Excellent topic. However, I think non-political people such as those of us in the food industry can have a well reasoned discussion about something like minimum wage without it becoming a referendum or sounding board for politics. Minimum wage is something that we've had to deal with in one way or another in this business and each of us has had to deal with how minimum wage effects our lives.
So, with that said......
I think the charge towards a $15 minimum wage is a reckless attempt to pander for votes from the masses who work for wages under $15 an hour. I'm not saying that the current Federal minimum wage of $7.25/hour is reasonable because its not. However, most states have their own minimum wage laws that are higher than the Federal minimum wage so, how much of a practical issue is this? Yet, just because the state's minimum wage laws may be higher than the Federal minimum wage, that does not guarantee that a worker will make more money as the folks in Seattle, Washington have discovered and the people of New York are going to discover with many bitter tears.
Food industry workers in Seattle were actually making more money per month before the increase in the minimum wage. Why? Because despite the fact that the minimum wage is higher, employers have cut back the number of hours (and employees) to offset the increase in payroll costs. On the average, workers in Seattle are earning about $200 to $300 less per month according to an analysis that was commissioned by the City of Seattle.
So, let's look at this from an operational perspective.
By far, the largest portion of a food business' overhead is going to be its administrative costs such as payroll, insurance etc. There is a balance between overhead and revenue that must be maintained. That relationship is also proportional. If the overhead costs increase, revenue must increase or overhead must be cut in some other area. Ultimately, the business must find a way to mitigate that increase in order to protect its profit margins. And if there is one thing most of us know all too well is that the profit margins in this business are paper thin. So, that leaves us with fewer options than most other businesses.
There is a simple rule when it comes to business dynamics: the value of an employee's work product must always be greater than the cost of their compensation. In other words, paying a worker $15/hour to flip a burger is not feasible nor is it sustainable. Why? Because in order to do that, the business must either hire more part time workers to do the same work - in other words 4 part timers to cover the same 8 hour shift as opposed to one employee to cover the same 8 hour shift. Its cheaper to pay 4 people to work 2 hours at $15 an hour than it is to pay 1 person to work 8 hours at $15/hour. While the cost per hour is the same, the difference is part timers are typically not entitled to benefits or overtime unlike the full time employee.
Another option is to transfer the increase in payroll costs to the consumer. But, there is limit to how much the general public is willing to pay for a burger. If the cost is too high, the customer base will dry up. No customers = no business. Many businesses in Seattle, especially locally owned businesses who could not sustain the increase in minimum wages, have either closed their doors or moved their businesses outside of Seattle's city limits. Many of those that stayed have experienced a drop in revenue due to increased costs of their goods and services. In short, consumers are going to the businesses outside of Seattle because its cheaper.
Seattle has also reported a higher jobless rate since the increase in minimum wage. In 2015, the jobless rate statewide was about 3.3%. As of June, 2019, that rate has increased to about 4.5%. There is more than just a temporal relationship between the increase in minimum wage in Seattle and the statewide increase in the jobless rate.
What about collateral effects of a $15/hour wage?
Tipping, for instance, will probably disappear. One of the drawbacks that service industry workers are experiencing in Seattle is the loss of revenue from tips. Customers have taken the position that because the food service employees are making $15/hour, they are no longer tipping or tipping a lot less. That means two things: 1) a higher portion of the worker's income is now visible to the IRS; and 2) some workers, especially in the higher end establishments who were averaging more than $15/hour with tips, have actually taken a pay cut.
So, I think the drawbacks of a $15/hour wage far exceed the benefits, which exist mostly on paper. The bottom line is that hourly wage employees live on their take-home pay and the size of that take-home pay is determined by the number of hours they work multiplied by their hourly rate. If they are making more per hour, but, working less hours, they have not taken any substantive steps forward financially.
Think about it. Who would you rather be? The person that works 40 hours per week + overtime earning $12/hour or the person who earns $15/hour and works only 25 - 30 hours per week with no overtime?
Now, New York is particularly vulnerable to the effects of this new wage law. New York has been hemorrhaging industry for the last 25 years. New York State is losing population faster than the next two states combined. Why? Because doing business in New York is literally cost prohibitive even without a $15/hour minimum wage. High taxes, high insurance costs (especially workers' comp and liability), high cost of living, a corrupt bureaucracy and a shrinking skilled work force drive businesses out of New York and prevent new industries from setting up shop there.
These factors are not being considered by those who blindly support a $15/hour wage increase. Why? Because most of them have never seen the operational side of a business. Most simply get their schedule, come to work, punch in, do their job, punch out and go home. Most don't see how the business operates on the other side of the punch clock and consequently, cannot understand how a mandatory wage increase to $15/hour can harm a business, especially in the food industry.
There's an old adage: if the deal is too good to be true, then, it probably is.
Cheers!