Happy New Year comes with another gift to small businesses via the government. January 1 saw a minimum wage increase for many states throughout the country, another extra burden handed down to those who have been suffering the most significant financial losses during nearly ten months of the COVID pandemic. Is this just another slap in the face for a middle class struggling with closed and restricted businesses and increased unemployment rates? Liberty Nation reached out to one small business owner in the Greater Seattle area of Washington State, whose pub and eatery had been severely affected since the original shutdowns in March 2020.
Sean Erskine, a Navy veteran, opened his small British pub, the Pickled Onion, nearly 20 years ago. He took a, well, shall we say, less than desirable business and turned it into a thriving, safe place for people to gather. The patrons are more than customers; they are family, and just like the classic television series, Cheers, it is a place “where everybody knows your name.”
Gov. Jay Inslee (D) has twice now barred such businesses from indoor dining (the first time a full closure of businesses not considered essential). Currently, the mandate isn’t expected to be lifted until at least January 11. The Pickled Onion (or P.O., to the locals) isn’t located in an area that allows for outside seating, so Mr. Erskine has been forced to keep his doors closed while bills pile up and owner expenses keep escalating. WA state’s minimum wage increased from $13.50 to $13.69, a 1.4% hike for a company already hit hard. However, as Erskine pointed out:
“The service industry employees get tips, but these are not counted in the minimum wage calculation. So, a good bartender can make up to $40 [or] $50 an hour. So can a good cocktail waitress. But we are still forced to increase our payroll expenses via the government’s intervention.”
In the city of Seattle, the minimum wage jumped $1.50 per hour, from $13.50 to $15. As The Seattle Times reported, Ali Ghambari, owner of Cherry Street Coffee, took a realistic, if somewhat fatalistic view of the increase, saying the extra wage “is not going to break our back. Our back is already broken” due to the pandemic.
Nearly half the country began the new year with wage increases, despite the hardships already placed on small businesses. While the powers-that-be decided to help those they consider the most vulnerable, they forget about the rest of society and its many levels. Renters can’t be evicted due to not paying their rent, but the landlords still have to pay their mortgages, property tax, insurance, and other bills. No indoor dining is allowed, so some restaurants and bars have adapted by placing huge plastic tents covering their patios or parking lots – although how this is safer than sitting inside is anyone’s guess. But this doesn’t help those, like the P.O. that don’t have room for such “temporary” covering.
The unemployed get a nice weekly boost to their benefits, but what about the employers whose rates are penalized? “We went from 0.13% [unemployment rate] to 3.99%,” Erskine explained. “We had five part-time employees laid off for 12 weeks. There’s no way this is called for.” Because the government determined these businesses were not essential, the owners are penalized by both losses of income and higher rate increases.
Without diving too deep into the consequences of a minimum wage – you can read more in-depth here from Liberty Nation’s Economics Correspondent Andrew Moran – what about job losses or hours cut because small businesses can’t afford the added expense? As Moran pointed out:
“In 2017, the National Bureau of Economic Research (NBER) published a paper that found Seattle’s workers experienced a decline of $1,500 in their annual earnings. Why? Their hours were cut by about 10%. This has been a common situation for many workers in the service sector who have received more per hour but less take-home pay, driven by fewer hours and tips.”
Not a Happy New Year
As Americans hunker down, cautiously optimistic for 2021 to at least see a partial return to normalcy, small business owners across the nation start the new year with another financial burden when most are struggling to keep their heads above the water. So many businesses across the nation have been forced to shut their doors for good; how many more will be able to continue to hang on as new increases and penalties bombard them? What are government officials going to do, other than provide loans, to help those who have already lost so much? While the loans has helped some, there are still other obstacles to overcome, as Erskine said:
“We got a PPP loan, and it helped a lot. We also got a small grant in the beginning of the first shut down, but that was gone in a day with bills and taxes, and in April, our liquor license came due. It’s funny that we have to keep our licenses current at the full price but can’t get a reduction or partial refund for being closed.”
Read more from Kelli Ballard.