Wage Hikes Coming At Big Costs For Operators

Roughly two-thirds of operators in areas where the minimum wage was raised have seen their labor costs jump between 3% and 9%, and another 16% have experienced a jump of 9% to 12%, according to new research.

But the increase isn’t only due to the effects of bringing workers’ wages up to the new minimum: A survey by technology supplier Harri of operators running more than 4,000 restaurants showed that 82% of restaurants have raised the pay of employees already earning more than the mandated minimum, a move that can placates veteran employees and keep their wages higher than those of entry-level labor. Three-fifths of those employees already earning more than the minimum wage saw raises in the range of 5% to 15%.

The Harri study results were examined at the annual State of the Industry conference of the New York City Hospitality Alliance, which represents restaurants, bars and hotels in the city’s five boroughs.

Among the other information shared with attendees:

• Because of increases in labor costs, 73% of restaurants have raised prices—46% by up to 5% and 37% by 5% to 10%.
• Spiking labor costs have forced 9% of operators to close a branch.
• Nearly three out of five (59%) restaurants have cut staff hours, and 31% have eliminated positions.

And it’s important to note that last week, Democrats in Congress moved forward with legislation to raise the federal minimum wage to $15 an hour over five years. The House Education & Labor Committee sent H.R. 582 to the House floor where it is expected to be put to a vote during the next few weeks. A virtually identical bill has been introduced in the Senate, where the Republican majority is expected to block it.