Opinion: The $15 minimum wage was supposed to hurt New York City restaurants — but both revenue and employment are up
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Opinion: The $15 minimum wage was supposed to hurt New York City restaurants — but both revenue and employment are up
Critics would have you believe that upping the minimum wage in restaurants will lead to massive layoffs and closures . But since raising the minimum wage to $15 per hour nearly a year ago, the restaurant industry in New York City has thrived .
I’m a professor with a focus on labor and employment law . My research on the minimum wage suggests a few reasons why this might be true.
What hasn’t happenedWhen worker pay goes up, employers can respond in a number of different ways. They can cut hours, lay off workers, accept smaller profits or raise prices.
With profits so low in the restaurant industry, averaging just 3%-5% , employers may not have the option to accept less in profits without going in the red.
In many industries, increased labor costs may prompt businesses to lay off American workers and move operations overseas where labor costs are lower. But this isn’t a viable solution in the restaurant industry, since most of the work is done on-site.
That leaves restaurant owners with two options. The first is to decrease the number of hours each employee works, which might explain why income gains from a higher minimum wage aren’t as large as one would predict.
Still, massive layoffs in the restaurant industry are unlikely because owners need a certain number of staff to operate a full-service kitchen .
The other option is to increase prices , which many restaurants in New York City have done .
Prices go upSome in the restaurant industry have argued that raising menu prices will lead to fewer people dining out and, consequentially, more restaurant closures.
But this hasn’t happened.
In fact, both restaurant revenue and employment are up. The reason for this is that restaurants don’t have to raise prices very much to pay for a minimum-wage increase.
In one study , for example, a $0.80 minimum wage increase equated to a 3.2% increase of food prices in restaurants in New Jersey. This is the amount that the New Jersey minimum wage increased in 1992.
Even a one-time increase of 10% to 15% is unlikely to dissuade large numbers of customers from dining out. That would amount to an extra $1.20 on a $12 burger.
The focus on single restaurants also ignores the larger economic impact of raising the minimum wage. According to an analysis by the Federal Reserve Bank of Chicago, if low-wage workers have more money in their pockets, they will have more money to spend , potentially expanding the number of consumers who can afford to eat out.
In fact, some people — including those from the Economic Policy Institute — have posited that a minimum-wage increase will actually lead to an increase in employment because of the effects of giving low-wage workers a raise. Other advantages to restaurants may include lower turnover rates and better job performance.
Wage hikes help everyonePerhaps the principal reason that the minimum wage increase did not seem to have a negative effect on the restaurant industry in New York is that the state’s economy is strong overall , so businesses have been able to absorb the increases without having to make hard decisions about where to cut.
If the economy were to go into a recession, business would undoubtedly suffer, though the suffering could hardly be attributed solely or mainly to a minimum-wage increase. In other words, a good economy means that everyone benefits , including low-wage workers.
Apocalyptic predictions of the industry’s demise will likely return as New York officials debate whether to get rid of the tip credit, which allows employers to make up part of their minimum wage obligations in tips. Right now, restaurants actually have to pay workers only $10 per hour if they make at least $5 per hour in tips.
There are many good policy reasons to abolish the tip credit, including ensuring that workers have pay stability and combating the problem of sexual harassment in the service industry. Women working in restaurants with lower minimum wages than other industries in the state were twice as likely to report being sexually harassed by a customer than women who were paid their state’s minimum wage.
Seven states , including Alaska, Montana and Washington, have already abolished the tip credit. New York may be next.
As the debate unfolds, just remember to look at the data. A pay increase for low-wage workers doesn’t have to be a zero-sum game. In fact, the evidence suggests that everyone can win.
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I have a niece who is a waitress (they call them servers or hostesses or something like that) at a popular restaurant in San Antonio. She is paid something like two dollars an hour plus tips. The restaurant owners takes a cut of the tips for themselves, and the workers are left wondering what their pay will be next week.
They're still only making about 2 bucks/hr??? Shit, I was getting 2.25/hr when the minimum wage was 3.35/hr back in 1981-4. Then the IRS came out with this rule that servers were to be taxed at 8% on their tips. What they basically did was take 8% of your total sales and taxed that. Back in those days people didn't tip much over 10-15%
Yes, it's 2.13 an hour, or at least it use to be. Bartenders make about 4.50+ an hour. I worked at Longhorn and a (lunch)shift that started at 10:45 AM I could pull in about $60. I was cut about 1PM and was home by 2. I never had to share my tips with anyone. A double shift on a Friday for me pulled in about 250-300, and I was able to go home for a couple hours before my next shift. This was Metro Atlanta, about 25 minutes NW of Atlanta. I can't imagine what servers make in downtown! I had my own apartment, paid my own bills. I honestly made more money serving tables and bar-tending than what I make now, and I do OK.
