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Minimum wage

14K views 122 replies 17 participants last post by  halb 
#1 ·
So without adding too much political aspects to this, how does everyone feel about the House passing a bill for a federal minimum wage increase to $15.00? Regardless of if it has a chance of ever being signed into law do you think this is a good trend for the food service industry? Here in NY we are facing the challenges of yearly increases and was just wondering if anyone else has had any experiences, good or bad to share.
 
#2 · (Edited)
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! :)
 
#3 ·
The $15 minimum wage doesn't stop there. Everyone who was making $15 an hr will also get a raise and so on, and so on and so on. Therefor I feel you'll see a lot of people getting laid off. You will also see less service and more self-service. Fast food will be simi fast food. Get used to talking to a robot and pushing buttons on a menu board. Pay at your table is already being used, order at your table will be coming soon, pickup your food at the counter will also be on the agenda. You'll wonder why you're leaving a tip because there won't be much in the way of services offered. The Dollar menu will be the $5 menu. I'm just happy I'm not in business anymore......ChefBillyB
 
#4 ·
Being only 3 hrs away from Seattle/Tacoma I can report that tipping is still alive and well there in the hospitality industry. The ubiquitous credit card machine will still prompt you to tip 20% with “other options available”.

Vancouver will, too, bring in a $15.00 minimum wage in the next year. On the one hand, housing/rent is the highest here then anywhere else in Canada, and pretty darn close to N.Y. City.

After the last min. wage hike I stopped going to Mcd’s. You now have to line up to order and pay, then line up again to wait and pick up your order. It just ain’t worth it.

Paul-ticks aside, if the cost of living goes up, wages have to as well.

The day may well come when people figure out it’s cheaper to make a thermos of coffee and samiches at home, then it is to eat at a deli with $10 for a sammich and $3.00 for a drip brewed coffee. Come to think of it, that’s what my Dad did....
 
#8 ·
My feeling is that restaurants became dependent on minimum wage workers when owners decided that an army of idiots in the kitchen was better than holding on to key tenured, efficient employees.
The day the business became more important than the talent needed to run it, being a cook or chef devalued to almost nothing.
All this whining when the truth is there are too many crap franchise restaurants who just dont wanna pay.
 
#12 ·
My feeling is that restaurants became dependent on minimum wage workers when owners decided that an army of idiots in the kitchen was better than holding on to key tenured, efficient employees.
The day the business became more important than the talent needed to run it, being a cook or chef devalued to almost nothing.
All this whining when the truth is there are too many crap franchise restaurants who just dont wanna pay.
While I would mostly agree with you, I would like to add that where I am located at least there is a major shortage of skilled labor. A lot of the times business may have to rely on unskilled labor simply because the labor pool is so small. Most of the fine dinning maintains their skilled labor for long periods and fast food chains snap up the lower end which leaves a huge gap in the middle.

I understand wanting wages to keep up with cost of living but at least here in NY it is so hard because the taxes are so high. The Walmart here has already converted 3/4's of the checkouts to self checkout and trying to find an associate to help you in any big box store is like playing a game of where's Waldo. Not to mention more often than not if I go to a fast food place they either screw up my order or forget something and I'm only ordering a couple items. All in all I think it is like a lot of other things where they are trying do a sweeping change for a lot of people without taking into consideration the effects of individual pockets that it will affect.
 
#9 ·
For those of us who have operated a business in the food industry, here is a simple Q & A.

Here are the givens:
1. Minimum wage has just increased to $15/hour;
2. Your payroll has just increased by 40%, not including payroll tax;
3. Your supplier has just implemented a price increase of 15% across the board to accommodate the minimum wage increase;

How do these changes effect your business and your margins?

What changes will you make in response?

The answers that appear in response to this hypothetical scenario constitute the reality of how this wage increase effects the food industry from the business perspective.
 
#10 ·
I owned and operated my own restaurants till I sold them. Higher costs of goods are nothing new. And these are the types of things that contribute to the 80% failure rate of restaurants. I solved this issue by knowing how to buy food efficiently and by not having any excess layers of ownership or management to pay off. In my experience it was usually management and administration costs that sank a business as much if not more than an overpaid dishwasher.
 
