California Restaurant Owner Opposes Rising Minimum Wage - Essay Sample

Introduction

The following is a commentary about an article on California's rising minimum wage whereby a restaurant owner thinks the raise is not beneficial to the sustainability of employment. According to the article, the minimum wage in the year 2020 is expected to be $12 dollars for business enterprises having less than 25 employees. Paula Fraga, the owner of Original Perry's, dislikes the idea of raising the minimum wage as that makes the operation of his restaurant not being sustainable. Moreover, he believes the employees do not welcome the rise in the minimum wage in small business enterprises such as the restaurant owned by Paula Fraga.

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The debate on the impact of increasing the minimum wage has led to various studies that explain the implications of employment. A study in the American Economic Review shows that an increase in the minimum wage reduces the sustainability of employment opportunities, especially in small business enterprises (Millsap). Paul Beaudry, Ben Sand, and David Green developed a framework with the intention of accounting for the impact of increased supply of labor has on labor demands, so as to isolate the impact of wages in employment opportunities (Millsap). The findings are intriguing as the increase in the minimum wages impacted employment negatively in the next ten years. Moreover, the findings reveal that an increase in wages by 1% leads to a decrease in employment opportunities in the same magnitude (Millsap). Also, the decrease in the employment opportunities as a result of an increase in the minimum wage is dependant on the industry and the demography upon which the increase is applied.

The concept of price control is significant when explaining the effects of raising minimum wage leading to the closure of restaurants in California. Based on the concept of minimum prices, this is used to provide the producers of goods or services a higher income from the previous wages (Pettinger). There are some disadvantages associated with minimum prices, which include; increased tariffs for products making prices to become high. Also, minimum prices lead to the supply of substandard products in the market. These substandard products may not be appreciated by the majority of consumers in the market. Therefore, price controls in the market have consequences associated with the supply of inefficient products according to the standards in the market.

Figure SEQ Figure \* ARABIC 1: Minimum Prices Diagram (Pettinger).

With respect to relatively small business enterprises in California where the minimum wage has to be increased $12 dollars, it is determined restaurants are affected, leading to their closure. In the year 2020, the employees are expected to earn more from their services offered in the restaurants. Hence, the restaurants have to charge more for their products and services to meet the demanding wage bill. That means the relatively small restaurants may have prices on the products and services offered, which may not be competitive with the market standards. Consequently, the customers may feel overcharged hence decide to resist the services offered by the business enterprise. In this case, California restaurants could be losing customers due to the high prices of products offered. Hence, the remaining option is closing business as they are unable to sustain the demanding wage bill. Moreover, some of the restaurants may result in acquiring substandard products, which are relatively cheap. However, this may lower the quality of food offered, making the customers desist from attending such restaurants.

Works Cited

Millsap, Adam. "How Higher Minimum Wages Impact Employment." Forbes.Com, 2018, https://www.forbes.com/sites/adammillsap/2018/09/28/how-higher-minimum-wages-impact-employment/.

Pettinger, Tejvan. "Price Controls - Advantages And Disadvantages - Economics Help." Economicshelp.Org, 2019, https://www.economicshelp.org/blog/621/economics/price-controls-advantages-and-disadvantages/.