Facing High Labor Costs From Minimum Wage Hikes, Chicago Restaurant Closes
By Leah Jessen, News Reporter for the Daily Signal
A Chicago restaurant abruptly closed this week, with ownership blaming the “rapidly changing labor market” and a 27 percent increase in base minimum wage costs over the last two years as culprits for the collapse.
Cantina 1910, a farm-to-table Mexican restaurant located in Chicago’s Andersonville neighborhood, opened in September 2015.
Former Cantina 1910 employees said they were shocked to find out late Sunday evening of the closing, DNAinfo reported.
“We are unable to further raise prices in this competitive restaurant market in order to sustain the labor costs necessary to operate Cantina 1910,” Mark Robertson and Mike Sullivan, Cantina 1910’s owners, said in an emailed statement to The Daily Signal.
In December 2014, the Chicago City Council passed an ordinance to raise the city’s minimum wage from $8.25 an hour to $13 an hour by 2019. The minimum wage for nontipped employees went up to $10.50 an hour on July 1.
“Unfortunately, the rapidly changing labor market for the hospitality industry has resulted in immediate, substantial increases in payroll expenses that we could not absorb through price increases,” the restaurant’s owners said. “In the last two years, we have seen a 27 percent increase in the base minimum wage, a 60 percent increase in kitchen wages, and a national shortage of skilled culinary workers.”
The owners say they “do not see a path forward” with mandatory paid sick leave and minimum wage set to increase in 2017. They stated:
As we look down the road, we are facing a Dec. 1 change in federal labor regulations that will nearly double required salaries for managers to qualify as exempt, a 2017 mandatory sick leave requirement and another minimum wage increase. Coupled with increasing Chicago and Cook County taxes and fees that disproportionately impact commercial properties and businesses, we are operating in an environment in which we do not see a path forward.
Raising the minimum wage was a “much needed” and “an essential step in making sure that hard work pays off for all of our residents,” Chicago Mayor Rahm Emanuel, a Democrat and President Barack Obama’s former chief of staff, said in a July 2015 statement.
Employment in the Chicago area’s leisure and hospitality sector sunk to a five-year low, according to government data, after a $1.75 an hour minimum wage hike went into effect in July 2015, Investor’s Business Daily’s Jed Graham wrote this past January.
“The law of demand states that when prices rise, customers buy fewer goods or services,” James Sherk, a research fellow in labor economics at The Heritage Foundation, says. “Cantina 1910’s closing is another demonstration that this economic law applies to businesses too.
“Chicago raised mandatory starting wages in the city, but the restaurant could not afford to stay in business at those prices. So it closed and all its employees lost their jobs. Heritage Foundation analysis finds that if Illinois mandated $15/hour starting wages this would cost over 300,000 jobs statewide.”
Originally published at The Daily Signal, click here.