#16 ·
Yes and here even the chains are starting to close leaving vacant buildings all over the place. We are too saturated with fast food and chains every where here. They build Starbucks and Mcdonald's less than 3 minutes driving time from one another and push out any chance for some real restaurants to go in. Add to that that the only main strip of "upscale" dining downtown is always changing due to ridiculous tax rates and we have a recipe for disaster.
 
#26 ·
This is all scary stuff. Why have culinary schools then if all that will be left are the big boys, whose only cooking skill is to listen for the beeper so you can flip that burger?

If all that will be left for restaurant choices are Golden Corrals, then we're in deep trouble.
 
#27 ·
This is all scary stuff. Why have culinary schools then
Well, maybe culinary schools should require at least a two year degree in business management and hospitality together with maybe 1000 hours documented work experience in a commercial kitchen as prerequisite before they will accept you.

But if you do all that what do you need culinary school for? So the only thing that will ever be required is cash.
 
#28 ·
Degree in business management as a Pre requisite? Are we talking about teaching cooks cooking skills or Chefs how to run a kitchen?

A simpler approach would be the European apprenticeship model: The future cook seeks an employer willing to hire him/her on for a three year period, then goes to school one day a week for those three years. The bonuses of this arrangement are that the apprentice remains employed after graduation, as well as not incurring any school debt.

Honestly now, if in the future only Applebees and Red Lobster would exist, would you celebrate your partners b-day or anniversary there?
 
#29 · (Edited)
Are we talking about teaching cooks cooking skills or Chefs how to run a kitchen?
If all you are going to aspire to is a cook then you are right. But your ultimate goal should be head Chef or owner. If you just start out working in this business you pretty much stagnate. Few will advance and even fewer will be able to afford to get an education. That's why they wind up flipping burgers for the rest of their lives.

What I'm talking about here is the basis of a culinary trade school.

A simpler approach would be the European apprenticeship model: The future cook seeks an employer willing to hire him/her on for a three year period, then goes to school one day a week for those three years. The bonuses of this arrangement are that the apprentice remains employed after graduation, as well as not incurring any school debt.
That's good but do they learn anything about running a business? I'm pretty sure even the CIA provides some business courses.

You don't need school to learn to cook but you will need some schooling in business if you want to make any money at it.
 
#33 · (Edited)
He raises some interesting points and logic, however since I have been cured of ownership for 15 years now, I am not sure how the points and logic he brought up would have impacted my business.

I can't help but think that a $15.00 minimum wage would have meant shuttering my doors before the seeds that were planted would reach maturity and bear fruit. When I was an owner, I endured a few hikes in minimum wage over a couple of decades and I do know that they did not have a positive effect on my restaurant's bottom line. I can't say that my personal bank account swelled during these time periods either.

If I were a plutocrat, I would embrace his thoughts. Not being a plutrocrat, I had to deal with the reality of a real time small profit margin.
 
#34 ·
"Degree in business management as a Pre requisite? Are we talking about teaching cooks cooking skills or Chefs how to run a kitchen?"

Why not? If the only thing needed to manage a chain is the business side, because the food is simply heat and serve, that would seem to be the times that we're all looking at in the future.
 
#36 ·
....because the food is simply heat and serve, that would seem to be the times that we're all looking at in the future.
Ah, c'mon now. I asked the question in the above post: would you take your Partner to Applebee's to celebrate a b-day or anniversary?

Another question: Would a 5 star hotel charging $400/night for a room, lease out their kitchens to Applebee's and let them take over the entire F&B, including room service and banqueting?

Another question: Would a winery be able to sell an $80 bottle of wine if the entire market only provided $20-$30 entrees?

With my limited 20 years of running my businesses I survived and thrived by providing a unique product/service.
O.t.o.h., the other business tactic that thrives is to buy out and squeeze out all competition, which brings us back to my first question-would you take your wife to Applebee's for her 50th b-day?
 
#35 ·
Eh...no. Chains exist because head office knows everything and has all the right programs and applications for any situation.

