Tipped Minimum Wage Reform Must Be Paired With Liquor License Reform

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Just like how overpriced popcorn and soda cross-subsidize movie tickets at movie theaters, the alcohol menu cross-subsidizes the food in most restaurant business models outside of our backwards state.

The alcohol menu cross-subsidizes the food at a small minority of restaurants in Pennsylvania too, but we ration the right to use this awesome business model through the County Quota System.

The County Quota System is a population-based cap on the number of R licenses (for bars, restaurants, and now supermarkets that have a “cafe” in them). Each county gets one R license per 3000 people. Those restauranteurs rich enough to afford the winning bid on a license get access to the awesome restaurant business model that most restaurants in the United States use.

The licenses can run as much as $200,000 (they’re currently about $80,000 in Philly due to our higher population density) so the ability to open a relatively stable new restaurant business is currently rationed to rich superstars of this industry like Stephen Starr and Jose Garces – compounding advantages they already enjoy over more modest new businesses and new entrepreneurs.

Without the County Quota System, we might sell liquor licenses for a flat fee of around $5000, so that any restaurant in the state could have a beer menu, and cross-subsidize its food with booze like a normal restaurant business.

These restaurants would also be more profitable, and would be more stable employers who can provide greater job security to the waitresses, hosts, busboys, dishwashers, and chefs who work for them. The failure rate for businesses in our food service industry is very high, but it could be lower if the state of Pennsylvania did not ration the right to use the only known stable restaurant business model.

This is the necessary pretext for debates in Pennsylvania over issues like paid sick days or ending the tipped minimum wage.

I’m excited Katie McGinty is getting out ahead of the other Democratic candidates for Governor proposing an end to the tipped minimum wage of $2.83 an hour.

But you know what the political reaction is going to be if somebody ever proposes this as a real bill. Restaurant owners are going to scream bloody murder. They’re going to remind politicians how competitive this sector is, how thin profit margins are for most restaurants, and whine about how much this is going to put them out of business.

If this were any other state, I’d laugh that off. But the fact is that Pennsylvania really is squeezing restauranteurs – especially the little guys and first-time business owners – in this state by rationing access to the best restaurant business model out there.

If you want to do paid sick days or tipped minimum wage reform, then it must be paired with liquor license reform.

Make these restaurants a deal – we’ll sell you a liquor license for a $5000 flat fee, but you have to pay the regular state minimum wage and let your employees earn sick days. You can have access to a much more profitable business model, but some of those profits have to flow to your workers as higher wages and benefits.

This entry was posted in Economy, Governor.

One Response to Tipped Minimum Wage Reform Must Be Paired With Liquor License Reform

  1. Taxpayer says:

    This limit on liquor licenses puts such a damper on small businesses!