wishes and hopes, we just can’t change or escape the basic laws of economics.  California restaurants are learning this lesson — one that so many other businesses have learned in so many other settings for so many years.

A number of California communities, including San Francisco, have decided that they should legislate substantial increases to the minimum wage, so that the minimum wage will reach $15 — a number that was picked not through the guidance of the invisible hand of supply and demand, but because it sounds goods when politicians promise it.  Basic laws of economics will tell you that if you increase the costs for a business, the business has only a few options:  either absorb the increase by cutting costs in other areas (or accepting lower profits), or increase their prices to make up for the extra costs, or recognize that you just can’t make the economics of the business work and close your doors.  In California, a number of restaurants have decided that the latter route is the only viable option.

o-restaurant-worker-facebookIn the Bay Area, at least 60 restaurants have closed since September, and as a result a number of line cooks, car valets, dishwashers, table bussers, and waiters — the people who were supposed to be helped by the $15 minimum wage initiatives, incidentally — have lost their jobs.  These results in the San Francisco area, where wages for starting workers are higher than in less affluent parts of the state, are leaving some Californians who aren’t living in economic dreamland wondering what the effects will be when a statewide minimum wage takes effect and inland areas, which already have higher unemployment numbers and where starting pay is correspondingly lower, are affected.

This restaurant closing effect shouldn’t be a surprise.  Many restaurants run on very thin margins as it is, trying to find that magic balance between quality food and reasonable prices and cool ambiance that diners are looking for.  They don’t have big profit margins that can simply absorb higher wages.  If minimum-wage legislation substantially increases their costs, most restaurants just don’t have the option of jacking up their prices because they know they are going to lose their more cost-sensitive patrons.  And there really aren’t many other areas in which restaurants can make up for increased labor costs.  Tinker with the quality of the food, or the ingredients, or the portion size, and you’ll likely end up losing your more discriminating patrons — and many restauranteurs who are passionate about food probably wouldn’t want to change how they prepare dishes, anyway.  So the logical option, unfortunately, is closing.

In short, the five-star joints, where there is less price sensitivity and where the wages may already be higher, will survive, but many of the more basic restaurants will struggle and close.  The cause-and-effect relationship is so predictable that a recent academic study found that every $1 hike in the minimum wage brings a 14 percent increase in the likelihood that a 3.5-star restaurant on Yelp! will close its doors.

The people who are advocating for large increases in the minimum wage no doubt are well-intentioned, but their efforts ultimately are misguided because you simply cannot ignore, or legislate away, the laws of economics.   How many times do we have to see this play before people start getting the plot?

The Future In The Past

They opened a coal mine in Pennsylvania last week.  It’s the first new coal mine opened in the area in as long as people can remember.

The Corsa Coal Company decided to open the Acosta mine, located about 60 miles south of Pittsburgh, last August.  It made the decision to open the mine because demands for metallurgical coal used by the steel industry, and cuts in coal production in China, have caused the prices for such coal to skyrocket.  Metallurgical coal is a special kind of coal, distinct from coal used for other purposes, and represents about 5 to 10 percent of the coal industry.

1024x1024Even though the decision to open the mine came before the last presidential election, President Trump has touted the opening of the mine as reflective of the new approach taken to coal in his administration.  Corsa’s chief executive said that Trump’s election has made the whole coal industry more optimistic.  He said “The war on coal is over,” and added that “Easing the regulatory burden, lowering taxes, stimulating infrastructure spending, balancing out the interest of economic growth versus environmental policy — it’s very good for coal.”  Corsa believes that if it can keep its costs low, it can compete with any company in the world in coal production.

I view the opening of a new coal mine in Pennsylvania with mixed emotions.  The past practices of the coal industry have left real scars in Ohio, Pennsylvania, or West Virginia, both on the landscape and, in some instances, on people.  At the same time, I am happy for the people of rural western Pennsylvania who have been desperate to find work and some cause for optimism.  It’s no surprise that the new mine has been bombarded with hundreds of job applications for the 100 positions that will be created, and that the mine is being praised as a lifeline for the local economy.

It’s odd that, even though we have moved well into the 21st century, the American economy is still looking at things like coal mining — work that has been going on for centuries — as a element of future job production.  I just hope that the coal industry has learned from the past as it moves forward into the future.

Construction Compulsion

Who wasn’t fascinated by construction sites  when they were kids?  Peering through the fencing, watching the big cranes hoist girders into place, hearing the heavy equipment beeping and whirring, seeing the hard-hatted workers, dizzingly high in the air, balanced on the steel framework as they maneuver materials into place — construction sites are beehives of activity, made for open-mouthed gaping by girls and boys.

In my case, the fascination has continued from childhood to codgerdom.  Every day I pass this construction site on my way to work, and I always take a good long look.  Fortunately, our building doesn’t have a view of the ongoing work, or else I’d spend a slice of each work day gazing at it in slack-jawed wonder.

Officially A “District”

I was walking through the Columbus airport on may way back from Denver last night when I passed a painted wall map depicting some of the different cool spots in Columbus.  There was the Short North, of course, and the Arena District, and the Brewery District, and the University District, and the Discovery District, and the Gay Street District.

Wait a second — the Gay Street District?

Well, if a painted wall on the airport says it, it must be so.  Good old Gay Street is now officially a “district,” right up there with the other established hot spots in Cbus.  If you’re a “district,” you know you’ve arrived.

Gay Street deserves to be a “district,” too.  It’s easily the coolest street in the core area of downtown Columbus, and it’s getting cooler by the minute.  With the recent addition of the Buckeye Bourbon House, the opening this week of Tiger + Lily, an Asian fusion restaurant, and the forthcoming opening of an Irish pub just across the alley, Gay Street offers a wide range of food and liquor options — and there is even more coming, with the Veritas Tavern set to open next year in the Citizens Building at the corner of Gay and High Street.  The street is bustling from noon onward, and it really shines during the spring and summer months, when the outdoor dining venues like Plantain Cafe, the Tip Top, and Due Amici all seem to be filled to overflowing when the workday ends and the fun begins.

