by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
Wealthy New York City restauranteurs, hit by a succession of minimum-wage increases (nine in recent years), are deeply worried about the effects on their businesses and dwindling employees of the planned minimum-wage hike to $15/hour in 2019.
Artificially forcing the minimum wage to $15/hr. would break the first rule of making policy to help the poor. It would make things worse overall for the poor. The negative impacts of the minimum wage is one of the items about which economists are in greatest agreement.
For that matter, the very knowledge that there are negative effects is clearly within the mainstream of economic thinking on the minimum wage. Those negative impacts aren’t randomly distributed. The disemployed tend to be the least skilled, the poorest, the least educated — the ones who most need the work.
It also makes it harder for the poor to eat out, because it disproportionately affects lower restaurants. Low-priced eateries serve a market interest in getting cheap food, and given how narrow the margins are in the restaurant business, severely boosting the price of labor destroys the business model.
The NYC restauranteurs’ solution is not ideal. It’s a compromise to allow bad policy to continue but save their businesses, with no concern about other businesses or competitors or their employees or customers. They’re asking to be able to charge a surcharge on customers for walking in the door, which they think will escape consumer notice more than would menu price increases to offset the impact of the forced wage increase.
Or they will go out of business.
With record hikes in wages over the past couple of years — on top of rising rent, food and other costs — restaurant owners pressed City Hall lawmakers to allow them to levy a surcharge on all diners to cover their bloated expenses.
Without the surcharge, which could range from 3% to 5%, or more, many owners said they will go out of business.
A group representing more than 100 restaurateurs — including Nobu, Tao, Smith & Wollensky, Tribeca Grill and Daniel — drafted a giant letter that was displayed on the steps of City Hall Wednesday. The group claims to have weathered nine mandated wage increases over the past several years. Next up: a minimum wage hike in 2019, to $15.
“Allow us the option of using a clearly disclosed surcharge to generate the revenue to simply survive,” the group said in an open letter to Mayor de Blasio. …
The issue is reaching a new urgency now because Gov. Cuomo is considering raising the minimum wage for tipped employees to $15 an hour — thereby abolishing the current minimum wage of $8.65 for tipped employees.
Now, given the exorbitant cost of living in New York City, a $15/hr. wage isn’t as big as it would be other parts of the country — especially rural North Carolina! So to paraphrase Frank Sinatra: If it can’t make it there, why think it’d make it anywhere?
Especially not here.