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Minimum Wage Hikes in NYC Are Forcing Businesses to Cut Jobs and Raise Prices

New York City business owners are eliminating jobs, cutting hours, and raising prices in the wake of a $15 minimum wage hike implemented at the end of last year.

According to The Wall Street Journal, entrepreneurs across the city are having to make tough choices to the detriment of their employees in order to stay solvent. Thomas Grech, the president of the Queens Chamber of Commerce, told the Journal that small businesses have been shuttering over the last six to nine months, which he blamed on the minimum wage legislation.

“They’re cutting their staff. They’re cutting their hours. They’re shutting down,” he said. “It’s not just the rent.” Businesses with 11 or more employees were required to raise the minimum wage to $15 on December 31, 2018, while businesses with 10 or fewer workers will have to do so at the close of this year.

As I’ve previously written, those pay increases disproportionately impact the restaurant industry, which operates on snug profit margins. Waitstaff in New York City currently collect a tipped wage, which sits below the mandatory minimum and allows workers to make up the rest—and sometimes much more—in tips. If the hourly average falls below the minimum wage with tips included, employers are required to make up the difference.

Federally, the tipped base pay is $2.13 per hour. New York upped it from $8.65 to $10 per hour at the end of 2018, but the Restaurant Opportunities Center (ROC), a group which advocates for “One Fair Wage” among restaurant workers, would like to see it scrubbed entirely.

In Washington, D.C., for instance, ROC was the driving force behind Initiative 77, which would have required restaurants to compensate all employees with a $15 per hour base pay. Although it passed at the ballot box in June of last year, the D.C. City Council overturned the measure after an outcry from service industry professionals, many of whom said the raise would backfire, as is happening in New York.

Susannah Koteen, who owns Lido Restaurant in New York’s Harlem neighborhood, told CBS News in January that she was consolidating employee positions to save money, putting the lowest-skilled workers in danger. “A server can bus their own table,” she said, “but you can’t ask a busboy to open a bottle of wine and talk about what it can be paired with.” She recently told the Journal that she has been able to avoid layoffs, but is slashing hours and is hawkish about overtime, as she can no longer afford to keep an excess of employees on the clock.

“What it really forces you to do is make sure that nobody works more than 40 hours,” Koteen said. “You can only cut back so many people before the service starts to suffer.” She is also raising prices with regularity, and has demurred on her plans to open a new restaurant at a larger location.

Koteen’s experience comports with a study released by the New York Hospitality Alliance earlier this year. According to the 574 restaurants surveyed, 75 percent of full-service dining establishments plan to cut hours and 47 percent forecast eliminating some positions entirely in response to the minimum wage increase. What’s more, 87 percent said they would need to raise prices to stay above water.

Anthony Advincula, a spokesman for the ROC, has argued that such negative effects need not happen in tandem with the city-mandated wage hikes. “Increasing to $15 would reduce income inequality, and the number of individuals living in poverty now is ridiculously high,” he told The Wall Street Journal. “This is not just a business issue, this is a race, gender, pay-equality issue.” But if New York City is any example, the measures pushed by Advincula will only serve to make those issues worse.


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About The Author

Billy Binion

Founded in 1968, Reason is the magazine of free minds and free markets. We produce hard-hitting independent journalism on civil liberties, politics, technology, culture, policy, and commerce. Reason exists outside of the left/right echo chamber. Our goal is to deliver fresh, unbiased information and insights to our readers, viewers, and listeners every day. Visit https://reason.com

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