Minimum wage hikes are causing higher menu prices, reduced staff hours

A new survey conducted by Harri, a workplace management software company that works with restaurants, found that restaurants have responded to recent minimum wage hikes by increasing menu prices and reducing employee hours.

The survey polled 173 restaurants about the impacts of raising the minimum wage.  The results provide an eye-opening view of the harsh reality local businesses are facing. Eighty-three percent of respondents reported that their labor costs have increased at least three percent. Seventy-one percent of respondents said to cope with the rising labor costs they would raise menu prices while nearly half reworked the prices of their food and beverage options to combat rising labor costs.

Even worse, 64 percent said they plan to reduce employee hours and 43 percent said they will eliminate staff positions.

Other restaurants have responded to rising labor costs by shuttering their doors altogether. In California, two restaurants recently cited increasing labor costs as a factor in closing.

These results should alarm both state and federal lawmakers who are considering raising the minimum wage nationwide. These policies only hurt those they intend to help by eliminating jobs and forcing businesses to close.

California Businesses Feel the Pinch from Minimum Wage Hikes

California’s minimum wage will increase over the next three years until it reaches $15 an hour, but many businesses have already started to feel the pinch.

Andy Smith, the former owner of the Bread Store in Sacramento, attributed the decision to close his bakery and sandwich shop to the recent minimum wage. He told the Sacramento Business Journal, “As soon as minimum wage goes up, everything goes up—workers’ comp, payroll tax…it’s not just a couple dollars increase.”

In San Francisco, Ike’s Love & Sandwiches gave its customers the option to pay a voluntary surcharge of 75¢ on each transaction to cover the increased costs of minimum wage and other labor expenses.

Minimum wage hikes have deterred new businesses from opening up shop in California and encouraged existing ones to leave the state entirely. According to Barry Broome, CEO of the Greater Sacramento Economic Council, one large-scale Amazon supplier promising roughly 800 jobs to the state pulled out before signing the lease over the possibility of rising labor costs.

States considering following California’s lead by implementing a $15 minimum wage should take note of the harmful repercussions already occurring throughout the Golden State.

Real Stories of Small Biz Owners Harmed By Wage Hikes

Contrary to Democrats’ claim that a $15 minimum wage is “good for businesses,” new research shows that a $15 minimum wage would cost as many as two million jobs.

Business owners throughout the country have grappled with the costs and consequences of a higher wage mandate. View some of their concerns below; you can reach dozens more at FacesOf15.com.

“After Seattle implemented a $15 minimum wage, my business went from having seven employees to three. We used to have the ability to hire and train younger and entry-level employees, but now we don’t have the margins to hire inexperienced workers anymore. Now, we’re faced with the very real prospect of closing. The lesson from Seattle is that Congress can’t mandate its way to wage growth and prosperity, because those mandates hit small businesses hard.”

Heidi Mann, Subway franchisee, Seattle, WA

“Raising the wage floor to $15 thus impacts entry-level employees earning less than that, but also shifts the wage scale for more experienced employees who already earned $15. California’s wage hike has cost us $600,000 so far. That kind of hit to the bottom line spurred more than self-reflection. It limited our ability to hire for vacant positions or expand where the company needs it, and has caused us to choose factory automation over additional workers so consumers are not hit with excessive price increases.”

Tom Manzo, President of Timely Industries, Pacoima, CA
Orange County Register, December 28th, 2017

“Flagstaff’s minimum wage of $12 an hour have left service providers in a bind, so far 32 people with disabilities have lost their jobs or had their hours cut so much they are not considered to be employed. A $15 federally mandated wage could potentially decimate our entire industry.”

 Armando Bernasconi, CEO of Quality Connections, Flagstaff, AZ
Arizona Daily Sun, November 3rd, 2017

“I’ve thought seriously about what I’d do if faced with a $15 minimum wage. We’d have to let our three warehouse employees go, and my husband and I would basically work seven days a week to try and do their jobs in addition to our own. If a $15 minimum wage became law, it would crush me.”

Katie Graham, Owner Mardi Gras Collections, Maitland, FL
Orlando Sentinel, January 15th, 2019

“A $15 minimum wage is something I think of every day. I’m already doing more with less. At $15, I might decrease from 3 employees at one location to just one who can perform all facets of the job, not young teenagers anymore.”