For those of us who worked on Gay Street in the early ’90s, when the area was a kind of ghost town after 5 p.m., the transformation to the Gay Street of the modern day has been both exciting and amazing.  And I like to think that our firm, Vorys, Sater, Seymour and Pease LLP — which has remained in its offices on Gay Street through thick and thin — helped to make that transformation happen with its large array of hungry and thirsty lawyers, paralegals, and staff helping to fill up the coffee houses, restaurants and taverns that now call Gay Street home.

“The Gay Street District.”  Yep, I like the sound of that.

Considering “Universal Basic Income”

Mark Zuckerberg is the latest of the Silicon Valley quadzillionaires to espouse the concept of “universal basic income.”

mark-zuckerberg-harvard-speech-01-480x270In a commencement speech at Harvard last week, the founder of Facebook called for the creation of “a new social contract.”  “We should have a society that measures progress not by economic metrics like GDP but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to make sure everyone has a cushion to try new ideas,” Zuckerberg said.  Zuckerberg noted that, because he personally had a safety net to fall back on, he had the confidence to try projects like Facebook, and he thinks everyone should have the same financial wherewithal.

For some, like Zuckerberg, universal basic income has become the Great White Whale.  It’s not fair, they think, that only people who come from families that have financial resources can experiment in pursuit of their dreams.  Proponents of UBI believe that, if only everyone had guaranteed funding irrespective of whether they worked or not, all people would have the freedom to follow their dreams, invent new things, and experience personal fulfillment.  Why, the outpouring of creativity and innovation would promote the flourishing of art, literature, music, technological development, and human interaction that undoubtedly would lead to a new Renaissance!

Or, people who got the money would sit around in their place of residence all day, watching TV and enjoying the recreational drug or adult beverage of their choice.

Look, who am I to disagree with Mark Zuckerberg?  But let’s lay aside the gnarly issue of how we could possibly pay for a basic stipend sufficient for every American to live on without working.  (Taxpayers, hang on to your wallets!)  My experience teaches that having a job is a good thing.  Working brings structure to lives.  It allows people to become self-sufficient and to learn the value of a dollar.  It promotes the development of responsibility, punctuality, responsiveness, planning, and other positive personal attributes.  And the labor of every worker also helps to fund things like national defense, Social Security, health care, national parks, and a bunch of other things that might not be as amply supported if the funds are going to pay basic living expenses for a bunch of people who are happily contemplating their navels.  And, if you really think your job sucks, maybe that will motivate you to go out on your own, become an entrepreneur, and follow your dream with the benefit of the real-life experience you’ve acquired.

And don’t call it “universal basic income,” either.  In my book, “income” should be reserved for something that you earn, through work or investment, not something that is handed to you.

So let me respectfully disagree with Mr. Zuckerberg.  If he wants to really help to create a “new social contract,” let him and the other mega-tycoons enter into some actual contracts — with employees working for the new ventures that Zuckerberg and the other filthy rich are in a position to establish and fund with their wealth.  Let’s help more people learn the value of actual work.

Conference Room Command

I was in an off-site meeting recently, and as I exited the conference room after the meeting was over I saw this sign above the door.  It made me chuckle — but the point of the sign was clear, too.

I felt that my mental state met the sign’s command, and I also thought the sign was pretty useful coaching.  How many people walk out of office meetings wondering what the heck they’re supposed to be doing?

Summer Jobs For Young And Old

If you’re looking for work this summer, you might just want to go to Maine.

Changes to the federal immigration laws that govern the ability of foreign workers to come to America and obtain seasonal employment have created a kind of labor shortage for cooks, waiters, bike shop workers, and other job staples during the Maine summer tourist season.   The laws permit 33,000 people to obtain visa to do seasonal work in the United States, but the way in which those workers are counted has changed.  Before, returning workers weren’t counted toward that 33,000 number; now they are.  As a result, the 33,000 ceiling has already been reached, primarily by hiring in the southern states.  Maine, where the season won’t really begin for a month or so, gets the short end of the stick.

IMG_0441Will the Maine businesses that used to hire foreign workers just close up shop?  No, of course not — because it’s not a real labor shortage until the entrepreneurs that run those businesses try to address the issue through other means.  If foreign workers aren’t available, maybe something can be done to attract non-foreign workers to fill the open jobs.  So Maine businesses are looking at offering higher wages, flexible work schedules that might be appealing to older workers, and other approaches that will allow them to get the jobs done with locals.  It’s a classic example of the law of supply and demand and the invisible hand at work (pun intended).

Of course, Maine’s elected representatives are attempting to change the law to reinstitute the exception for returning workers that will allow more foreign hiring to occur, because for local businesses it’s no doubt cheaper and easier to hire those workers than it is to recruit, train, and deal with locals who might be more demanding about pay and hours and other job conditions.  But for now, at least, opportunity can be found in Maine, if you’re a kid, or a retiree, who’s willing to serve up lobster rolls or work in a bike shop or serve as a deck hand on a tour boat in order to put some extra dollars in your pocket.

As someone who left Columbus, Ohio and spent a wonderful summer working at the Alpine Village resort in Lake George, New York in 1976 — an experience you can read about here and here — I don’t think changes in our federal immigration laws that incentivize businesses to hire local teenagers and seniors for summer jobs is a bad thing.  If the changes open the way for more American kids to get used to the concept of holding down a job, keeping the boss happy, earning a paycheck, and putting money in the bank, that’s a good thing in my book.