From what I understand the servers have to share tips with the bus people and with the other servers in their "section" of the restaurant. I think my niece works about 8 hours 4 or 5 days a week, but some of that time is set up and clean up and there are no tips for that. She is a 23 year old college student and I think she makes about 500 dollars a week before taxes. I'm not sure about that sum . Her mother told me, but I dont exactly remember.
That kind of share. Yea, I had to do at least 1% of my food sales to the hostesses, ( We didn't have bus boys, we did our own), and I had to do at least 1% of my bar sales to the bartenders. Nothing that was really breaking the bank. At the end of the night, I usually gave about $3 to each, a couple extra if I had a great night and if I was really taken care of by both.
The picture painted by the latest available government data shows a vibrant New York City restaurant sector. Restaurant sales rose an average of 6.6 percent yearly starting in 2014 to reach nearly $22 billion in 2018.
If every diner paid the suggested rate of tip they wouldnt need a minimum wage. Many people dont tip, or a large group will tip a sum that falls far short of 15-20% per person.
What we have is a public that wants the waitresses and waiters and other wait staff to subsidize their desire to dine out.
Many places here in Atlanta already charge 20% for parties of 6 or more to ensure the servers don't get "stiffed".
NYC's $15 minimum wage hasn't brought the restaurant apocalypse — it's helped them thrive
New York City restaurant workers saw their pay increase by 20% after a $US15 minimum-wage hike, and a new report says business is booming despite warnings that the boost would devastate the city’s restaurant industry.
As New York raised the minimum wage to $US15 this year from $US7.25 in 2013, its restaurant industry outperformed the rest of the US in job growth and expansion, a new study found .
The study, by researchers from the New School and the New York think tank National Employment Law Project, found no negative employment effects of the city increasing its minimum wage to $US15.
Restaurant workers in the city saw a pay increase of 20% to 28%, representing the largest hike “for a big group of low-wage workers since the 1960s,” James Parrott, a director of economic and fiscal policies at the New School and an author of the study, told Gothamist .
NYC restaurants are 'flourishing' despite minimum wage ...
While the city’s minimum wage for tipped restaurant workers with 11 or more employees rose to $5 an hour in 2013, restaurant sales increased on average 6.6% annually starting in 2014 to reach ...
NYC restaurants are ‘flourishing’
despite minimum wage hikes, study says
Restaurant sales increased an average of 6.6% annually from 2014 to 2018, following a mandated 2013 pay increase.
Minimum wage increases for restaurant workers have impacted thousands of New Yorkers over the years, but a new study suggests the pay hikes have not negatively affected restaurant revenues.
While the city’s minimum wage for tipped restaurant workers with 11 or more employees rose to $5 an hour in 2013, restaurant sales increased on average 6.6% annually starting in 2014 to reach $22 billion in 2018, according to the report issued by the Center for New York City at the New School and the National Employment Law Project.
“I think the data we compiled is proof that businesses can adapt to a minimum wage and succeed and prosper,” said James Parrot, one of the report’s co-authors.
The study used data from various sources, including the state Department of Labor’s Quarterly Census of Employment and Wages reports. While the minimum wage was increased again to $10 an hour in December, researchers did not analyze data beyond 2018.
They are looking at sales over 5 years, not costs:
77% of New York restaurants have cut employee hours, and over a third have laid off employees. 53% planned on eliminating jobs this year, as the $15 minimum is implemented.
Good thing then that Donald Trump is providing good paying jobs to anyone who wants to work.
It's misguided and dishonest to hold up NYC as the example of how wonderful the wage increase is.
It's misguided because the cost of living is already so much higher in NYC than most other places that resident and tourist patrons can afford to pay prices that support a high minimum wage.
It's dishonest because NYC (and California) have already been cited as outliers - exceptions - in the analysis, and the author knows this (or should know this). How do I know this? It's in the exact article that the author cites to make this claim:
Follow that link:
It takes you to an article titled " National Restaurant Association comes out strongly against 'Raise the Wage Act' "
About halfway through that source, you will read:
So, those critics forecasting problems resulting from the wage increase have already acknowledged that it might work just fine in NYC. But it's foolish to assume that what works in NYC must necessarily work everywhere else. Unfortunately, the author of this article chose not to disclose that truth.
Employment is up because old people can't afford to quit working and retire there.