No, as kitchen mngr you just need to order the pre selected products from the approved suppliers and follow protocol, that is the job.
 
#40 ·
When I started my Business I remembered something some one told me many years ago. This was when I was managing restaurants. They told me to pay everyone every hour cash for that hour worked. Count the money out and do this for 8 hours. At the end of the day or even after an hour or two you will realize what you getting for your money. It makes you realize how hard it is to hand out that money and be able to see what you got for that hour in productivity. I remembered this for years and realized there are always places to cut labor. I also realized most of the people at the time weren't worth $8 to $10 at the time for what they were doing. In all my operations I expected a lot out of my employees and ran my kitchens with half the labor of other places doing the same business and under the same conditions. My point to all of this is, It's not up to the employer to pay an unreasonable wage and not get that amount of productivity needed to have a profitable business. As far as a $15 wage goes for the Restaurant industry it's not even close to being reasonable.....
 
#43 ·
I see things from another point of view...

Here in Vancouver, a basic, crappy, 1 bdrm basement suite rents for $900, apartments cost more. Right now, my 21 yr old is renting a smelly, moldy 4 tiny bedroom basement for $2,000/ mth—shared with 3 other guys. I helped him move in, the door in his room will only close if you position the bed diagonally. In a way he’s pretty lucky, only $500 for rent, and as a line cook he’s earning $17.50/ hr. Then again, the room he rents is a sh*t hole.... Now of course the further you move away the cheaper rent becomes, and in neighboring municipalities the rent is significantly cheaper, but you need a car to travel, and gas is crazy expensive here, as is insurance and repairs.

It’s true, pay peanuts, get monkeys. If you offer crap wages, you get crap workers, utilize crap workers, and you have to dumb down everything. Dumb down everything, and you have an inferior product/ service to offer. Just like everyone else, so now you have to compete on price. And on and on it goes, slowly drilling a path down towards China....
 
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#44 ·
I see things from another point of view...

Here in Vancouver, a basic, crappy, 1 bdrm basement suite rents for $900, apartments cost more. Right now, my 21 yr old is renting a smelly, moldy 4 tiny bedroom basement for $2,000/ mth-shared with 3 other guys. I helped him move in, the door in his room will only close if you position the bed diagonally. In a way he's pretty lucky, only $500 for rent, and as a line cook he's earning $17.50/ hr. Then again, the room he rents is a sh*t hole.... Now of course the further you move away the cheaper rent becomes, and in neighboring municipalities the rent is significantly cheaper, but you need a car to travel, and gas is crazy expensive here, as is insurance and repairs.

It's true, pay peanuts, get monkeys. If you offer crap wages, you get crap workers, utilize crap workers, and you have to dumb down everything. Dumb down everything, and you have an inferior product/ service to offer. Just like everyone else, so now you have to compete on price. And on and on it goes, slowly drilling a path down towards China....
Foodpump, I totally understand your point. I started my career in Hawaii . We picked up and moved 3000 miles to Eastern Washington State to give my family a better life. Choices, we all have them.

If living in a large populated area with a higher cost of living demands higher wages then so be it. Why does that have to apply to an area with a lower cost of living???
 
#48 ·
I personally think it comes down to the fact that there is no certification process to work in the industry. It cost me a bunch of money every time I want to bring on as a cake decorator.
For everyone I put through the system I end up taking a bath because they don't work out.
Ill have someone who is unorthodoxly spinning a cake which doesn't bother me as long as it is right. Then they tell the person next to them they are a pastry chef.
How is that since the don't have a clue how the cake is made that their decorating.
I have new hires at 16,00 who think their sh-t doesnt stink, I keep them because I see potential. thenI have people who have been with me 25 yrs that make 125000. k plus.It's all relevant. I don't care if it's 15.00 an hour, try to find a pot washer
 
#50 ·
I don't even know where to start discussing minimum wage without discussing politics. The two don't exist in a vacuum and can't really be separated. The workers of the US have been abused badly for at least fifty years if not longer. Wages for middle and lower income workers have been stagnant since at least the 70's. NAFTA gutted the ag industry of Mexico and most of the manufacturing sectors of the US. True, a lot of money was made but very little of it 'trickled down' to workes in any meaningful way. Now we have low unemployment on paper but 1) a lot of McJobs that require multiple McJobs to survive and 2) a ton of people that have given up on ever finding a job and dropping out of the work force entirely (at the highest rate since the 70's).

