During the President Obama’s State of the Union address at the end of January, minimum wage once again was a hot topic. The debate over federal minimum wage continues as an executive order was given to raise wages to $10.10 for new federal contracts. What hasn’t made headlines is the small changes already occurring at the state level.
Thirteen states from coast to coast have or will raise minimum wage higher than the federal $7.25 per hour. For example, Arizona’s 2013 hourly minimum wage was $7.80. In 2014 that has been increased to $7.90. Other states, such as New Jersey, have seen a more drastic $1 per hour increase from 2013-2014. Ron Ruggless, columnist for the Nation’s Restaurant News, points out in his article ‘How state minimum wage hikes impact restaurants’ that “at least another dozen jurisdictions are considering increases this year either at the ballot box or in their legislatures.” As election time approaches, minimum wage will be an important topic. The pressure is felt by those at the NRA (National Restaurant Association). The executive vice president for policy, Scott DeFife, admits he doesn’t think a federal increase in minimum wage will happen. However, he feels it is unavoidable at the local level.
Restaurant operators are voicing their concern. These higher labor costs are having a great affect on the restaurant industry. As state-level raises are implemented, the minimum wage for tipped employees is also affected. A type of ripple effect happens when a state establishes minimum wage higher than the standard set by the federal government and restaurant operators see little choice but to raise prices. This response does not just affect the consumer.
The effects of a raise on minimum wage is having a profound affect on the employees of restaurants. The biggest impact seen is that worker hours are being reduced. In order to combat the raise in prices, operators might conclude a need to reduce the amount of hours. This reduction will offset the increase in the hourly rates of the employees. Operators must consider profit margins. With the margins narrowing, an increase in menu prices as well as a reduction in worker hours is the manageable solution. Bottom line, higher labor costs could reduce job opportunities for restaurant workers. These “operational efficiencies” will offset the pressure, but can have a direct unfavorable impact.
