Featured Minimum wage

Discussion in 'Professional Chefs' started by Seoul Food, Jul 19, 2019.

  1. Seoul Food

    Seoul Food

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    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.
     
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  2. sgsvirgil

    sgsvirgil

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    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! :)
     
    Last edited: Jul 19, 2019
  3. chefbillyb

    chefbillyb

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    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. foodpump

    foodpump

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    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....
     
  5. Innocuous Lemon

    Innocuous Lemon

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    fair bit
    min wage goes up, tronc input into wage from service charge comes down. All the same in the end.
     
  6. toddhicks209

    toddhicks209

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    I don't think the federal minimum wage should be raised higher than the 11-12 dollar an hour level.
     
  7. foodpump

    foodpump

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    Just for arguments sake, compare what a plain-Jane 1bdrm apt. would rent for in your area, and in a large city like N.Y. Or L.A...
     
  8. peachcreek

    peachcreek

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    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.
     
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  9. sgsvirgil

    sgsvirgil

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    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. peachcreek

    peachcreek

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    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.
     
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  11. chefross

    chefross

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    The trickle down effect is what will kill many places. It's not just they, who will be paying the wage increase, but everyone they do business with as well.
     
  12. Seoul Food

    Seoul Food

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    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.
     
  13. halb

    halb

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    My thought is do we really need 50 food establishments per square mile? Let them go out of business- thinning of the herd. What survives will do more business and be more profitable and hopefully they can pay their employees properly.
     
    Last edited: Jul 22, 2019
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  14. foodpump

    foodpump

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    Not only
    Or, to put it another way:
    Businesses offer a unique product and service at a price that is sustainable.
    This has been my business motto for the past 20 years—If Johny across the street is selling apples, I will sell oranges....
     
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  15. chefross

    chefross

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    Sure, those 50 establishments will thin out leaving only the chains, while the mom and pops will have to go out of business.
     
  16. Seoul Food

    Seoul Food

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    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.
     
  17. halb

    halb

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    Well, that should tell you something. If only the chains are left it means the population only want's crap food. That's why a decent restaurant isn't going to get enough business to be sustainable. If they did their homework before deciding on that location they should have seen that. Market research. Unfortunately demographics do change over the years for established restaurants that can make them unprofitable.
     
  18. Seoul Food

    Seoul Food

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    This exactly. Private restaurants used to be able to survive as they were the main if not only game in town. A lot of the area has changed and developed so with that came all of the chains and franchises.

    I would say yes and no to this for a few reasons, at least in my area. One is that there is literally a dozen chains for each private owned if that. Also, convenience comes into play when you can go to a chain with a family and be done faster and located near all shopping, grocery stores, ect. Plus as a society we have presented chains as "upscale" dining in some instances without the knowledge to the public about how the food is prepared or where it comes from. So I don't think the population necessarily always wants crap food so much as it is what is available to them. It's much easier for a family of four to go out to Applebee's and not drop a mint for dinner over trying to find parking downtown to go to a better private restaurant with $30 entrees.
     
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  19. foodpump

    foodpump

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    Not really....

    The last business we had, the chocolate business was a textbook example of a M&P. When the cost of bulk couverture went up, we rolled with the punches and adjusted our prices accordingly. When minimum wage went up, we worked a bit harder and longer for a few months, then eased off and got a p/t back in.
    Being small has a few advantages, one of them being extreme flexibility, and not waiting for head office to o.k. your request to go wee wee...
     
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  20. foodpump

    foodpump

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    [QUOTE="halb, post: 601807, member: 72459.....Market research. Unfortunately demographics do change over the years for established restaurants that can make them unprofitable.[/QUOTE]

    It used to be that Shopping malls were a guaranteed thing. The last 5 years or so, the major malls around here have lost their anchor tenants and are really struggling to fill retail space. They still charge a lot, and they still want a slice of action, and they still love chains, because chains usually have huge nationwide advertising campaigns.

    Still, the last T.g.i.f. went belly up in a large mall over 5 years ago and it’s still vacant. Mcd’s has shut down several locations here and not replaced them, Stah-bucks too.