I've been a chef and a manager for over 20 years, with almost 30 years of working as a cook. There are business realities that I can't ignore, yet I'm not oblivious to why it's nearly impossible to get good help or stay at full staff. Who in their right mind would bust their ass in a kitchen for $12 if they could sit in an air conditioned call center and make $14? And with full benefits, no less. I know some owners & managers carp that the staff they get aren't worth $15 but look in the mirror- do you deserve their best for $12? In their place would you work for you at the terms that are common now? That includes "on demand" scheduling and working six or seven days to get 30 to 35 hours? An enterprising person would be better off picking up tin cans and mowing lawns, cleaning gutters, etc.

Restaurant work used to be a great opportunity. I started out with just two years of college and no degree, and of course no experience to begin, and within maybe five years of serious application rose to the point where I made pretty decent money. Not 'retire-to-the-French-Rivierra' money but getting buy. As we automate and franchise our way to the 21st century how many kids can work from the dish pit up to Exec Chef like I (and probably a lot of you) did.

The $15 wage push is a symptom of something much larger and more ominous. The middle class has been hollowed out to the point of non-existence. Our system now exists only to pump wealth up to the top. Plutocrats are now even eying the crumbs and lick their chops at the thought feasting on t he few remaining social programs like SS and Medicaid. The pitchfork guy is right and it's a mistake not to see it.

The most successful places here in Bozeman are already paying $15 or more. Rents here are approaching west coast levels and nearly nobody under 40 that I know has their own place. COL is ridiculous for being just a dot in the middle of a giant pasture. But the good places have learned how to pay $15-$17, and some of the $15 places offer full benefits.

IMO the $15 minimum is coming. Like it or not we're gonna have to figure it out.
 
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#52 ·
My opinion is that if someone works 40 hours a week they should at least make enough to pay for basic necessities like housing and food for themselves in the area where they work. If we can't do that they wind up on public assistance and we all wind up paying for them one way or another.

I heard some guy on the radio say today that he is against minimum wage, that you pay $15/hr and you get somebody that doesn't want to work. Ever hear of firing them? Does paying $8/hr make you feel better when the employee stands around and does nothing?
 
#56 ·
I saw those encampments in May when I was there visiting. Wow. I knew that the $15.00/hr. things was going to put a lot of businesses and people out of work. In rural areas this would be devastating.
A) You bust your ass, get paid $8/hr, have to live in a homeless encampment and are on the government cheese line.

B) You don't have a job, have to live in a homeless encampment and are on the government cheese line.

Which sounds like a better deal?

Like I said, if a business can't or won't pay their employees a living wage they NEED to go out of business. The ones that remain will thrive.
 
#57 ·
While I get the point you are making my argument is what is a "living wage" and who gets to decide that? A living wage in a rural area is going to be vastly different than a city and are we considering a living wage the basic necessities of food, clothing, shelter? Now a days a lot of people consider their phone a necessity, so would a new phone and enough to cover the monthly expenses be included in a living wage? What about if you want to practice a specialty diet that requires expensive ingredients? Should that wage reflect your food choices and types of food you can and cannot eat? Should the wage be able to pay for a 1, 2 or 3 bedroom apartment? Or maybe a house? But how many sq. ft.? People with job skills need to advocate for themselves for their compensation and people who have none should not expect to make the same or have the same things in life as those who work harder or have different skill sets. Would I love to make as much as a CEO? Of course, but I know my skill set is not appropriate for that and I don't think my income should be inflated just because I may want better things in life.

The other issue to comparing minimum wage in the restaurant industry with others. The profit margins can be so small that it could kill a small business, while someone like Jeff Bezos makes more in an hour than his $15.00 employees do in 50 years. Some industries may be able to handle sporadic, mandated increases but again that will never take into account all the different aspects of the workforce that it will affect.
 
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