Frank Cole, Owner of Seagreen Bicycle, Lewes and Rehoboth Beach, DE
WBOC Delmarva, January 1st, 2019

“A $15 minimum wage without a tip credit would never work for my business. Unless I change our model to where we have way fewer employees or totally fancy things up to where we can charge $20 to $30 dollars a plate, how are we going to afford that?”

Damien Devine, Owner of Devine Pastabilities, San Diego, CA
NBC San Diego, January 2nd, 2019

“If the minimum would increase to $15 an hour, that would have a big negative impact on our business. We could see some workers lose the jobs or have their hours cut. I would like to see people succeed and have more money in their pocket but, in the end, a $15 minimum wage would hurt everybody’s pocket.”

Johnny Mendez, Manager of Si Senor Mexican restaurant, Jacksonville, FL
Action News Jax, January 22nd, 2019

“I see [a $15 minimum wage] — and everyone else I talk to in the restaurant business sees it — as a huge challenge. It is a total squeeze on the franchisees and I think it is going to result in less jobs, less restaurants and less service. That’s how I see it today.”

[Phelps’ was previously an advocate for a $15 minimum wage and recently changed his opinion once he realized that a $15 minimum wage is “not sustainable” and bad for employees or business.]

Bill Phelps, Co-founder and CEO of Wetzel’s Pretzels franchises, CA
Washington Examiner, May 10th, 2018

“It would cost my business more than $10,000 a month to raise every employee to $15 an hour. I would have to restructure my workforce and reduce the number of employees. I would have no choice. If this happens, I can assure you that MANY jobs would be lost across the state. Small businesses can only bear so much load.”

Ed Bolton, Small Business Owner, Southern, MD
Baltimore Sun, January 10th, 2019

“A [$15 minimum wage] kills. Not actual people, but it kills jobs. Two years ago, I had 14 employees. After the [minimum wage] increases, I could no longer afford to keep all those employees; I had to go lay off six of them. We’re at the point that entry-level workers, who not long ago cost just $8 an hour, are about to cost $15 an hour. When will it be enough?”

Eli Amsel, owner of Lagmitz Paper & Plastic Co., LLC., New York, NY
The New York Daily News, April 9th, 2018

Let Michigan Servers Keep Their Tips

This fall, Michigan voters may consider a ballot proposal to further increase the state’s minimum wage to $12 an hour—a 30 percent increase over the state’s current minimum wage. However, included in this proposal is a far more radical policy change—the elimination of the tip credit, effectively raising the tipped minimum wage by 240 percent.

In a new policy brief from the Employment Policies Institute, economists use a methodology developed by the Congressional Budget Office to estimate that the proposed policy would cost the state approximately 17,000 jobs. What is more harmful is the estimated impact of eliminating the tip credit.

The economists draw on their own past research on tipped wage impacts and show that eliminating the tip credit will cost full-service restaurants as many as 14,000 jobs. Roughly 45 percent of the estimated job loss (approximately 6,000 jobs) would be in the Detroit area.

In New York, where the tipped wage has risen sharply in recent years, the full-service restaurant industry has experienced a dramatic slowdown in employment growth. One city restaurateur explained that he cut roughly 1,500 people from his staff (from 4,000 down to 2,500) not by firing them, but by opting not to replace employees who left. That’s one employer, and in response to an increase that’s a fraction of the size that ROC wants to enact in Michigan.

The proposal’s primary supporter is a controversial New York-based labor group called the Restaurant Opportunities Center, or ROC, which has raised over $1 million for its ballot committee. ROC has put forth a number of rationales for eliminating the tipped wage, none of which pass basic scrutiny, as is demonstrated in this report.

ROC’s ultimate goal in Michigan is ideological, not economic. A ROC employer-member recently admitted that the policy change it has proposed in Michigan (and elsewhere) is the first step in getting to “no tips.” That might be a desired consequence for ROC and its foundation donors, but servers don’t want what ROC is selling. A survey from industry publication Upserve found that 97 percent of tipped workers preferred earning tips and a base wage to a flat hourly wage.

Michigan’s proposed tip credit elimination has the potential to turn from a dangerous ballot measure into a disastrous one.